<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 24, 1996.
REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
SINTER METALS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
Delaware
(STATE OR OTHER JURISDICTION OF
INCORPORATION OR ORGANIZATION)
3399
(PRIMARY STANDARD INDUSTRIAL
CLASSIFICATION CODE NUMBER)
25-1677695
(I.R.S. EMPLOYER
IDENTIFICATION NUMBER)
------------------------
50 Public Square, Suite 3200
Cleveland, Ohio 44113
(216) 771-6700
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING
AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------
JOSEPH W. CARRERAS
Chairman of the Board and Chief Executive Officer
Sinter Metals, Inc.
50 Public Square, Suite 3200
Cleveland, Ohio 44113
(216) 771-6700
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
------------------------
COPIES TO:
CHRISTOPHER M. KELLY, ESQ.
Jones, Day, Reavis & Pogue
901 Lakeside Avenue
Cleveland, Ohio 44114
(216) 586-3939
HOWARD S. LANZNAR, ESQ.
Katten Muchin & Zavis
525 West Monroe Street
Chicago, Illinois 60661
(312) 902-5200
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after this Registration Statement has become 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 1993, check the following box: / /
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, 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 to be made pursuant to Rule
434, please check the following box. / /
<TABLE>
<CAPTION>
===============================================================================================================
Proposed Proposed
Title of Each Class of Amount to Maximum Offering Maximum Aggregate Amount of
Securities to be Registered Be Registered Price Per Share(1) Offering Price(1) Registration Fee
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A Common Stock,
$.001 par value............. 2,530,000 Shares $26.94 $68,151,875.00 $20,652.08
===============================================================================================================
<FN>
(1) Estimated solely for the purposes of calculating the registration fee pursuant to Rule 457(o).
</TABLE>
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE
OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
<PAGE> 2
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor
may offers to buy be accepted prior to the time the registration statement
becomes effective. This prospectus shall not constitute an offer to sell or
the solicitation of an offer to buy nor shall there be any sale of these
securities in any State in which such offer, solicitation or sale would be
unlawful prior to registration or qualification under the securities laws
of any such State.
PROSPECTUS (Subject to Completion)
Issued December 24, 1996
2,200,000 Shares
SINTER METALS, INC.
CLASS A COMMON STOCK
------------------
OF THE 2,200,000 SHARES OF CLASS A COMMON STOCK BEING OFFERED, 1,760,000 SHARES
ARE BEING OFFERED INITIALLY IN THE UNITED STATES AND CANADA BY THE U.S.
UNDERWRITERS AND 440,000 SHARES ARE BEING OFFERED INITIALLY OUTSIDE
THE UNITED STATES AND CANADA BY THE INTERNATIONAL UNDERWRITERS. SEE
"UNDERWRITERS." ALL OF THE SHARES OF CLASS A COMMON STOCK
OFFERED HEREBY ARE BEING SOLD BY THE COMPANY. THE COMPANY'S
CLASS A COMMON STOCK IS LISTED ON THE NEW YORK STOCK
EXCHANGE UNDER THE SYMBOL "SNM." ON DECEMBER 20,
1996, THE REPORTED LAST SALE PRICE OF THE CLASS
A COMMON STOCK ON THE NEW YORK STOCK
EXCHANGE WAS $27 PER SHARE.
------------------
SEE "RISK FACTORS" BEGINNING ON PAGE 9 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS.
------------------
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.
------------------
PRICE $ A SHARE
------------------
<TABLE>
<CAPTION>
UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC COMMISSIONS(1) COMPANY(2)
------------------ ------------------ ------------------
<S> <C> <C> <C>
Per Share.......................... $ $ $
Total (3).......................... $ $ $
</TABLE>
- ---------------
(1) The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended.
(2) Before deducting expenses payable by the Company estimated at $ .
(3) The Company has granted to the U.S. Underwriters an option, exercisable
within 30 days of the date hereof, to purchase up to an aggregate of 330,000
additional Shares of Class A Common Stock at the price to public less
underwriting discounts and commissions for the purpose of covering
over-allotments, if any. If the U.S. Underwriters exercise such option in
full, the total price to public, underwriting discounts and commissions and
proceeds to the Company will be $ , $ and $ ,
respectively. See "Underwriters."
------------------
The Shares are offered, subject to prior sale, when, as and if accepted by
the Underwriters named herein and subject to approval of certain legal matters
by Katten Muchin & Zavis, counsel for the Underwriters. It is expected that
delivery of the Shares will be made on or about , 1997 at the office
of Morgan Stanley & Co. Incorporated, New York, N.Y., against payment therefor
in immediately available funds.
------------------
MORGAN STANLEY & CO. SALOMON BROTHERS INC
Incorporated
, 1997
<PAGE> 3
[ART WORK -- TO BE PROVIDED]
------------------------
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE CLASS A COMMON
STOCK AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET.
SUCH TRANSACTIONS MAY BE EFFECTED ON THE NEW YORK STOCK EXCHANGE OR OTHERWISE.
SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
<PAGE> 4
NO PERSON IS AUTHORIZED IN CONNECTION WITH ANY OFFERING MADE HEREBY TO GIVE
ANY INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS,
AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR BY ANY UNDERWRITER. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO
BUY ANY SECURITY OTHER THAN THE SHARES OF CLASS A COMMON STOCK OFFERED HEREBY,
NOR DOES IT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY
OF THE SECURITIES OFFERED HEREBY TO ANY PERSON IN ANY JURISDICTION IN WHICH IT
IS UNLAWFUL TO MAKE ANY SUCH OFFER OR SOLICITATION TO SUCH PERSON. NEITHER THE
DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREBY SHALL UNDER ANY
CIRCUMSTANCE IMPLY THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY
DATE SUBSEQUENT TO THE DATE HEREOF.
------------------------
For investors outside of the United States: No action has been or will be
taken in any jurisdiction by the Company or any Underwriter that would permit a
public offering of the Class A Common Stock or possession or distribution of
this Prospectus in any jurisdiction where action for that purpose is required,
other than in the United States. Persons into whose possession this Prospectus
comes are required by the Company and the Underwriters to inform themselves
about and to observe any restrictions as to the offering of the Class A Common
Stock and the distribution of this Prospectus.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary....................... 3
Risk Factors............................. 9
The Company.............................. 14
Use of Proceeds.......................... 16
Capitalization........................... 17
Price Range of Common Stock.............. 18
Dividend Policy.......................... 18
Exchange Rates........................... 18
Unaudited Pro Forma Financial
Information............................ 19
Selected Historical Financial Data....... 24
Management's Discussion and Analysis of
Financial Condition and Results of
Operations............................. 27
Industry................................. 35
Business................................. 37
<CAPTION>
PAGE
----
<S> <C>
Management............................... 47
Executive Compensation................... 50
Principal Stockholders................... 53
Certain Transactions..................... 55
Description of Capital Stock............. 55
Shares Eligible For Future Sale.......... 58
Certain United States Federal Tax
Considerations for Non-U.S. Holders of
Class A Common Stock................... 60
Underwriters............................. 62
Legal Matters............................ 64
Experts.................................. 65
Available Information.................... 65
Index to Financial Statements............ F-1
</TABLE>
------------------------
Sinter and PMH report their consolidated financial statements in U.S.
dollars. Krebsoge reports its consolidated financial statements in German
Deutschmarks ("DM"). ALL DOLLAR AMOUNTS SET FORTH IN THIS PROSPECTUS ARE IN U.S.
DOLLARS, EXCEPT WHERE OTHERWISE INDICATED. In this Prospectus references to
"dollars" and "$" are to United States dollars, and the term "United States" or
"U.S." means the United States of America, its states, its territories, its
possessions and all areas subject to its jurisdiction. For the convenience of
the reader, certain financial information contained in this Prospectus has been
translated into U.S. Dollars ($ or US$) from German Deutschmarks using, for
assets and liabilities, exchange rates at the end of the period for which the
relevant statements are prepared and, for revenues and expenses, the weighted
average rates for the period. These translations should not be construed as
representations that the German Deutschmark amounts actually represent such U.S.
dollar amounts or could be converted into U.S. dollars at the rate indicated or
at any other rate. See "Exchange Rates" for information regarding the rates of
exchange between the German Deutschmark and the U.S. dollar from January 1, 1993
to December 19, 1996. See "Risk Factors -- Risk of International Operations."
2
<PAGE> 5
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and financial statements (including the notes thereto) and pro forma
financial information appearing elsewhere in this Prospectus. As used in this
Prospectus, "Sinter" refers to Sinter Metals, Inc. and its subsidiaries and
their combined operations on a historical basis; "PMH" refers to Powder Metal
Holding, Inc. and its subsidiaries and their combined operations on a historical
basis; "Krebsoge" refers to Krebsoge Sinterholding GmbH and its subsidiaries and
their combined operations on a historical basis; and the "Company" refers to
Sinter, PMH and Krebsoge on a pro forma combined basis after consummation of
Sinter's acquisition of PMH and Krebsoge. Except as otherwise indicated herein,
the information contained in this Prospectus assumes that the U.S. Underwriters'
over-allotment option is not exercised. Certain capitalized terms which are used
but not defined in this summary are defined elsewhere in this Prospectus.
Prospective investors should carefully consider the information set forth under
the heading "Risk Factors."
THE COMPANY
The Company is the world's largest independent manufacturer of precision
pressed powder metal parts. With its recent acquisitions of Krebsoge and PMH
(the "Acquisitions"), the Company manufactures and markets over 4,000 different
pressed powder metal parts for use principally in the automotive industry in
North America and Europe and, to a lesser extent, for use in the lawn and
garden, power tool and home appliance industries in North America and Europe.
The Company has completed eight acquisitions since 1991, which, together with
internally generated growth, have resulted in net sales of the Company growing
at a compound annual rate of approximately 62% from $50.8 million in 1991 to
$353.4 million in 1995 on the pro forma basis described herein. See "Unaudited
Pro Forma Financial Information."
Approximately 74% of the Company's net sales in 1995 were made to the
automotive industry. The Company is the largest supplier of pressed powder metal
parts to Ford, Chrysler, Volkswagen, BMW and Daimler Benz and the second largest
supplier of such parts to General Motors. Approximately 95% of the Company's
sales to automotive customers are made on a sole source basis. Management
believes that automotive customers seek suppliers, such as the Company, who are
able to provide broad product lines, higher value-added products, low costs,
reliable service and, increasingly, global distribution capability. As these
customers continue to reduce the number of suppliers, the Company's ability to
meet their requirements is becoming an increasingly important competitive
advantage.
The Company operates 18 manufacturing facilities in the United States,
Germany, Sweden and Canada. At these facilities, the Company uses powder
metallurgy to transform metal alloys in powdered form into durable high quality
metal parts such as gears, bearings and sprockets. Pressed powder metal parts
are increasingly being substituted for metal parts manufactured using more
traditional technologies such as forging and casting, particularly in the
automotive industry. The Company believes the reasons for this trend are: (i)
pressed powder metal parts can be produced at a lower per unit cost due to the
elimination or significant reduction in secondary machining and raw material
waste as well as lower material costs; (ii) pressed powder metal parts have
performance attributes comparable to parts produced through other metalworking
processes; and (iii) powder metallurgy can manufacture parts with complex shapes
and dimensional tolerances that would be impractical or impossible to produce
using other metalworking processes.
According to the Metal Powder Industries Federation ("MPIF"), the North
American shipments of pressed powder metal have increased from approximately
315,000 tons in 1992 to approximately 434,000 tons in 1995, representing a
compound annual growth rate of 11.2%. This growth is primarily attributable to
increased demand for pressed powder metal parts by the North American automotive
industry and occurred even though the sales of light vehicles over this same
period grew at a compound annual rate of only approximately 1.3%. The amount of
pressed powder metal parts contained in the typical North American automobile
increased from approximately 20 pounds in 1990 to approximately 28 pounds in
1995.
According to the European Powder Metallurgy Society (the "EPMS"), the
European shipments of pressed powder metal have increased from approximately
109,000 tons in 1992 to approximately 129,000 tons
3
<PAGE> 6
in 1995, representing a compound annual growth rate of 5.8%. This growth is due
primarily to increased demand from the automotive sector as a result of the
introduction of new pressed powder metal parts for use in automobiles, and
increased demand for such parts.
The Company believes that the current trend of substitution of pressed
powder metal parts for cast or forged parts will continue both in North America
and Europe. Based on industry sources, the Company believes that the current
average pressed powder metal parts content in Ford Motor Company's cars will
rise from 40 pounds in 1996 to 50 pounds by the year 2000, and that the annual
growth in the pressed powder metal part content of General Motors' cars will be
5 to 10% through 2001.
The Company attributes its leading position in the manufacture of precision
pressed powder metal parts to the following competitive strengths: (i) broad
geographic scope and manufacturing capabilities; (ii) technological and
engineering expertise; (iii) a broad, stable customer base; (iv) access to
financial resources; and (v) a proven management team with a successful track
record. The Company believes that these competitive strengths, together with its
growth strategy will enable it to continue to grow in the pressed powder metal
parts industry.
GROWTH STRATEGY
The Company's business objective is to enhance its leadership position in
the pressed powder metal parts industry. To achieve this objective, the Company
will continue to pursue a growth strategy based on the following elements:
- Expanding and Penetrating its Customer Base. The Company believes that
there are significant growth opportunities in the pressed powder metal
parts industry driven principally by (i) the increasing use of pressed
powder metal parts by automotive and other industrial manufacturers and
(ii) the automotive industry's trend towards supplier consolidation and
globalization. The Company also believes that since no supplier controls
a significant share of the pressed powder metal parts market in either
North America or Europe, the Company has a significant opportunity to
increase its market share because of its geographic scope, technical
expertise, broad range of products and financial resources. To capitalize
on the Acquisitions, the Company intends to leverage its relationships
with Ford, Chrysler and General Motors to increase Krebsoge's sales to
American manufacturers in Europe. Similarly, the Company intends to
leverage Krebsoge's relationships with Volkswagen, Daimler Benz and other
European manufacturers to enhance the Company's marketing efforts in
North America with these European manufacturers. The Company also
believes that its broad geographic scope should enable it to increase its
customer base as it integrates its newly acquired foreign operations and
increases its marketing presence in new geographic regions.
- Expanding Product Lines. Since 1995, the Company has expanded its
traditional product line of over 4,000 pressed powder metal parts by
introducing more than 100 new pressed powder metal parts into the market.
As a result of the Company's continued emphasis on innovative research
and development, a number of its recent product introductions have
targeted markets in high growth areas such as completed integrated
sub-assemblies. Through the Acquisitions, the Company has expanded its
product line to include powder metallurgical applications such as filters
made of highly porous sintered metals, powder forged parts, highspeed
steel and highly engineered plastics and composites. Furthermore, new
product lines are currently being introduced by the Company, which are
based upon powder metal injection molding, friction materials and high
performance aluminum alloys. The Company believes that there are
significant growth opportunities associated with these additional product
lines.
- Improving Operating Efficiencies. Based on its experience with
integrating prior acquisitions, the Company believes that significant
opportunities exist to increase the operating efficiency of both PMH and
Krebsoge. The Company also believes that the Acquisitions will allow it
to increase the operating efficiency of the Company as a result of the
significant increase in the scale of the Company's operations, both
geographically and in terms of equipment, products lines, customer base
and financial resources. As part of integrating the Acquisitions, the
Company intends to implement changes in its operations, including
restructuring its management information systems, modifying Krebsoge's
and
4
<PAGE> 7
PMH's production processes to more closely resemble Sinter's,
centralizing its marketing and purchasing departments and coordinating
its research and development activities. The Company intends to
facilitate communication and share best practices among its world-wide
operations so that research and development ideas and accumulated
knowledge is shared among such operations. The Company also intends to
continue to foster an environment of continuous improvement by
benchmarking the attributes of its products and processes to those of its
competitors and customers in terms of quality, cost, efficiency and
delivery. The Company uses the results of such benchmarking to make
adjustments necessary to continue to be a leader in the manufacture,
marketing and distribution of pressed powder metal parts.
- Pursuing Strategic Acquisitions. The pressed powder metal parts industry
is highly fragmented in North America and Western Europe with over 250
participants, most of which have annual sales of less than $50 million.
The pressed powder metal parts industry has and is continuing to undergo
consolidation as evidenced by the Acquisitions and Sinter's recent
acquisition of certain assets of Delco Remy America, Inc. The Company
intends to take advantage of such opportunities by selectively pursuing
additional acquisitions in its existing as well as new markets.
- Achieving Cost Reductions. The Company has historically been able to
achieve cost reductions through the integration of its acquisitions.
Integrating the Acquisitions will enable the Company to eliminate
duplicative functions currently being performed by each of Sinter, PMH
and Krebsoge in the areas of administration, finance, sales, marketing,
purchasing, technical and field services and management information
systems. Management believes that cost savings of at least $4.5 million
can be achieved annually through eliminating duplicative facilities as
well as research and development and engineering personnel. The Company
is in the process of identifying additional cost savings, such as
purchasing, marketing and processing synergies that would increase
potential savings.
THE OFFERING
<TABLE>
<S> <C>
Class A Common Stock offered(1)
U.S. offering.............................. 1,760,000 shares
International offering..................... 440,000 shares
-----------------
Total.............................. 2,200,000 shares
-----------------
Common Stock to be outstanding after the
Offering:(2)
Class A Common Stock....................... 7,209,747 shares
Class B Common Stock....................... 2,543,381 shares
-----------------
Total.............................. 9,753,128 shares
-----------------
Use of Proceeds.............................. To repay certain outstanding indebtedness
incurred under the New Credit Facility in
connection with the Acquisitions. See "Use of
Proceeds."
NYSE Symbol.................................. SNM
</TABLE>
- ---------------
(1) Assumes no exercise of the U.S. Underwriters' over-allotment option. See
"Underwriters."
(2) Excludes 340,300 shares of Class A Common Stock issuable upon exercise of
employee stock options outstanding as of December 20, 1996, of which 103,000
were exercisable.
5
<PAGE> 8
SUMMARY PRO FORMA FINANCIAL INFORMATION
The summary historical consolidated financial data set forth below for the
year ended December 31, 1995 have been derived from, and are qualified by
reference to, the audited consolidated financial statements of Sinter, PMH and
Krebsoge included elsewhere in this Prospectus. The summary historical
consolidated financial data set forth below for the nine months ended September
30, 1996 have been derived from the unaudited consolidated financial statements
of Sinter and PMH. The unaudited pro forma condensed consolidated statements of
operations for the year ended December 31, 1995 and for the nine months ended
September 30, 1996 give effect to the Acquisitions, the New Credit Facility and
the offering of 2.2 million shares of Class A Common Stock by the Company (the
"Offering") as if they occurred on January 1, 1995. The pro forma as adjusted
condensed consolidated balance sheet as of September 30, 1996 has been prepared
as if the Acquisitions, the New Credit Facility (as defined herein) and the
Offering had occurred on that date.
The summary unaudited pro forma financial information does not purport to
present the actual financial position or results of operations of the Company as
if the transactions assumed therein had in fact occurred on the dates specified,
nor are they necessarily indicative of the results of operations that may be
achieved in the future. The summary unaudited pro forma financial information is
based on certain assumptions and adjustments described in the notes to the
Unaudited Pro Forma Financial Information and should be read in conjunction
therewith. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations," and the Consolidated Financial Statements and the Notes
thereto for each of Sinter, PMH and Krebsoge, included elsewhere in this
Prospectus. The summary unaudited pro forma financial information is subject to
a number of assumptions, limitations and qualifications.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1995
------------------------------------------------------------
HISTORICAL (1) PRO FORMA
----------------------------- --------------------------
SINTER KREBSOGE PMH ADJUSTMENTS CONSOLIDATED
------- -------- -------- ----------- ------------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net sales................................................... $94,310 $152,622 $106,473 -- $353,405
Cost of sales............................................... 73,245 119,386 92,263 $ 850(2) 285,744
------- -------- -------- --------- --------
Gross margin.............................................. 21,065 33,236 14,210 (850) 67,661
Selling, general and administrative expense................. 7,698 21,582 2,417(3) (3,000)(4) 28,697
Amortization of intangible assets........................... 332 18 -- 2,984(5) 3,334
------- -------- -------- --------- --------
Income from operations.................................... 13,035 11,636 11,793 (834) 35,630
Interest expense............................................ 287 6,118 3,133 2,688(6) 12,394
Other expense/(income)...................................... 111 (1,032) 115 -- (806)
------- -------- -------- --------- --------
Income before income tax expense.......................... 12,637 6,550 8,545 (3,690) 24,042
Income tax expense/(credit)................................. 4,750 1,132 (253) 3,191(7) 8,820
------- -------- -------- --------- --------
Net income before cumulative effect of accounting change.... $ 7,887 5,418 $ 8,798 $ (6,881) $ 15,222
======= ======== ======== ========= ========
Weighted average common shares outstanding.................. 7,500 9,700
Net income per share........................................ $ 1.05 $ 1.56
OTHER FINANCIAL DATA:
Depreciation and amortization............................... $ 4,272 $ 8,328 $ 5,622 $ 4,209 $ 22,431
Capital expenditures........................................ 4,301 8,226 3,195 -- 15,722
</TABLE>
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30, 1996
-----------------------------------------------------------
HISTORICAL (1) PRO FORMA
---------------------------- --------------------------
SINTER KREBSOGE PMH ADJUSTMENTS CONSOLIDATED
------- -------- ------- ----------- ------------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net sales.................................................... $83,068 $121,338 $82,604 -- $287,010
Cost of sales................................................ 64,205 94,467 74,838 $ (206)(2) 236,304
------- -------- ------- ------- --------
Gross margin............................................... 18,863 23,871 7,766 206 50,706
Selling, general and administrative expense.................. 7,322 16,561 5,326 (2,250)(4) 25,969
Amortization of intangible assets............................ 300 12 -- 2,238(5) 2,550
------- -------- ------- ------- --------
Income from operations..................................... 11,241 7,298 2,440 218 22,197
Interest expense............................................. 288 3,574 2,162 836(6) 6,860
Other expense/(income)....................................... (60) (576) 264 -- (372)
------- -------- ------- ------- --------
Income before income tax expense........................... 11,013 4,300 14 (618) 15,709
Income tax expense........................................... 4,025 716 31 500(7) 5,844
------- -------- ------- ------- --------
Net income (loss)............................................ $ 6,988 $ 3,584 $ (17) $(1,118) $ 9,865
======= ======== ======= ======= ========
Weighted average common shares outstanding................... 7,549 9,749
Net income per share......................................... $ 0.93 $ 1.02
</TABLE>
(footnotes on next page)
6
<PAGE> 9
<TABLE>
<CAPTION>
AS OF SEPTEMBER 30,
1996
---------------------
PRO FORMA
SINTER AS ADJUSTED
------- -----------
(IN THOUSANDS)
<S> <C> <C>
BALANCE SHEET DATA(1):
Working capital................................................................... $11,365 $ 44,558
Total assets.................................................................... 90,113 390,782
Short-term debt................................................................. 154 --
Long-term debt.................................................................. 15,821 178,627
Stockholders' equity.............................................................. 48,579 103,227
</TABLE>
- ---------------
(1) Reflects the historical financial statements of the companies. Krebsoge's
financial statements have been prepared in accordance with German GAAP. See
"Unaudited Pro Forma Financial Information". Krebsoge's balance sheet has
been converted to United States dollars using the September 30, 1996
exchange rate, and the statements of operations were converted using average
exchange rates for the period presented.
(2) Represents the adjustment to cost of sales resulting from:
<TABLE>
<CAPTION>
NINE MONTHS
YEAR ENDED ENDED
DECEMBER 31, 1995 SEPTEMBER 30, 1996
----------------- ------------------
<S> <C> <C>
Increased depreciation as a result of the
step-up in value of property, plant and
equipment.................................. $ 1,225 $ 919
Elimination of operating lease expense as a
result of property acquisition............. (375) (1,125)
------ ------
$ 850 $ (206)
====== ======
</TABLE>
(3) During 1995, PMH recorded $5,200 in income by reversing a restructuring
reserve that had been established in a prior year. This non-recurring
benefit has not been adjusted.
(4) Represents the adjustment to selling, general and administrative expense for
synergies that will be realized on an annual basis by the elimination of
duplicative headquarters facilities and functions ($2,000) and reduced raw
material costs ($1,000).
(5) Represents amortization of the goodwill generated by the Acquisitions,
summarized as follows:
<TABLE>
<CAPTION>
TOTAL
--------
<S> <C>
Goodwill recognized...................................................... $119,697
========
Amortization for the year ended December 31, 1995........................ $ 2,984
========
Amortization for the nine months ended September 30, 1996................ $ 2,238
========
</TABLE>
Consistent with the historical accounting policies of Sinter, goodwill is
amortized over 40 years.
(6) Represents net adjustment to reflect (i) interest expense on $169,432 of pro
forma borrowings to complete the Acquisitions after application of the net
proceeds from the Offering, (ii) amortization of the New Credit Facility
costs over the eight year life of the facility, and (iii) elimination of
historical interest expense on debt to be retired with the net proceeds of
the Offering and the New Credit Facility. The interest on the pro forma
borrowings was calculated using the rates in effect on December 20, 1996, as
adjusted for the reduced interest rate based upon a reset leverage ratio, as
defined in the New Credit Facility. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Liquidity and
Capital Resources".
(7) Represents the estimated tax effect of the adjustments, including the
reversal of the utilization of operating loss carryforwards of PMH that will
be limited as a result of the Acquisitions.
7
<PAGE> 10
SUMMARY HISTORICAL FINANCIAL DATA
The following sets forth summary historical financial data for Sinter for
the three years ended December 31, 1995, and the nine month periods ended
September 30, 1995 and 1996. The comparability of the historical consolidated
financial data reflected in this financial data has been significantly impacted
by acquisitions. The information presented below is qualified in its entirety
by, and should be read in conjunction with, "Management's Discussion and
Analysis of Financial Condition and Results of Operations," "Selected Historical
Financial Data," and the Consolidated Financial Statements and the Notes thereto
for Sinter, included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
NINE MONTHS
ENDED SEPTEMBER
YEAR ENDED DECEMBER 31, 30,
--------------------------- -----------------
1993 1994 1995 1995 1996
------- ------- ------- ------- -------
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales...................................... $68,584 $82,479 $94,310 $69,392 $83,068
Cost of sales.................................. 54,061 64,765 73,245 53,930 64,205
------- ------- ------- ------- -------
Gross margin................................. 14,523 17,714 21,065 15,462 18,863
Selling, general and administrative expense.... 6,442 8,212 7,698 5,476 7,322
Amortization of intangible assets.............. 308 302 332 242 300
Income from operations....................... 7,773 9,200 13,035 9,744 11,241
Interest expense............................... 5,107 1,956 287 220 288
Other expense, net............................. 11 166 111 109 (60)
------- ------- ------- ------- -------
Income before income taxes and extraordinary
charge.................................... 2,655 7,078 12,637 9,415 11,013
Provision for income taxes..................... 2,370 2,900 4,750 3,600 4,025
------- ------- ------- ------- -------
Net income before extraordinary charge....... 285 4,178 7,887 5,815 6,988
Extraordinary charge, net of tax............... -- (580) -- -- --
------- ------- ------- ------- -------
Net income................................... 285 3,598 7,887 5,815 6,988
Preferred dividends............................ (242) (202) -- -- --
------- ------- ------- ------- -------
Net income applicable to common stock.......... $ 43 $ 3,396 $ 7,887 $ 5,815 $ 6,988
======= ======= ======= ======= =======
Net income per share........................... $ .01 $ .61 $ 1.05 $ .78 $ .93
OTHER FINANCIAL DATA:
Depreciation and amortization.................. $ 3,256 $ 3,759 $ 4,272 $ 2,915 $ 3,930
Capital expenditures........................... 4,198 4,160 4,301 2,727 6,023
</TABLE>
<TABLE>
<CAPTION>
AS OF DECEMBER 31, AS OF
--------------------------- SEPTEMBER 30,
1993 1994 1995 1996
------- ------- ------- -----------------
<S> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital................................ $ (180) $ 2,130 $ 9,128 $11,365
Total assets................................... 47,086 53,335 65,220 90,113
Short-term debt................................ 2,187 28 267 154
Long-term debt................................. 20,013 2,736 4,432 15,821
Stockholders' equity........................... 5,599 32,244 41,462 48,579
</TABLE>
- ---------------
8
<PAGE> 11
RISK FACTORS
Prospective investors should consider, in addition to the information set
forth elsewhere in this Prospectus, the following matters in evaluating the
Company and the Class A Common Stock offered hereby.
RISKS OF INTEGRATING ACQUISITIONS
On a pro forma basis, the Acquisitions increased the Company's net sales in
1995 from $94.3 million to $353.4 million. Integration of the operations of
Krebsoge and PMH with those of Sinter will place a strain upon the Company's
financial and managerial resources. There can be no assurance that the Company
will be able to integrate these operations successfully. The full benefits of
the business combination of Sinter with Krebsoge and PMH will require the
integration of administrative, finance, purchasing, engineering, sales and
marketing organizations; the coordination of production efforts; and the
implementation of appropriate operational, financial and management systems and
controls. Such benefits will also be dependent, in part, upon an increase in the
productivity of the work force of PMH and Krebsoge and the ability to meet
performance requirements under specific contracts, each of which require
substantial attention from the senior management of the Company. Additionally,
the Company's management must also address concerns related to the integration
of the "corporate cultures" of PMH and Krebsoge with that of Sinter. If the
Company fails to successfully integrate PMH and Krebsoge, the Company's
business, financial condition and results of operations could be materially
adversely affected. In addition, the Unaudited Pro Forma Financial Information
contains adjustments relating to the integration of PMH and Krebsoge with
Sinter. Although these adjustments are based upon available information and
certain assumptions the Company considers reasonable as of the date of this
Prospectus, actual amounts could differ from those set forth therein. Moreover,
no assurance can be given that the anticipated impact of the integration of PMH
and Krebsoge with Sinter upon the Company's financial condition and results of
operations as presented in such pro forma information will be as presented. See
"Unaudited Pro Forma Financial Information" and "Management's Discussion and
Analysis of Financial Condition and Results of Operations."
DEPENDENCE ON AUTOMOTIVE INDUSTRY; AUTOMOTIVE INDUSTRY CYCLICALITY
The automotive industry is the primary end-user of pressed powder metal
parts, and in 1995 accounted for approximately 67% of the North American pressed
powder metal parts industry's aggregate production. Sinter's sales to the
automotive industry have increased as a percentage of total sales over the last
decade and accounted for approximately 61% of Sinter's net sales during 1995.
Giving effect to the Acquisitions, the Company's sales to the automotive
industry accounted for approximately 74% of the Company's net sales during 1995.
The automotive industry is highly cyclical, dependent on consumer spending and
subject to the impact of domestic and international economic conditions and
international trade. The Company also sells its products to customers in other
industries that experience cyclicality in demand for products, such as the home
appliance industry. Economic factors adversely affecting automotive production
and consumer spending could have an adverse effect on the Company's business,
financial condition and results of operations. See "Business -- Customers."
RELIANCE ON SIGNIFICANT CUSTOMERS
General Motors and Chrysler accounted for approximately 30% and 10%,
respectively, of Sinter's 1995 net sales, and its top five customers accounted
for approximately 55% of its net sales. Giving effect to the Acquisitions, in
1995 Ford, General Motors and Chrysler would have accounted for approximately
18%, 13% and 9%, respectively, of the Company's net sales, and the top five
customers of the Company would have accounted for approximately 49% of the
Company's net sales. Although the Company has had long-standing relationships
with each of Ford, General Motors and Chrysler and sells a wide variety of
products to each company, there can be no assurance that sales to these
customers will continue; further, continuation of these relationships is
dependent on the customers' on-going satisfaction with the price, quality and
delivery of the Company's products. Moreover, while the Company has long-term
supply arrangements with many of its customers, such supply arrangements do not
require such customers to purchase minimum amounts of products. Thus, a
significant decrease or interruption in business from Ford, General Motors or
Chrysler, or a
9
<PAGE> 12
loss of any of the Company's other significant customers, could have a material
adverse effect on the Company's financial condition, liquidity and results of
operations. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and "Business -- Customers."
RISKS OF ACQUISITION STRATEGY
The Company intends to pursue further growth through the opportunistic
acquisition of assets or companies involved in the pressed powder metal parts
industry and routinely reviews such acquisition opportunities. While the Company
believes that currently there are available a number of potential acquisition
candidates that would be complementary to its business, the Company currently
has no agreements, understandings or arrangements to acquire any specific
business or other material assets. The Company cannot predict whether it will be
successful in pursuing such acquisition opportunities or what the consequences
of any such acquisition would be. Future acquisitions may involve the
expenditure of significant funds and management time. Depending upon the nature,
size and timing of future acquisitions, the Company may be required to raise
additional financing. There is no assurance that such additional financing will
be available to the Company on acceptable terms.
SUBSTANTIAL LEVERAGE; RESTRICTIVE COVENANTS
Giving effect to the Acquisitions and the Offering, the Company's total
indebtedness on September 30, 1996 would have been $178.6 million, and the
percentage of total debt to total capitalization as of September 30, 1996 would
have been approximately 63%. The consequences of such leverage include, but are
not limited to, the following: (i) possible impairment of the Company's ability
to obtain additional financing in the future for working capital, capital
expenditures, acquisitions, product innovations, enhanced marketing programs,
refinancing of outstanding indebtedness and general corporate purposes; (ii)
significantly increased cash requirements for debt service; (iii) covenants and
operating restrictions imposed by the terms of the New Credit Facility requiring
the Company to meet certain financial tests and limiting, among other things,
its ability to borrow additional funds or to dispose of assets; (iv) putting the
Company at a competitive disadvantage against less leveraged competitors; and
(v) increasing the impact that a downturn in the Company's business will have on
its results of operations. Additionally, the Company's obligations under the New
Credit Facility are secured by liens on substantially all of its assets.
Accordingly, if the Company is in default under the New Credit Facility, the
lenders thereunder could foreclose upon their collateral, which would have a
material adverse effect upon the Company. The Company's ability to meet its debt
service obligations will depend upon its ability to execute its business plan,
which includes successfully integrating the businesses of PMH and Krebsoge with
existing operations and other factors, many of which are not within its control,
including fluctuating interest rates and general economic conditions. See
"-- Risks of Business Integration," and "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Pro Forma Liquidity and Capital
Resources."
DEPENDENCE ON CONTINUOUS IMPROVEMENT OF CRITICAL TECHNOLOGIES; PRODUCT CYCLES
The ability of the Company to continue to meet customer specifications in
respect of performance, cost, quality and service will be dependent upon the
ability of the Company to sustain the competitive technological advantages that
management believes the Company currently possesses. The Company's business may
therefore require from time to time significant additional capital expenditures
and investment in the areas of research and development, manufacturing and
management information systems. There can be no assurance that the Company will
be successful in this effort or that it will have the capital or other resources
available to meet this continuing challenge. The inability of the Company to
continuously improve and sustain its competitive technological advantages could
have a material adverse effect on the Company's business, financial condition
and results of operations. See "Business -- Business Strategy."
The Company's products are subject to obsolescence as the Company's
customers introduce new or redesigned products. The Company competes for new
business principally at the beginning of the development of new products, which
generally begins two to four years prior to full scale production, and the
redesign of existing products by its major customers, which typically involve
long lead times as well. Although the
10
<PAGE> 13
Company has been successful in the past in obtaining such new business, there
can be no assurance that the Company will continue to be able to obtain such new
business in the future. The failure of the Company to obtain new business when
its customers introduce new or redesigned products could lead to product
obsolescence, and thus have a material adverse effect on the Company's financial
condition, liquidity and results of operations.
RECENT FINANCIAL PERFORMANCE OF PMH
PMH, which was organized in 1989 and in which Sinter acquired a 30% equity
interest in 1993, experienced substantial operating losses in each of its fiscal
years prior to 1994, had a stockholders' deficit of approximately $45.1 million
as of December 31, 1993, and had to renegotiate debt arrangements in 1990, 1991
and 1993. In 1993, PMH's management commenced a restructuring of its
manufacturing operations and product lines in an attempt to improve its
financial performance. PMH's earnings increased in 1994, 1995 and 1996, reducing
the stockholders' deficit to $26.3 million as of November 22, 1996. As part of
its integration of PMH, the Company intends to, among other things, lower PMH's
overhead and other costs. However, even if such cost-saving measures are
implemented, there can be no assurance that PMH's future financial performance
will improve. If PMH's financial performance does not so improve, the Company's
business, financial condition and results of operations may be adversely
affected. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- PMH" and the Consolidated Financial Statements of PMH,
included elsewhere in this Prospectus.
COMPETITION
The Company operates in a highly competitive, fragmented industry. The
Company competes with other manufacturers of pressed powder metal parts, certain
of which may have greater financial and other resources than the Company, on the
basis of product quality and performance attributes, customer service, price,
new product innovation and timely delivery. The Company also competes with
companies using wrought steel or casting technologies, since the Company's
technological advancements are increasing the instances in which the Company's
parts may be substituted for wrought steel or iron parts. There can be no
assurance that the Company's business will not be adversely affected by
increased competition in the markets in which it operates. See
"Business -- Competition."
RISK OF INTERNATIONAL OPERATIONS
Giving effect to the Acquisitions, international sales accounted for
approximately 45% of the Company's 1995 net sales and approximately 44% of the
Company's assets. Foreign sales are subject to numerous risks, including
political and economic instability in foreign markets, restrictive trade
policies of foreign governments, economic conditions in local markets, the
imposition of product tariffs and the burdens of complying with a wide variety
of international and U.S. export laws. Additionally, a significant portion of
the Company's revenues and expenses are denominated in currencies other than
U.S. dollars. Changes in exchange rates therefore may have a significant effect
on the Company's business, financial condition and results of operations.
RELIANCE ON MANAGEMENT TEAM
The Company's continued success will depend largely on the efforts,
abilities and services of its current management team, which includes members of
Krebsoge's former management team. If for any reason any member of the
management team leaves the Company, the Company could be adversely affected. In
addition, the Company believes future growth will require the hiring of
additional managerial personnel and there can be no assurances that the Company
will be able to attract and retain such personnel when necessary. See
"Management -- Directors and Officers" and "-- Other Significant Employees of
the Company."
11
<PAGE> 14
SUPPLY AND PRICE OF POWDER METAL
The Company's principal raw material is powder metal, which is produced
primarily from scrap metal. Currently there are a limited number of producers of
high quality powder metal. The Company obtains its powder metal requirements
from a number of powder metal producers, including Hoeganaes Corporation in the
United States ("Hoeganaes U.S."), Mannesmann AG, Hoganas AB in Sweden ("Hoganas
Sweden"), Quebec Metal Powder and Kobelco. In 1995, Hoeganaes U.S. and Quebec
Metal supplied Sinter with approximately 45% and 30%, respectively, of its
powder metal requirements, Hoeganaes U.S. supplied PMH with substantially all of
its powder metal requirements and Mannesmann AG and Hoganas Sweden supplied
Krebsoge with approximately 36% and 50%, respectively, of its powder metal
requirements. The Company typically enters into two-year supply contracts with
its suppliers. In September 1996, Sinter entered into a new two-year supply
agreement with Hoeganaes U.S., which contains certain minimum purchase
requirements. Except for a brief period in 1993 during which Sinter experienced
difficulty in obtaining a particular blend of powder metal, the Company has
generally been able to obtain sufficient supplies of powder metal for its
operations. The price of powder metal is subject to change as the price paid by
powder metal producers for scrap metal changes. An interruption in the Company's
supply of powder metal or a substantial increase in its price, which the Company
is generally unable to pass-through to its customers, or a reduction in the
Company's need for powder metal below the minimum purchase requirement from
Hoeganaes U.S., could have a material adverse effect on the Company's business,
financial condition and results of operations. See "Business -- Suppliers and
Raw Materials."
LABOR RELATIONS
Approximately 60% of the Company's employees are covered by collective
bargaining or similar agreements which expire at various times over the next
several years. The Company's collective bargaining agreements with its employees
at its Van Wert, Ohio and St. Thomas, Ontario facilities expire March 1, 1997
and May 17, 1998, respectively. The Company's employees located in Germany are
represented by the National Metal Workers Union under a series of regional
contracts that run one to two years. The Company's employees in Sweden are
members of a Swedish labor union. The Company anticipates that new agreements on
satisfactory terms will be reached as the existing agreements expire. There can
be no assurance, however, that new agreements will be reached without a work
stoppage or strike or will be reached on terms satisfactory to the Company. A
prolonged work stoppage or strike at any one of the Company's manufacturing
facilities could have a material adverse effect on the Company's results of
operations. See "Business -- Employees."
ENVIRONMENTAL CONSIDERATIONS
Pressed powder metal parts manufacturers such as the Company are subject to
increasingly stringent environmental standards imposed by federal, state and
local environmental laws and regulations. The Company has made, and will
continue to make, expenditures to comply with such environmental standards. The
Company regularly reviews its procedures and policies for compliance with
environmental laws. However, current conditions and future events, such as
changes in existing laws and regulations, may give rise to additional compliance
costs that could have a material adverse effect on the Company's business,
financial condition, or results of operations. Historical groundwater and soil
contamination has been identified at PMH's St. Thomas, Ontario and Van Wert,
Ohio facilities. Moreover, as the Company integrates the operations of PMH and
Krebsoge, additional environmental issues may be discovered and, as a result,
the Company may incur additional expenditures to address such issues. No
assurance can be given that such additional environmental issues will not
adversely impact the Company's financial condition, liquidity or results of
operations. See "Business -- Environmental Matters."
CONTROL BY CERTAIN EXISTING STOCKHOLDERS; STOCKHOLDERS AGREEMENT; ANTI-TAKEOVER
PROVISIONS
Upon completion of the Offering, Citicorp Venture Capital, Ltd. ("CVC") and
certain members of the Company's management will beneficially own approximately
25% of the outstanding shares of the Class A Common Stock (the only voting
securities of the Company) and CVC will own all the outstanding shares of Class
B Common Stock (which are convertible into Class A Common Stock on a one-for-one
basis at the
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<PAGE> 15
option of the holder). The Company and certain of its significant stockholders,
who in the aggregate will hold after the Offering approximately 24% of the Class
A Common Stock and all of the shares of Class B Common Stock, have agreed to
vote their respective shares to elect certain persons to the Company's Board of
Directors. As a result, these stockholders may significantly impact the
direction of the affairs of the Company. See "Principal
Stockholders -- Stockholders Agreement" and "Description of Capital Stock."
Certain provisions of the Company's Restated Certificate of Incorporation
and Restated By-laws, as well as certain provisions of the Delaware General
Corporation Law, could have the effect of deterring hostile takeovers or
delaying or preventing changes in control or management of the Company. See
"Description of Capital Stock."
SHARES ELIGIBLE FOR FUTURE SALE
Immediately upon consummation of the Offering, the Company will have
outstanding 7,209,747 shares of Class A Common Stock, (7,539,747 if the U.S.
Underwriters exercise in full their over-allotment option). 4,750,000 of such
shares (5,080,000 if the U.S. Underwriters exercise in full their over-allotment
option) will have been sold in the Offering or the Company's initial public
offering in October 1994 and will be freely transferable without restriction or
further registration under the Securities Act of 1933, as amended (the
"Securities Act"), except for such shares owned at any time by an "affiliate" of
the Company within the meaning of Rule 144 under the Securities Act, which sales
will be subject to the volume limitations and certain other restrictions set
forth in Rule 144. CVC and certain other stockholders have the right, subject to
certain restrictions and limitations, to participate in future registered sales
of Class A Common Stock by the Company. No prediction can be made as to the
effect, if any, that future sales of shares of Class A Common Stock, or the
availability of shares of Class A Common Stock for future sales, will have on
the market price of shares of Class A Common Stock prevailing from time to time.
The sale of any substantial number of shares of Class A Common Stock following
the Offering, or the perception that such sales could occur, could have a
material adverse impact on the market price of the Class A Common Stock. See
"Shares Eligible for Future Sale."
LIMITED TRADING HISTORY AND MARKET FOR COMMON STOCK
The Company's Class A Common Stock has been traded on the New York Stock
Exchange ("NYSE") since October 1994, although prior to the Offering only
approximately 51% of the Company's outstanding Class A Common Stock was listed
for trading. After the Offering, approximately 66% of the Company's Class A
Common Stock will be listed for trading on the NYSE. The average daily trading
volume in the Class A Common Stock in the eleven months ended November 1996 was
approximately 11,000 shares per day. Accordingly, the prices at which such
trades have been made may not reflect the prices that would have prevailed had
there been a more active market. Furthermore, there can be no assurance that the
trading price for the Class A Common Stock will approximate the price of the
Class A Common Stock prior to the Offering. The public offering price for the
Class A Common Stock offered hereby has been determined by negotiations between
the Underwriters and the Company in light of recent sale prices of the Class A
Common Stock as reported on the NYSE. There can be no assurance that an active
public market for the Class A Common Stock will develop or be sustained after
the Offering or that the public offering price corresponds to the price at which
the Class A Common Stock will trade in the public market subsequent to the
Offering. See "Price Range of Common Stock."
PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
All statements contained herein that are not historical facts, including
but not limited to, the Company's integration plans, are based on current
expectations. These statements are forward looking in nature and involve a
number of risks and uncertainties. Actual results may vary materially. The
factors that could cause actual results to vary materially include but are not
limited to those items identified under "Risk Factors" and other risks described
from time to time in the Company's reports filed with the Securities and
Exchange Commission (the "Commission"). The Company cautions potential investors
not to place undue reliance on any such forward looking statements, which
statements are made pursuant to the Private Securities Litigation Reform Act of
1995, and as such, speak only as of the date made.
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<PAGE> 16
THE COMPANY
HISTORICAL OVERVIEW
Sinter was organized in December 1991 to acquire all of the outstanding
capital stock of Pennsylvania Pressed Metals ("PPM") from a subsidiary of the
Gleason Corporation. PPM had been engaged since 1965 in the design, engineering
and production of precision pressed powder metal parts for use principally in
the automotive, home appliance, lawn and garden and power tool industries. Since
1991, Sinter has completed eight acquisitions, increasing its net sales from
$50.8 million in 1991 to $353.4 million in 1995, on the pro forma basis
described herein.
- In August 1992, Sinter purchased certain assets of American Powder
Metals for $2.2 million and established a manufacturing facility in
Conover, North Carolina that provided Sinter with technology in the
production of aluminum alloy metal parts and broadened Sinter's
geographical scope into the southeastern United States.
- In November 1993, Sinter purchased a 30% interest in PMH, one of the
largest manufacturers of pressed powder metal parts in the United
States, offering products primarily to the United States automotive
industry.
- In July 1994, Sinter acquired Midwest Sintered Products Corporation
for approximately $3.1 million, which provided Sinter with a
strategically-located production facility near certain major
customers as well as additional production technology in the
production of stainless steel pressed powder metal parts.
- In June 1995, Sinter acquired Kolsva Sinterteknik Atkiebolag AB, a
Swedish corporation, for approximately $3.8 million and 100,000
shares of Class A Common Stock, which expanded Sinter's geographical
scope into Europe and introduced Sinter to the Scandinavian
automotive industry.
- In July 1996, Sinter acquired SinterForm Incorporated ("SinterForm")
in Michigan for approximately $8.6 million, which provided Sinter
with a strategically-located facility producing pressed powder metal
parts for use primarily in the automotive industry.
- In December 1996, Sinter acquired the assets of Delco Remy America,
Inc.'s Powder Metal Forge Unit. This acquisition provided Sinter
with additional technology and increased the breadth of its product
offerings.
THE ACQUISITIONS
On October 7, 1996, Sinter and MAAG Holding AG ("MAAG") entered into
agreements whereby Sinter agreed to buy the remaining 70% interest in PMH not
already owned by Sinter and 98.2% of the outstanding capital stock of Krebsoge,
for aggregate consideration of $215.0 million, subject to certain closing and
post-closing adjustments. Before the Acquisitions, PMH was the second largest
pressed powder metal parts manufacturer in North America, based upon 1995 sales
of approximately $106.5 million. Krebsoge, which offers pressed powder metal
parts for use principally in the European automotive, machine, power tool and
home appliance industries, is among the leading pressed powder metal parts
manufacturers in Europe, and the largest pressed powder metal parts producer in
Germany. Krebsoge had 1995 sales of approximately $152.9 million.
On December 19, 1996 (the "Closing Date"), the Acquisitions were
consummated for aggregate consideration of approximately $211.8 million. After
giving effect to the closing adjustments, MAAG received approximately $83.1
million from Sinter, subject to further adjustment based upon PMH's net working
capital, as defined, as of the Closing Date. On the Closing Date, Sinter, on
behalf of PMH and Krebsoge, repaid all of PMH's and Krebsoge's outstanding
indebtedness aggregating approximately $128.7 million.
As a result of the Acquisitions, the Company is the world's largest
independent pressed powder metal parts manufacturer, based on net sales. The
Company believes that the Acquisitions have strengthened its core
14
<PAGE> 17
business, expanded its product line and expanded its customer base, particularly
in Europe. Moreover, the Company expects to have an increased ability to bid on
contracts for new business areas that draw upon the complementary capabilities
and customer relationships of PMH and Krebsoge. Additionally, the Company
expects to achieve significant operating efficiencies and cost savings resulting
from the consolidation of facilities, staff reductions, process improvements and
elimination of duplicative costs. See "Business -- Competitive Strengths" and
"-- Growth Strategy."
In October 1994, Sinter completed an initial public offering of
approximately 2.5 million primary shares of Class A Common Stock. The Company
used the net proceeds of approximately $14.7 million to repay certain
outstanding indebtedness and to redeem the Company's then outstanding preferred
stock.
The Company's executive offices are located at 50 Public Square, Suite
3200, Cleveland, Ohio 44113, telephone (216) 771-6700, fax (216) 344-7631,
internet address http://sinter-metals.com. The Company's website and the
information contained in this site shall not be deemed a part of this
Prospectus.
15
<PAGE> 18
USE OF PROCEEDS
The Offering. The net proceeds to be received by the Company from the sale
of the 2.2 million shares of Class A Common Stock in the Offering (after
deduction of estimated underwriting discounts and commissions and expenses
payable by the Company) are estimated to be approximately $54.6 million ($62.8
million if the U.S. Underwriters' over-allotment option is exercised in full)
assuming an offering price of $27 per share. The net proceeds to be received by
the Company from the Offering will be used to retire $54.6 million of the U.S.
Term Facilities on a pro rata basis. Interest on the U.S. Term Facilities is
based on either the LIBOR rate or the Alternate Base Rate, which is the highest
of the Prime Rate, Federal Funds Effective Rate plus 1/2 of 1% and the Base CD
Rate plus 1% (in each case, as defined in the New Credit Facility), in each case
plus an applicable margin. The U.S. Term Facilities currently bear interest at a
weighted average of 8.41% per annum and mature, in the case of the Tranche A
Term Loan Facility, on June 30, 2003, and in the case of the Tranche B Term Loan
Facility, on June 30, 2005.
Financing the Acquisitions. In order to (i) fund the Acquisitions, including
the repayment of certain PMH and Krebsoge indebtedness, (ii) refinance Sinter's
then outstanding debt of $6.8 million, and (iii) pay related costs and expenses
of approximately $5.5 million, Sinter entered into a $275.0 million credit
facility with a syndicate of financial institutions (the "New Credit Facility").
Under the New Credit Facility, the lenders have provided the Company with (i)
three senior secured term loan facilities in the aggregate principal amount of
up to $225.0 million, allocated between (a) a Tranche A Term Loan Facility in an
aggregate principal amount of $30.0 million, (b) a Tranche B Term Loan Facility
in the aggregate principal amount of $115.0 million (together with the Tranche A
Term Loan Facility the "U.S. Term Facilities"), and (c) a German Term Facility
(the "German Term Facility") in the aggregate principal amount of DM 124.5
million (approximately $80.0 million), (ii) a senior secured revolving credit
facility in an aggregate amount equal to $30.0 million, of which up to $20.0
million will be available in the form of standby letters of credit and (iii) a
senior secured revolving credit facility in an aggregate amount of DM 30 million
(approximately $19.3 million), of which DM 10 million (approximately $6.4
million) will be available in the form of standby letters of credit. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources," "Related Party Transactions" and
"Underwriters."
The following sets forth the sources and uses of funds provided by the New
Credit Facility and the Offering.
<TABLE>
<CAPTION>
AMOUNT
--------------
(IN THOUSANDS)
<S> <C>
SOURCES OF FUNDS:
Gross proceeds from the Offering...................................... $ 59,400
Gross proceeds from the New Credit Facility
Revolving Credit Facility........................................... 3,410
Tranche A Facility.................................................. 30,000
Tranche B Facility.................................................. 115,000
German Term Loan.................................................... 80,000
-------
Total sources............................................... $287,810
=======
USES OF FUNDS:
Consideration for equity of Krebsoge and PMH.......................... $ 81,585
Repayment of Tranche A Facility....................................... 14,200
Repayment of Tranche B Facility....................................... 40,400
Repayment of PMH indebtedness......................................... 53,900
Repayment of Krebsoge indebtedness.................................... 74,832
Refinance existing Sinter bank debt................................... 11,289
Fees and expenses of New Credit Facility.............................. 6,804
Estimated fees and expenses of Offering............................... 4,800
-------
Total uses.................................................. $287,810
=======
</TABLE>
16
<PAGE> 19
CAPITALIZATION
The following sets forth the short-term debt and capitalization of Sinter
on (i) an actual basis as of September 30, 1996, (ii) on a pro forma basis to
reflect the consummation of the Acquisitions and the funding thereof with the
proceeds of the New Credit Facility and (iii) on a pro forma as adjusted basis
to reflect the issuance and the sale of 2.2 million shares of Class A Common
Stock by the Company in the Offering (assuming an initial offering price of $27
per share and after deduction of the estimated underwriting discounts and
commissions and expenses) and the application of the net proceeds therefrom to
the repayment of indebtedness. This table should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," "Unaudited Pro Forma Financial Information" and the Consolidated
Financial Statements of each of Sinter, Krebsoge and PMH and the Notes thereto,
included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
AS OF SEPTEMBER 30, 1996
--------------------------------------
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
-------- --------- -----------
(IN THOUSANDS, EXCEPT SHARE AND PER
SHARE AMOUNTS)
<S> <C> <C> <C>
Short-term debt:
Current portion of long-term debt.............. $ 154 $ -- $ --
======== ======== =========
Long-term debt, net of current maturity:
New Credit Facility............................ $ -- $224,080 $ 169,432
Term Loans..................................... 2,121 2,000 2,000
Revolving Credit Facility...................... 6,505 -- --
Industrial Development Bond.................... 7,195 7,195 7,195
-------- -------- ---------
Total long-term debt...................... 15,975 233,275 178,627
-------- -------- ---------
Stockholders' equity:
Preferred Stock, authorized 5,000,000 shares;
none issued and outstanding.................
Class A Common Stock, par value $.001 per
share; authorized 20,000,000 shares; issued
and outstanding 5,004,747 shares, and
7,204,747 shares on a pro forma basis(1).... 5 5 7
Class B Common Stock, par value $.001 per
share; authorized 5,000,000 shares; issued
and outstanding 2,543,381 shares............ 2 2 2
Additional paid-in capital..................... 27,925.. 27,925 82,571
Retained earnings.............................. 20,274 20,274 20,274
Other equity................................... 373 373 373
-------- -------- ---------
Total stockholders' equity................ 48,579 48,579 103,227
-------- -------- ---------
Total capitalization................... $ 64,554 $281,854 $ 281,854
======== ======== =========
</TABLE>
- ---------------
(1) Excludes 340,300 shares of Class A Common Stock issuable upon exercise of
employee stock options outstanding as of December 20, 1996, of which 103,000
were exercisable.
17
<PAGE> 20
PRICE RANGE OF COMMON STOCK
Sinter's Class A Common Stock has been traded on the NYSE since October 26,
1994 under the symbol "SNM." The following table sets forth, for the periods
indicated, the high and low closing sale prices for Sinter's Class A Common
Stock as reported on the NYSE:
<TABLE>
<CAPTION>
CLASS A COMMON
STOCK PRICE
-----------------
HIGH LOW
------ ------
<S> <C> <C>
1994
Fourth Quarter (since October 26, 1994)............. $10 3/8 $ 9
1995
First Quarter....................................... 10 8 1/2
Second Quarter...................................... 10 1/2 8 3/4
Third Quarter....................................... 11 3/8 9 7/8
Fourth Quarter...................................... 12 3/8 9 7/8
1996
First Quarter....................................... 15 7/8 11 5/8
Second Quarter...................................... 19 1/4 13 1/2
Third Quarter....................................... 22 1/4 16 3/4
Fourth Quarter (through December 20, 1996).......... 29 1/8 20
</TABLE>
As of December 20, 1996 there were approximately 99 holders of record of
Class A Common Stock and one holder of record of Class B Common Stock. The
Company believes that it has significantly more than 99 beneficial holders of
its Class A Common Stock. CVC is the sole holder of Class B Common Stock. See
"Principal Stockholders" and "Description of Capital Stock." A recent reported
last sale price of the Class A Common Stock on the NYSE is set forth on the
cover of this Prospectus.
DIVIDEND POLICY
The Company has not declared or paid any dividends on its Common Stock
since its incorporation. The Company currently intends to retain earnings to
support its growth strategy and does not anticipate paying dividends in the
foreseeable future. Payment of future dividends, if any, will be at the
discretion of the Company's Board of Directors after taking into account various
factors, including the Company's financial condition, operating results, current
and anticipated cash needs and plans for expansion. In addition, the payment of
dividends by the Company on its Common Stock is subject to limitations under the
New Credit Facility. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Liquidity and Capital Resources".
EXCHANGE RATES
The table below sets forth, for the periods and dates indicated, certain
information concerning the exchange rate for the German Deutschmark against the
U.S. dollar, based on the Noon Buying Rate. For a discussion of the effects of
currency fluctuations on the Company's operations, see "Management's Discussion
and Analysis of Financial Condition and Results of Operations -- Overview."
<TABLE>
<CAPTION>
DM PER US $1.00
--------------------------------------------
AT END AVERAGE
CALENDAR YEAR OF PERIOD RATE (1) HIGH LOW
- --------------------------------------------- --------- -------- ------ ------
<S> <C> <C> <C> <C>
1993......................................... 1.7263 1.6533 1.7480 1.5655
1994......................................... 1.5488 1.6228 1.7670 1.4860
1995......................................... 1.4335 1.4331 1.5653 1.3455
1996 (through December 19, 1996)............. 1.5590 1.5030 1.5730 1.4306
</TABLE>
- ---------------
(1) The average of the Noon Buying Rates on the last business day of each full
month during the relevant period.
18
<PAGE> 21
UNAUDITED PRO FORMA FINANCIAL INFORMATION
The following unaudited pro forma financial information (the "Unaudited Pro
Forma Financial Information") is based on the historical financial statements of
Sinter, PMH and Krebsoge and has been prepared to illustrate the effects of the
Acquisitions, the New Credit Facility, the Offering, and adjustments to the
Krebsoge financial information to conform the presentation to US GAAP.
The unaudited pro forma condensed consolidated statements of operations for
the year ended December 31, 1995 and for the nine months ended September 30,
1996 give effect to each of these transactions as if such transactions had been
completed as of January 1, 1995. The unaudited pro forma condensed consolidated
balance sheet as of September 30, 1996 gives effect to each of these
transactions as if such transactions had been completed on September 30, 1996.
The Krebsoge financial information is prepared in accordance with German
GAAP, and with respect to the year ended December 31, 1995, has been derived
from the audited financial statements included herein. The information presented
for the period ended September 30, 1996 has been derived from unaudited
financial information not included in this Prospectus. German GAAP differs from
U.S. GAAP in certain significant respects. Had the year ended December 31, 1995
financial information been recorded in accordance with U.S. GAAP, the net loss
would have been $(4,873) compared to $5,418 presented herein.
The Acquisitions will be accounted for using the purchase method of
accounting. The total purchase cost of the Acquisitions will be allocated to the
tangible and intangible assets acquired and liabilities assumed based upon their
respective fair values. The allocation of the aggregated purchase price
reflected in the Unaudited Pro Forma Financial Information is preliminary. The
final allocation of the purchase price will be contingent upon the receipt of
the final appraisals of certain acquired assets and final determination of
assumed liabilities.
The Unaudited Pro Forma Financial Information does not purport to represent
the actual financial position or results of operations of the Company had the
transactions and events assumed therein in fact occurred on the dates specified,
nor are they necessarily indicative of the results of operations that may be
achieved in the future. The Unaudited Pro Forma Financial Information is based
on certain assumptions and adjustments described in the notes hereto and should
be read in conjunction therewith. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations," and the Consolidated Financial
Statements and the Notes thereto for each of Sinter, PMH and Krebsoge, included
elsewhere in this Prospectus.
19
<PAGE> 22
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1995
------------------------------------------------------------------
HISTORICAL(1) PRO FORMA
--------------------------------- ----------------------------
SINTER KREBSOGE PMH ADJUSTMENTS CONSOLIDATED
------- -------- -------- ----------- ------------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
Net sales........................... $94,310 $152,622 $106,473 -- $353,405
Cost of sales....................... 73,245 119,386 92,263 $ 850(2) 285,744
------- -------- -------- ------- --------
Gross margin...................... 21,065 33,236 14,210 (850) 67,661
Selling, general and administrative
expense........................... 7,698 21,582 2,417(3) (3,000)(4) 28,697
Amortization of intangible assets... 332 18 -- 2,984(5) 3,334
------- -------- -------- ------- --------
Income from operations............ 13,035 11,636 11,793 (834) 35,630
Interest expense.................... 287 6,118 3,133 2,688(6) 12,394
Other expense/(income).............. 111 (1,032) 115 -- (806)
------- -------- -------- ------- --------
Income before income tax
expense........................ 12,637 6,550 8,545 (3,690) 24,042
Income tax expense/(credit)......... 4,750 1,132 (253) 3,191(7) 8,820
------- -------- -------- ------- --------
Net income before cumulative effect
of accounting change.............. $ 7,887 $ 5,418 $ 8,798 $(6,881) $ 15,222
======== ======== ======== ======== ========
Weighted average common shares
outstanding....................... 7,500 9,700
Net income per share................ $ 1.05 $ 1.56
</TABLE>
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30, 1996
-----------------------------------------------------------------
HISTORICAL(1) PRO FORMA
-------------------------------- ----------------------------
SINTER KREBSOGE PMH ADJUSTMENTS CONSOLIDATED
------- -------- ------- ----------- ------------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
Net sales........................... $83,068 $121,338 $82,604 -- $287,010
Cost of sales....................... 64,205 94,467 74,838 $ (206)(2) 236,304
------- -------- -------- ------- --------
Gross margin...................... 18,863 23,871 7,766 206 50,706
Selling, general and administrative
expense........................... 7,322 16,561 5,326 (2,250)(4) 25,959
Amortization of intangible assets... 300 12 -- 2,238(5) 2,550
------- -------- -------- ------- --------
Income from operations............ 11,241 7,298 2,440 218 22,197
Interest expense.................... 288 3,574 2,162 836(6) 6,860
Other expense/(income).............. (60) (576) 264 -- (372)
------- -------- -------- ------- --------
Income before income tax
expense........................ 11,013 4,300 14 (618) 15,709
Income tax expense.................. 4,025 716 31 500(7) 5,844
------- -------- -------- ------- --------
Net income/(loss)................... $ 6,988 $ 3,584 $ (17) $(1,118) $ 9,865
======= ======== ======== ======= ========
Weighted average common shares
outstanding....................... 7,549 9,749
Net income per share................ $ .93 $ 1.02
</TABLE>
20
<PAGE> 23
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
AS OF SEPTEMBER 30, 1996
-----------------------------------------------------------------
HISTORICAL (1) PRO FORMA
-------------------------------- ----------------------------
SINTER KREBSOGE PMH ADJUSTMENTS CONSOLIDATED
------- -------- ------- ----------- ------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Assets:
Cash and equivalents.............. $ 1,752 $ 3,520 $ 373 $ -- $ 5,645
Accounts receivable, net.......... 14,611 24,821 16,457 -- 55,889
Inventories....................... 13,751 19,186 7,062 -- 39,999
Other current assets.............. 775 578 2,169 -- 3,522
------- -------- -------- --------- --------
Total current assets......... 30,889 48,105 26,061 -- 105,055
Property, plant & equipment,
net............................ 35,043 35,412 30,280 33,556(8) 134,291
Intangible assets, net............ 18,325 1,002 -- 119,697(9) 139,024
Other assets...................... 5,856 870 186 5,500(10) 12,412
------- -------- -------- --------- --------
Total assets................. $90,113 $ 85,389 $56,527 $ 158,753 $390,782
======= ======== ======= ========= ========
Liabilities and Stockholder's Equity
Accounts and notes payable........ $10,209 $ 7,908 $59,631 $ (50,201)(11) $ 27,547
Other current liabilities......... 9,315 11,743 7,392 4,500(12) 32,950
------- -------- -------- --------- --------
Total current liabilities.... 19,524 19,651 67,023 (45,701) 60,497
Long-term debt.................... 9,316 42,108 2,600 124,603(11) 178,627
Revolving debt.................... 6,505 -- -- (6,505)(11) --
Related party debt................ -- 35,215 2,084 (37,299)(11) --
Other liabilities................. 810 20,690 13,912 (2,710)(13) 32,702
Deferred income taxes............. 5,379 -- -- 10,350(8) 15,729
------- -------- -------- --------- --------
Total liabilities............ 41,534 117,664 85,619 42,738 287,555
Preferred stock................... -- -- -- -- --
Common stock...................... 7 22,097 -- (22,095)(14) 9
Additional paid-in capital........ 27,925 6,557 49,649 (1,560)(14) 82,571
Other equity...................... 373 (180) 881 (701)(14) 373
Retained earnings................. 20,274 (60,749) (79,622) 140,371(14) 20,274
------- -------- -------- --------- --------
Total liabilities and stockholders'
equity............................ $90,113 $ 85,389 $56,527 $ 158,753 $390,782
======= ======== ======= ========= ========
</TABLE>
21
<PAGE> 24
NOTES TO PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT FOR PER SHARE DATA)
(1) Reflects the historical financial statements of the companies. Krebsoge's
balance sheet has been converted to United States dollars using the
September 30, 1996 exchange rate, and the statements of operations were
converted using average exchange rates for the period presented.
(2) Represents the adjustment to cost of sales resulting from:
<TABLE>
<CAPTION>
NINE MONTHS
YEAR ENDED ENDED
DECEMBER 31, 1995 SEPTEMBER 30, 1996
----------------- ------------------
<S> <C> <C>
Increased depreciation as a result of the
step-up in value of property, plant and
equipment.................................. $ 1,225 $ 919
Elimination of operating lease expense as a
result of property acquisition............. (375) (1,125)
------ ------
$ 850 $ (206)
====== ======
</TABLE>
(3) During 1995, PMH recorded $5,200 in income by reversing a restructuring
reserve that had been established in a prior year. This non-recurring
benefit has not been adjusted.
(4) Represents the adjustment to selling, general and administrative expense for
synergies that will be realized on an annual basis by the elimination of
duplicative headquarters facilities and functions ($2,000) and reduced raw
material costs ($1,000).
(5) Represents amortization of the goodwill generated by the Acquisitions,
summarized as follows:
<TABLE>
<CAPTION>
TOTAL
--------
<S> <C>
Goodwill recognized...................................................... $119,697
========
Amortization for the year ended December 31, 1995........................ $ 2,984
========
Amortization for the nine months ended September 30, 1996................ $ 2,238
========
</TABLE>
Consistent with the historical accounting policies of Sinter, goodwill is
amortized over 40 years.
(6) Represents net adjustment to reflect (i) interest expense on $169,432 of pro
forma borrowings, to complete the Acquisitions after application of the net
proceeds from the Offering, (ii) amortization of the New Credit Facility
costs over the eight year life of the facility, and (iii) elimination of
historical interest expense on debt to be retired with the net proceeds of
the Offering and the New Credit Facility. The interest on the pro forma
borrowings was calculated using the rates in effect on December 20, 1996, as
adjusted for the reduced interest rate based upon a reset leverage ratio, as
defined in the New Credit Facility. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Liquidity and
Capital Resources".
(7) Represents the estimated tax effect of the adjustments, including the
reversal of the utilization of operating loss carryforwards of PMH that will
be limited as a result of the Acquisitions.
(8) Increase in property, plant and equipment, net is attributable to the
application of purchase accounting to the acquired companies resulting in
the step-up of the property to fair value. The step-up was determined based
on recent appraisals of the property and the corresponding increase in
depreciation is reflected in the pro forma condensed consolidated statements
of operations for the year ended December 31, 1995
22
<PAGE> 25
and nine months ended September 30, 1996. Deferred taxes on the step-up have
been recorded based on the anticipated tax rates in effect.
<TABLE>
<CAPTION>
TOTAL
--------
<S> <C>
Historical net book value................................................ $ 65,692
Fair value at acquisition date........................................... 99,248
--------
Recorded step-up....................................................... $ 33,556
========
Deferred tax liability recorded.......................................... $ 10,350
========
</TABLE>
(9) Represents the premium paid after the application of purchase accounting to
identified tangible and intangible assets.
<TABLE>
<S> <C>
Cash purchase price...................................................... $211,800
Other direct costs of acquisition........................................ 12,141
Historical deficit of acquired entities.................................. 61,366
Repayment of historical indebtedness..................................... (132,054)
Value of property step-up................................................ (33,556)
--------
Recorded goodwill........................................................ $119,697
========
</TABLE>
(10) Represents costs incurred in connection with obtaining the New Credit
Facility to finance the Acquisitions. These costs are being amortized over
eight years in accordance with the term of the New Credit Facility. See
Note (6) above.
(11) Represents the effect of the pro forma borrowings under the New Credit
Facility to finance the Acquisitions, and refinance existing debt of Sinter
and application of the net proceeds of the Offering. See "Capitalization"
and Note (6) above.
(12) Represents the accrual of estimated severance and shut down costs of the
acquired companies in connection with the Acquisitions.
(13) Represents the recording of the fair value of certain long term liabilities
assumed as a result of the Acquisitions. These adjustments include
approximately $4,000 to reflect the pension liability in accordance with
Statement of Financial Accounting Standards No. 87 -- Employers' Accounting
for Pensions, and approximately $3,000 related to the present value of a
capital lease obligation.
(14) Reflects the elimination of the historical equity of Krebsoge and PMH as a
result of the Acquisitions. Additionally, represents the issuance of 2.2
million shares of Class A Common Stock at an assumed offering price of $27
per share, net of estimated underwriting discounts, commissions and
expenses.
23
<PAGE> 26
SELECTED HISTORICAL FINANCIAL DATA
SINTER
The selected consolidated financial data for Sinter presented below for,
and as of the end of each of the years in the three-year period ended December
31, 1995, is derived from Sinter's Consolidated Financial Statements which have
been audited by Arthur Andersen LLP, independent accountants. The consolidated
financial statements at December 31, 1994 and 1995 and for each of the three
years in the period ended December 31, 1995 and the auditors' report thereon are
included elsewhere in this Prospectus. The selected combined results of
operations data for the nine months ended September 30, 1995 and 1996 and the
balance sheet data at September 30, 1996 are derived from the unaudited
financial statements of Sinter and, in the opinion of Sinter's management,
reflect all adjustments necessary for a fair presentation of its results of
operations and financial condition. All such adjustments are of a normal
recurring nature. The results of operations for an interim period are not
necessarily indicative of results that may be expected for a full year or any
other interim period. This selected combined financial data should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations -- Sinter" and Sinter's Consolidated Financial
Statements and related Notes, included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------------------
THE NINE MONTHS ENDED
PREDECESSOR SEPTEMBER 30,
----------- -----------------
1991 1992 1993 1994 1995 1995 1996
----------- ------- ------- ------- ------- ------- -------
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net sales.......................... $50,809 $57,778 $68,584 $82,479 $94,310 $69,392 $83,068
Cost of sales...................... 42,054 46,606 54,061 64,765 73,245 53,930 64,205
------- ------- ------- ------- ------- ------- -------
Gross margin....................... 8,755 12,172 14,523 17,714 21,065 15,462 18,863
Selling, general and administrative
expense.......................... 3,837 5,018 6,442 8,212 7,698 5,476 7,322
Amortization of intangible
assets........................... 289 264 308 302 332 242 300
------- ------- ------- ------- ------- ------- -------
Income from operations............. 4,629 6,890 7,773 9,200 13,035 9,744 11,241
Interest expense................... 232 2,768 5,107 1,956 287 220 288
Other expense, net................. 203 45 11 166 111 109 (60)
------- ------- ------- ------- ------- ------- -------
Income before income taxes and
extraordinary
charge........................... 4,194 4,077 2,655 7,078 12,637 9,415 11,013
Provision for income
taxes............................ 1,986 1,875 2,370 2,900 4,750 3,600 4,025
------- ------- ------- ------- ------- ------- -------
Net income before extraordinary
charge........................... 2,208 2,202 285 4,178 7,887 5,815 6,988
Extraordinary charge, net.......... 42,054 -- -- (580) -- -- --
Net income......................... 2,208 2,202 285 3,598 7,887 5,815 6,988
Preferred dividends................ -- (242) (242) (202) -- -- --
------- ------- ------- ------- ------- ------- -------
Net income applicable to common
stock......................... $ 2,208 $ 1,960 $ 43 $ 3,396 $ 7,887 $ 5,815 $ 6,988
======= ======= ======= ======= ======= ======= =======
PER SHARE DATA:
Income before extraordinary
charge........................... $ .47 $ .01 $ .72 $ 1.05 $ .78 $ .93
Extraordinary charge............... -- -- (.11) -- -- --
Net income......................... .47 .01 .61 1.05 .78 .93
</TABLE>
<TABLE>
<CAPTION>
AS OF DECEMBER 31, AS OF
-------------------------------------------------- SEPTEMBER 30,
1991 1992 1993 1994 1995 1996
------- ------- ------- ------- ------- -------------
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Total assets.......................... $44,894 $47,086 $53,335 $65,220 $90,113
Total debt............................ 23,037 22,200 2,764 4,699 15,975
Stockholder's equity.................. 5,038 5,599 32,244 41,462 48,579
</TABLE>
24
<PAGE> 27
KREBSOGE
The selected consolidated statement of operations and balance sheet data
for the three years in the period ended December 31, 1995 are derived from
Krebsoge's Consolidated Financial Statements which have been audited for fiscal
year 1995 by Price Waterhouse GmbH, independent accountants, and for fiscal
years 1994 and 1993 by BDO Grunewalder Treuhard GmbH, independent accountants.
The Consolidated Financial Statements at December 31, 1994 and 1995 and for each
of the three years in the period ended December 31, 1995 and the auditors'
reports thereon are included elsewhere in this Prospectus. This selected
consolidated financial data should be read in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of
Operations -- Krebsoge" and Krebsoge's Consolidated Financial Statements and
related Notes, included elsewhere in this Prospectus.
The selected consolidated financial data presented below (unless otherwise
indicated) and Krebsoge's Consolidated Financial Statements included elsewhere
in this Prospectus are prepared in accordance with German GAAP and are presented
in DMs. German GAAP differs in certain significant respects from U.S. GAAP. For
a discussion of the significant differences between German GAAP and U.S. GAAP as
they relate to Krebsoge, see Note 26 to Krebsoge's Consolidated Financial
Statements.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------
1993 1994 1995
--------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales............................................. DM164,836 DM178,936 DM224,798
Net income (loss)..................................... (4,695) 4,416 7,782
Net (loss) in accordance with U.S. GAAP............... (12,590) (7,378) (6,569)
</TABLE>
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
-----------------------------------
1993 1994 1995
--------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C>
BALANCE SHEET DATA:
Total assets, including cumulative loss in excess of
equity.............................................. DM173,165 DM167,220 DM178,211
Total debt............................................ 140,756 130,734 123,107
Stockholders' deficit, classified as cumulative loss
in excess of equity................................. (70,501) (66,274) (54,905)
Stockholders' equity (deficit) in accordance with U.S.
GAAP................................................ 6,413 (1,154) (1,206)
</TABLE>
PMH
The selected consolidated statement of operations and balance sheet data
for the two years in the period ended December 31, 1995 and the period from
January 1, 1996 to November 22, 1996 are derived from PMH's Consolidated
Financial Statements which have been audited by Deloitte & Touche LLP,
independent auditors. The consolidated financial statements at December 31, 1995
and November 22, 1996 and for each of the two years in the period ended December
31, 1995 and the period from January 1, 1996 to November 22, 1996 and the
auditors' report thereon are included elsewhere in this Prospectus. The
consolidated statement of operations data for the year ended December 31, 1993
and the balance sheet data as of December 31, 1994 are derived from audited
financial statements not presented herein. This selected financial data should
be read in conjunction with "Management's Discussion and Analysis of Financial
Condition and Results of Opera-
25
<PAGE> 28
tions -- PMH" and PMH's Consolidated Financial Statements and related Notes,
included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
PERIOD FROM
YEAR ENDED DECEMBER 31, JANUARY 1, 1996
---------------------------------- TO
1993 1994 1995 NOVEMBER 22, 1996
-------- -------- -------- -----------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales................................. $ 97,647 $107,803 $106,473 $ 101,671
Income (loss) from operations............. (26,550) 7,002 11,793 4,774
Income (loss) before accounting change.... (36,524) 5,394 8,798 2,172
Cumulative effect of accounting change.... (1,853) -- 770 --
Net income (loss)......................... (38,377) 5,394 9,568 2,172
</TABLE>
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
--------------------- AS OF
1994 1995 NOVEMBER 22, 1996
-------- -------- -----------------
(IN THOUSANDS)
<S> <C> <C> <C>
BALANCE SHEET DATA:
Total assets.......................................... $ 54,148 $ 56,276 $ 59,094
Total debt............................................ 50,926 53,804 54,192
Capital leases........................................ 249 208 155
Stockholders' deficit................................. (39,815) (29,082) (26,331)
</TABLE>
26
<PAGE> 29
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The Overview and Pro Forma Liquidity and Capital Resources sections give
effect to the Acquisitions, the New Credit Facility and the Offering. This
discussion should be read in conjunction with Unaudited Pro Forma Financial
Information and Notes thereto set forth elsewhere in this Prospectus.
OVERVIEW
The Company is the world's largest independent manufacturer of precision
pressed powder metal parts. The Company manufactures and markets over 4,000
different pressed powder metal parts for use principally in the automotive
industries in North America and Europe and, to a lesser extent, the lawn and
garden, power tool and home appliance industries in North America and Europe.
Sinter was organized in 1991 to facilitate the stock acquisition of Pennsylvania
Pressed Metals, Inc. Since then, the Company has grown considerably through its
eight additional acquisitions, including Sweden's Kolsva Sinterteknik
("Sinterteknik") in June 1995, SinterForm, Inc. in 1996 and the Acquisitions.
Sinter accounted for all of these acquisitions under the purchase method of
accounting where the purchase price is allocated between identified tangible and
intangible assets purchased and liabilities assumed. Unallocated purchase price
is treated as goodwill and amortized over 40 years.
In October 1994, Sinter completed an initial public offering of its Class A
Common Stock, raising net proceeds of approximately $14.7 million. Sinter used
these net proceeds together with borrowings of approximately $2.0 million under
the Company's revolving credit facility to repay all of its then outstanding
senior and subordinated indebtedness and to redeem its then outstanding
preferred stock.
Net Sales. The Company's net sales are affected by numerous factors,
including automotive production schedules and North American and European
economic conditions. The Company's sales are also dependent on its ability to
provide highly engineered powder metal parts at competitive prices, and are
subject to fluctuation based on the production cycles of the major automotive
OEMs. Once an automotive OEM designates the Company to supply pressed powder
metal parts for a new vehicle program, the OEM will usually continue to purchase
those parts from the Company for the life of the program, although not
necessarily for a redesign. As a result, the life cycle for a typical pressed
powder metal part for use by an automotive OEM is about five to ten years,
although the exact time period may vary based on the particular part or the
success of the OEM platform of which it is a part. Approximately 95% of the
Company's automotive sales are made on a sole source basis. On a pro forma
basis, net sales to the automotive industry accounted for approximately 74% of
the Company's net sales in 1995, reflecting PMH's and Krebsoge's relatively high
concentration of sales to the automotive industry. Without the effect of the
Acquisitions, Sinter's sales to the automotive industry accounted for
approximately 61% of 1995 net sales.
The Company expects the percentage of automotive sales to increase as it
expands its ability to offer global service and based on the forecasted increase
in pressed powder metal part content per automobile. Before the Acquisitions,
substantially all of the Company's sales were made in North America. Giving
effect to the Acquisitions, international sales accounted for approximately 45%
of the Company's 1995 net sales. The Company expects sales in Western Europe to
account for an increasing percentage of the Company's total sales. A significant
portion of the Company's revenues and expenses are denominated in currencies
other than U.S. dollars. Changes in exchange rates therefore may have a
significant effect on the Company's results of operations and financial
condition.
Cost of Sales. The principal elements of cost of sales are direct labor,
raw materials and manufacturing overhead. The Company's costs are affected by
fluctuating raw material costs, but the impact of such fluctuation is partially
mitigated because the Company does not maintain long-term fixed price contracts
with its customers and is able to buy raw materials at competitive prices due to
the size of its purchases. Due to the capital-intensive nature of the Company's
business, plant utilization is a significant factor in determining the Company's
profitability. The Company manufactures over 4,000 parts with varying gross
margins. Accord-
27
<PAGE> 30
ingly, the Company's overall gross margin is impacted by its product mix, raw
material costs and plant utilization rates.
Selling, general and administrative expenses. Selling, general and
administrative expenses include the costs, associated with selling, general
corporate overhead and other related administrative functions. Integrating the
Acquisitions will enable the Company to eliminate duplicative functions
currently being performed by each of Sinter, PMH and Krebsoge in the areas of
administration, finance, sales, marketing, purchasing, technical and field
services and management information systems.
Income taxes. Income taxes consist of the consolidation of the tax
provisions, computed on a separate company basis, in each country in which the
Company has an established presence. In 1994 and 1995, the effective tax rate
was affected by the favorable difference in statutory tax rates between Sweden
and the United States and the utilization of certain net operating loss
carryforwards relating to PMH and Krebsoge.
RESULTS OF OPERATIONS: SINTER
The following table sets forth, for each of the periods indicated, certain
income statement data expressed as a percentage of net sales:
<TABLE>
<CAPTION>
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%
===== ===== ===== ===== =====
Gross profit..................................... 21.2 21.5 22.3 22.3 22.7
Selling, general and administrative expenses..... 9.4 10.0 8.2 7.9 8.8
Amortization of intangible assets................ .4 .4 .3 .4 .4
----- ----- ----- ----- -----
Income from operations........................... 11.3 11.2 13.8 14.0 13.5
Interest expense................................. 7.4 2.4 .3 .3 .4
Provision for income taxes....................... 3.5 3.5 5.0 5.2 4.8
Extraordinary charge............................. -- .7 -- -- --
----- ----- ----- ----- -----
Net income....................................... .4% 4.4% 8.4% 8.4% 8.4%
===== ===== ===== ===== =====
</TABLE>
NINE MONTHS ENDED SEPTEMBER 30, 1996 COMPARED TO NINE MONTHS ENDED
SEPTEMBER 30, 1995
Net Sales. Net sales increased $13.7 million, or 19.7%, to $83.1 million
in the first nine months of 1996 from $69.4 million in the comparable period of
1995. The increase in net sales reflects the impact of the Sinterteknik
acquisition, the SinterForm acquisition, increased penetration by the Company in
the automotive market and an increase in average selling price per unit. The
increased penetration in the automotive market is evidenced by an approximate
11.6% increase in automotive sales experienced by the Company in the first nine
months of 1996 over the first nine months of 1995, while North American light
vehicle production during the same period declined by .7%.
Gross Profit. Gross profit increased by $3.4 million, or 22.0%, to $18.9
million in 1996. The gross profit margin increased from 22.3% in 1995 to 22.7%
in 1996. The increase is principally attributable to a change in product mix and
the inclusion of Sinterteknik for a full nine months, which consistently reports
a higher gross margin than the domestic plants.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased $1.8 million in 1996 to $7.3 million.
Similarly, selling, general and administrative expenses as a percentage of sales
increased from 7.9% to 8.8% for the first nine months of 1995 and 1996,
respectively. The increase in selling, general and administrative expenses in
1996 is primarily attributable to the inclusion of Sinterteknik for nine months
of 1996 as compared to two months of 1995. Sinterteknik historically reports
higher selling, general and administrative expenses as a percentage of sales
than the domestic plants.
28
<PAGE> 31
Income From Operations. Income from operations increased by $1.5 million,
or 15.4%, in 1996, as compared to 1995. Income from operations as a percent of
net sales decreased from 14.0% in 1995 to 13.5% in 1996, reflecting the increase
in selling, general and administrative expenses described above.
Income Taxes. The provision for income taxes was $4.0 million in 1996 and
$3.6 million in 1995. The increase reflects increased income before income taxes
which was partially offset by the decline in the effective tax rate as a result
of more favorable income tax rates in Sweden.
YEAR ENDED 1995 COMPARED TO YEAR ENDED 1994
Net Sales. Net sales increased $11.8 million, or 14.3% to $94.3 million in
1995 from $82.5 million in 1994. The increase in net sales reflects increased
penetration in the automotive market, the partial year impact of the
Sinterteknik acquisition in June 1995, and the full year impact of the Midwest
Sintered Products Corporation ("Midwest") acquisition in July 1994. Due to the
increased utilization of powder metal parts by the automobile industry, Sinter
posted a 9% increase in automotive sales for the year, excluding the
Sinterteknik acquisition. This increase was primarily attributable to Sinter's
introduction of nearly 60 new parts in the last half of 1995. The sales
improvement was also partially the result of an increase in average selling
price per pound. The average selling price per pound, excluding Sinterteknik,
increased 9.5% in 1995. The increase in selling price per pound is a reflection
of a change in product mix, and an increase in Sinter's secondary finishing
operations.
Gross Profit. Gross profit increased by $3.4 million, or 18.9%, to $21.1
million in 1995. The gross profit margin increased modestly from 21.5% in 1994
to 22.3% in 1995, reflecting a change in product mix and the impact of improved
operating efficiencies. The improvement in operating efficiencies offset an
increase in raw material prices of approximately 5.6% in 1995 and an increase in
Sinter's outside secondary operations of 24.1%. The increase in outside
secondary costs is attributable to an increase in both volume and price.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses declined from the 1994 level of $8.2 million or 10.0% of
net sales to $7.7 million or 8.2% of net sales in 1995. The decline was
primarily attributable to the $2.4 million charge to compensation expense in
1994 resulting from the award of common stock to certain members of management
under Sinter's Management Incentive Stock Compensation Plan (the "Stock
Incentive Plan"). The Stock Incentive Plan was terminated at the time of
Sinter's initial public offering.
Income From Operations. Income from operations increased by $3.8 million
to $13.0 million, or 13.8% of net sales in 1995, as compared to $9.2 million, or
11.2% of net sales in 1994, reflecting the increase in net sales, the increase
in gross profit and gross profit percentage as well as the decline in selling,
general and administrative expenses.
Interest Expense. Interest expense decreased $1.7 million from $2.0
million in 1994 to $ .3 million in 1995. The decrease is the result of Sinter's
repayment of long-term indebtedness in 1994 from the proceeds of Sinter's
initial public offering. While Sinter's long-term debt was increased in 1995 due
to the acquisition of Sinterteknik, the amount of the indebtedness was reduced
in the last half of the year from cash flow generated by Sinter.
Income Taxes. The provision for income taxes was $4.8 million in 1995
reflecting an increase of $1.9 million from the 1994 provision of $2.9 million.
The effective tax rate in 1995 declined modestly from 1994 due to the lower
effective tax rate of Sinterteknik.
YEAR ENDED 1994 COMPARED TO YEAR ENDED 1993
Net Sales. Net sales increased $13.9 million, or 20.3%, to $82.5 million in
1994 from $68.6 million in 1993. The increase in net sales reflected the
five-month impact of the Midwest acquisition, general improvement in automotive
production and increased penetration in the automotive market. Excluding
Midwest, net sales increased $10.8 million, or 15.7%, from the 1993 level. The
sales improvement is attributable to an increase in volume and mix. Average
selling price per pound excluding Midwest increased
29
<PAGE> 32
4.9% in 1994, which is a reflection of a change in product mix as well as an
increase in Sinter's secondary finishing operations.
Gross Profit. Gross profit increased by $3.2 million, or 22.0% to $17.7
million in 1994. The gross profit margin increased modestly from 21.2% in 1993
to 21.5% in 1994, reflecting a change in product mix and the impact of improved
operating efficiencies offset in part by a raw material price increase in the
fourth quarter of 1994.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased $1.8 million in 1994 to $8.2 million or 10.0%
of net sales, from $6.4 million or 9.4% of net sales in 1993. The increase was
primarily attributable to the $2.4 million charge to compensation expense in
1994 resulting from the award of common stock to certain members of management
under the Stock Incentive Plan. The Stock Incentive Plan was terminated at the
time of Sinter's initial public offering.
Income From Operations. Income from operations increased by $1.4 million,
or 18.4% to $9.2 million, in 1994, compared to $7.8 million in 1993. This
increase is attributable to the increase in net sales and gross margin partially
offset by the increase in selling, general and administrative expenses.
Interest Expense. Interest expense decreased by approximately $3.1 million
or 61.7% from $5.1 million in 1993 to $2.0 million in 1994. Interest expense in
1993 included a charge of $2.9 million due to the repurchase of the capital
appreciation rights associated with Sinter's original acquisition financing.
Excluding the charge in 1993, interest expense would have been $2.2 million,
generating a decrease of $.2 million in 1994. The net decrease is the result of
Sinter's repayment of long-term indebtedness in the fourth quarter of 1994 from
the net proceeds of Sinter's initial public offering.
Income Taxes. The provision for income taxes was $2.9 million in 1994
reflecting an increase of $.5 million from the 1993 provision of $2.4 million.
The effective tax rate in 1994 declined significantly from 1993, primarily due
to the charge associated with the capital appreciation rights in 1993.
Extraordinary Charge. In 1994, the Company incurred an extraordinary charge
of $6.0 million reflecting the write-off of deferred financing costs and debt
discount associated with Sinter's early repayment of its long-term indebtedness.
LIQUIDITY AND CAPITAL RESOURCES
Sinter's principal capital requirements are to fund its working capital,
purchase capital equipment and fund potential acquisitions. In addition, the
Company's capital requirements will be affected by the substantial indebtedness
the Company incurred in connection with the financing of the Acquisitions, which
will increase the Company's cash requirements for debt service and will impose
various operating restrictions. Historically, Sinter has used income generated
by operations as well as borrowings available under long-term credit agreements
and the issuance of subordinated notes to fund these capital needs.
For the years ended December 31, 1994 and 1995 and for the nine months
ended September 30, 1996, Sinter's cash flow from operations was $10.2 million,
$8.7 million and $10.6 million; cash used by investing activities was $7.2
million, $8.3 million and $21.7 million; and cash provided by financing
activities was $(3.0) million, $1.0 million and $11.4 million, respectively. The
primary sources of cash provided by operating activities are net income and
non-cash charges for depreciation and amortization expense. Fluctuations between
periods in cash flows used for investing activities are attributable to the
levels of acquisition activity and fixed asset additions. Fluctuations between
periods in cash flows from financing activities are attributable to the levels
of borrowings required to fund that portion of investing activities not funded
by cash flows from operations.
Upon consummation of the Offering, the Company's primary sources of
liquidity will be cash flow from operations and borrowings under the New Credit
Facility. Under the New Credit Facility, the lenders have provided the Company
and its subsidiaries with (i) the U.S. Term Facilities and (ii) (a) a U.S.
dollar-denominated senior secured revolving credit facility (the "U.S. Revolving
Facility" and, together with the U.S. Term Facilities, the "U.S. Facilities") in
an aggregate principal amount equal to $30.0 million, of which
30
<PAGE> 33
up to $20.0 million will be available in the form of standby and trade letters
of credit and (b) a DM-denominated senior secured revolving credit facility (the
"German Revolving Facility" and, together with the German Term Facility, the
"German Facilities") in an aggregate principal amount equal to DM 30.0 million,
of which up to DM 10.0 million may be used for standby and trade letters of
credit. All obligations of the Company under the U.S. Facilities are guaranteed
by each domestic subsidiary of the Company and will be secured by substantially
all the assets of the Company and each of its domestic subsidiaries. All
obligations under the German Facilities are guaranteed by (i) German
subsidiaries of the Company (other than the German subsidiary borrower
thereunder) and (ii) the Company, and are secured by (i) substantially all the
assets of the Company and (ii) pledges of shares of certain German subsidiaries
of the Company and collateral assignments of certain intercompany obligations.
On the Closing Date, the Company used substantially all of the funds available
under the Term Facilities and approximately $3.4 million under the U.S.
Revolving Facility to finance the Acquisitions and related costs (including
repayment of related indebtedness and refinancing of certain Sinter
indebtedness). The net proceeds of the Offering will be used to repay a portion
of the indebtedness outstanding under the U.S. Term Facilities. See "Use of
Proceeds." Amounts repaid under the Term Facilities may not be reborrowed. The
New Credit Facility will require the Company to comply with certain financial
covenants (including a maximum debt to consolidated EBITDA ratio, a minimum
fixed charge coverage ratio, a minimum consolidated EBITDA to consolidated
interest expense ratio, minimum levels of annualized consolidated EBITDA and
minimum levels of net worth). The New Credit Facility also contains operating
covenants and restrictions that, among other things, limit the ability of the
Company and its subsidiaries to incur additional indebtedness, create liens, pay
dividends and make other restricted payments, make capital expenditures, make
certain investments, transact with affiliates, and consolidate, merge or
transfer assets.
Under the U.S. Facilities, the Company may elect to borrow at either the
LIBOR Rate (for dollar deposits) or the Alternate Base Rate ("ABR"), while the
borrowings under the German Facilities are at the DIBOR Rate (the LIBOR Rate for
DM deposits), or a German Prime Rate, in each case plus an additional spread
(the "Interest Rate Spread"). The Interest Rate Spread varies based upon the
underlying interest rate election, the facility under which funds were borrowed,
and the Company's leverage ratio (the ratio of indebtedness to EBITDA). In the
absence of a default under the New Credit Facility, the maximum Interest Rate
Spreads for the various combinations of interest rate elections and facilities
are as follows: 1.00% for U.S. Revolving Loans at the ABR; 2.00% for U.S.
Revolving Loans at the LIBOR Rate; 1.50% for Tranche A Term Loans at the ABR;
2.00% for Tranche B Term Loans at the ABR; 2.50% for Tranche A Term Loans at the
LIBOR Rate; 3.00% for Tranche B Term Loans at the LIBOR Rate; 1.00% for German
loans at the German Prime Rate; 2.50% for German Term Loans at the DIBOR Rate;
and 2.00% for German Revolving Loans at the DIBOR Rate. The Company's initial
borrowings under the New Credit Facility were made at the LIBOR Rate (in the
case of the U.S. Facilities) and DIBOR Rate (in the case of the German
Facilities), supplemented in all cases by the highest applicable Interest Rate
Spreads. Following the Offering, the Company may qualify for reduced Interest
Rate Spreads based upon an improved leverage ratio after the application of the
net proceeds.
The Company's aggregate capital expenditures for fiscal 1994 and fiscal
1995 and the nine months ended September 30, 1996 were $14.6 million, $14.5
million and $18.2 million, respectively. Management anticipates that the total
capital expenditures of the Company for the balance of fiscal 1996 and for
fiscal 1997 will be approximately $22.6 million, which will be used for the
Company's previously announced plant expansions, required improvements in PMH's
operations and other customary expenditures for a capital-intensive business.
Management plans to fund these capital expenditures from cash flow from
operations, and, if necessary, borrowings under the New Credit Facility.
Based upon current and anticipated levels of operations and plans for
integrating the Acquisitions, the Company believes that its cash on hand and
cash flow from operations, combined with borrowings available under the New
Credit Facility after application of the net proceeds from the Offering, will be
sufficient to enable the Company to meet its current and anticipated cash
operating requirements, including scheduled interest and principal payments,
capital expenditures and working capital needs for the next 12 months. However,
actual capital requirements may change, particularly as a result of any
acquisitions which the
31
<PAGE> 34
Company may make. The ability of the Company to meet its current and anticipated
operating requirements will be dependent upon the future performance of the
Company and its subsidiaries which, in turn, will be subject to general economic
conditions and to financial, business and other factors, including factors
beyond the Company's control. Depending on the nature, size and timing of future
acquisitions, the Company may be required to raise additional financing. There
can be no assurances that such additional financing will be available to the
Company on acceptable terms. Substantially all of the debt of the Company bears
interest at floating rates; therefore, its liquidity and financial condition is
and will continue to be affected by changes in prevailing interest rates.
ACCOUNTING STANDARDS CHANGES
Statement of Financial Accounting Standard No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of"
(SFAS 121) and Statement of Financial Accounting Standard No. 123, "Stock-Based
Compensation" (SFAS 123) are effective for fiscal years beginning after December
15, 1995. The Company has elected to adopt the disclosure only method allowed by
SFAS 123 for 1996. The Company does not believe that SFAS 121 will have a
material effect on the results of operations or financial position of the
Company.
EFFECT OF INFLATION
Inflation generally affects the Company by increasing the interest expense
of floating rate indebtedness and by increasing the cost of labor, equipment and
raw materials. The Company does not believe that inflation has had any material
effect on its business over the past three years.
BACKLOG
The Company has long-term supplier relationships with virtually all of its
customers and believes it supplies over 95% of its products to its automotive
customers on a sole source basis under blanket purchase orders. A majority of
the Company's shipments of products are made pursuant to releases from blanket
purchase orders and to meet the customers' requirements for the following 90
days. At September 30, 1996, giving effect to the Acquisitions, the Company's
backlog of firm sales releases amounted to approximately $73.7 million, compared
to approximately $67.2 million at December 31, 1995. The Company believes that
substantially all of its backlog of firm sales releases existing on September
30, 1996 will be shipped before March 31, 1997.
SEASONALITY
The Company typically experiences slightly lower revenues, gross profits
and operating income during the third and fourth quarters as compared to the
first and second quarters. Third and fourth quarter results are affected by
scheduled plant shut-downs for vacations and holidays at many of the Company's
customers, as well as manufacturers' changeovers in production lines.
RESULTS OF OPERATIONS: KREBSOGE
Sintermetallwerk Krebsoge GmbH was established in 1943 when Schweimer
Eisenwerke diversified into the production of self-lubricating bronze bearings
and soft iron materials. Between 1987 and 1995, Krebsoge made various
acquisitions in North America and the former East Germany, and invested in
smaller companies in China and India. In March of 1995, Krebsoge made a major
acquisition by purchasing the powder metal plant of a competitor, Ringsdorff
Sinter GmbH, with its operations in Bonn, Germany.
This discussion should be read in conjunction with the Krebsoge
Sinterholding GmbH Consolidated Financial Statements and notes thereto, which
are presented on a German GAAP basis. Such financial statements differ
significantly from U.S. GAAP. For a discussion of the principal differences
between German GAAP and U.S. GAAP, see Note 26.
32
<PAGE> 35
The following table sets forth, for each of the periods indicated, certain
income statement data expressed as a percentage of net sales:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
---------------
1994 1995
---- ----
<S> <C> <C>
Net sales.................................................... 100% 100%
==== ====
Gross profit................................................. 71.9 71.2
Personnel expenses........................................... 44.4 46.9
Other operating expenses..................................... 11.8 13.3
Taxes on income.............................................. 1.3 0.7
---- ----
Net income................................................... 2.5% 3.5%
==== ====
</TABLE>
YEAR ENDED DECEMBER 31, 1995 COMPARED TO YEAR ENDED DECEMBER 31, 1994
Net Sales. Net sales increased DM 45.9 million, or 25.6%, to DM 224.8
million in 1995 from DM 178.9 million in 1994. The increase in net sales relates
primarily to the inclusion of the results of the former Ringsdorf Sinter GmbH
("Bonn") since April 1, 1995 and Sintermetallwerk Krebsoge GmbH, which
experienced a DM 8.1 million increase in "pressed metal forging" sales and a
general increase in conventional pressed metal sales due to improved economic
conditions. The increase in net sales from acquisitions was offset in part by a
slight decrease in sales due to design changes from producers of airbag safety
parts, reduced volumes, and lower prices.
Gross profit. Gross profit, defined as total output less material costs,
increased by DM 31.3 million, or 24.3%, to DM 160.1 million in 1995 from DM
128.8 million in 1994. Gross margin declined by .7% to 71.2% in 1995 from 71.9%
in 1994. The decline in gross margin is a result of the lower margins
experienced at Bonn. Without the effect of Bonn, Krebsoge had a gross margin of
71.9%.
Personnel expenses. The increase in personnel expenses relates primarily
to wage increases at Bonn due to collective bargaining agreements and increased
overtime and headcount.
Other operating expenses. The increase in other operating expenses relates
primarily to increased commissions, freight and professional fees as a result of
the inclusion of Bonn and the increased sales levels.
Taxes on income. The taxes on income declined from 33.4% of pre-tax income
in 1994 to 16.7% of pre-tax income in 1995 as a result of the utilization of tax
loss carryforwards related to Bonn. Without the effect of these carryforwards,
the provisions would have remained relatively constant.
RESULTS OF OPERATIONS: PMH
PMH was established in 1989 for the purpose of forming ICM/Krebsoge, a
Delaware partnership (the "Partnership"), between Amplex Van West Corporation
("Amplex"), and Krebsoge Powder Metal, Inc. ("KPM"), a subsidiary of PMH. In
1991, Amplex sold its equity interest in the Partnership to American PM, Inc.
("APM"), a Delaware corporation and newly formed subsidiary of PMH. In 1993, a
30% equity interest in PMH was sold to Sinter and Sinter acquired the remaining
70% in connection with the Acquisitions.
This discussion should be read in conjunction with the Powder Metal
Holding, Inc. and Subsidiaries Consolidated Financial Statements and notes
thereto.
33
<PAGE> 36
The following table sets forth, for each of the periods indicated, certain
income statement data expressed as a percentage of net sales:
<TABLE>
<CAPTION>
YEAR ENDED JANUARY 1,
DECEMBER 31, 1996
--------------- THROUGH
1994 1995 NOVEMBER 22, 1996
----- ----- -----------------
<S> <C> <C> <C>
Net sales................................................... 100.0% 100.0% 100.0%
----- ----- -----
Gross profit................................................ 11.6 13.3 10.8
Selling, general and administrative expenses................ 8.1 7.2 6.1
Income from operations...................................... 6.5 11.1 4.7
Interest expense............................................ 1.5 2.9 2.3
Income tax credit........................................... -- 0.2 --
Cumulative effect of accounting change...................... -- (0.7) --
----- ----- -----
Net income.................................................. 5.0% 9.0% 2.1%
===== ===== =====
</TABLE>
YEAR ENDED DECEMBER 31, 1995 COMPARED TO YEAR ENDED DECEMBER 31, 1994
Net Sales. Net sales decreased $1.3 million, or (1.2)%, to $106.5 million
from $107.8 million. The decrease in net sales is the result of an overall
decline in North American light vehicle production in 1995 of approximately 3%.
The decline in automotive production was partially offset by the introduction of
new parts by PMH and the ramp-up of new parts introduced in previous years.
Pricing of PMH's products remained relatively stable during 1995 compared to
1994.
Gross Margin. Gross margin increased by $1.8 million, or 14.1% to $14.2
million in 1995. As a percentage of sales, gross margin increased from 11.6% to
13.3% in 1994 and 1995, respectively. The increase in gross margin is
attributable to a cost reduction plan implemented by PMH in 1995, which resulted
in reductions of direct and indirect labor, plant overtime and maintenance
expense, offset in part by raw material price increases during the first half of
1995.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses declined from the 1994 level of $8.8 million, or 8.1% of
net sales, to $7.7 million, or 7.2% of net sales in 1995. The decrease was also
a result of the cost reduction plan implemented in 1995, particularly general
and administrative cost declines at plant locations.
Restructuring Reserve. Income recorded as a result of reversing the
restructuring reserve increased $2.0 million to $5.3 million in 1995 from $3.3
million in 1994. The reversal of the restructuring reserve was the result of
PMH's decision to retain the Canadian facility. See Note 8 to the Consolidated
Financial Statements of PMH for a discussion of this reversal.
Income from Operations. Income from operations increased by $4.8 million
to $11.8 million, or 11.1% of sales in 1995, as compared to $7.0 million, or
6.5% of net sales in 1994. This increase reflects the improved gross margin,
reduced selling and administrative expenses, and the reversal of the
restructuring reserve as discussed above.
Interest Expense. Interest expense increased $1.5 million from $1.6
million in 1994 to $3.1 million in 1995. The increase is the result of an
overall increase in outstanding indebtedness, an increase in the letters of
credit outstanding and a general rate increase on the revolving loan. See Note 2
to the Consolidated Financial Statements of PMH for a discussion of PMH's
accounting treatment for the debt and interest forgiven by the lender in 1993.
Cumulative Effect of Accounting Change. Effective January 1, 1995, PMH
changed its method of recognizing actuarial gains and losses related to its U.S.
union and nonunion postretirement plans from the defer and amortize method
prescribed in Statement of Financial Accounting Standards No. 106, "Employers'
Accounting for Postretirement Benefits Other Than Pensions," to a method of
immediately recognizing the gains or losses at the measurement date. The
cumulative effect of this change as of January 1, 1995 was approximately $1.2
million, or approximately $.8 million after tax.
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INDUSTRY
OVERVIEW
The pressed powder metal parts industry in North America and Europe is
highly fragmented, with over 250 participants, most of which have annual sales
of less than $50 million. The Company believes that it is the only participant
in the pressed powder metal parts industry in either North America or Western
Europe with a market share of over 5% other than the Company. Pressed powder
metal parts are principally sold to automobile manufacturers and, to a lesser
extent, other industrial manufacturers.
Automotive Industry. The automotive industry is the largest purchaser of
pressed powder metal parts in North America and Europe, accounting for over 70%
of the total sales of pressed powder metal parts in these markets in 1995. In
Europe, sales of pressed powder metal parts to automotive manufacturers
accounted for over 77% of total industry sales in 1995, while in North America
sales of pressed powder metal parts to automotive manufacturers accounted for
over 67% of total sales in 1995. In addition, sales to the automotive market are
highly concentrated, particularly in North America, with General Motors, Ford
and Chrysler. Furthermore, sales to automotive manufacturers continue to
increase as a percentage of total pressed powder metal parts sales. For example,
in 1994, sales to automotive manufacturers accounted for 64% of total pressed
powder metal parts sales in North America, while in 1996 sales to automotive
manufacturers are expected to account for approximately 74% of such sales.
According to the MPIF, the North American shipments of pressed powder metal
have increased from approximately 315,000 tons in 1992 to approximately 434,000
tons in 1995, representing a compound annual growth rate of 11.2%. According to
the EPMS, the European shipments of pressed powder metal have increased from
approximately 109,000 tons in 1992 to approximately 129,000 tons in 1995,
representing a compound annual growth rate of 5.8%. This growth is due primarily
to increased demand from the automotive sector as a result of the introduction
of new pressed powder metal parts for use in automobiles and increased demand
for such parts.
Other Industrial Manufacturers. Sales of pressed powder metal parts to
non-automobile manufacturers, such as John Deere, Frigidaire and Electrolux,
represent an important part of the pressed powder metal parts industry in North
America and Europe. The customer base in this sector is highly fragmented, with
pressed powder metal parts being used by traditional industrial manufacturers
and increasingly by manufacturers of recreational and electronic products. The
pressed powder metal parts sold to these sectors are generally less
technologically advanced than those sold to automotive manufacturers because the
parts are generally less complex and require lower tolerances. However, the
average product life cycles in this sector (e.g., 20 to 25 years) are generally
longer than the average product life cycles in the automotive industry (e.g., 5
to 10 years). Sales in this sector tend to be cyclical in nature and are driven
by general economic conditions such as consumer durable goods spending and new
housing starts. Also, many sales in the lawn and garden category tend to be
seasonal and may also be affected by weather.
CURRENT INDUSTRY TRENDS
The key trends affecting the pressed powder metal parts industry include:
(i) increased substitution of pressed powder metal parts for cast or forged
parts in the automotive and non-automotive markets; (ii) globalization and
consolidation of the automotive OEM supplier base; and (iii) consolidation of
the pressed powder metal parts industry. The Company believes that these trends
have had and will continue to have a significant impact on its future
profitability and growth prospects.
Increased Substitution of Pressed Powder Metal Parts for Cast or Forged
Parts. The technology associated with the manufacture of pressed powder metal
parts has advanced significantly over the last decade. As a result, larger,
stronger, more structurally complex pressed powder metal parts have been
developed, which are being substituted more frequently for metal parts
manufactured using more traditional technologies, particularly in the automotive
industry. This trend has been driven principally by the cost advantages offered
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by powder metal technology, which allow parts to be manufactured faster with
less labor and with reduced material waste than conventional forged or cast
technology.
The Company believes that the current trend of substitution of pressed
powder metal parts for cast or forged parts will continue both in North America
and Europe. Based on industry sources, the Company believes that the current
average pressed powder metal parts content in Ford Motor Company's cars will
rise from 40 pounds in 1996 to 50 pounds by the year 2000, and that the annual
growth in the pressed powder metal part content of General Motors' cars will be
5 to 10% through 2001.
Globalization and Consolidation of OEM Supplier Base. Since the 1980s, in
response to competitive pressures to improve quality and reduce costs, Ford,
Chrysler, General Motors and other automotive original equipment manufacturers
("OEMs") have been actively reducing their supplier base to focus on key
suppliers who can meet increasingly strict standards for product quality,
on-time delivery and manufacturing costs. In addition, these OEMs have also
increasingly required their suppliers to maintain manufacturing facilities
capable of producing parts or components with consistent quality on a world-wide
basis. As a result, the automotive OEMs are more frequently awarding long-term
sole source supply arrangements to suppliers who are able to offer broad product
lines, higher value-added innovative products, low costs, reliable service and
global manufacturing capability. The Company believes that this trend should
continue in the foreseeable future and should provide the Company with an
opportunity, based on its competitive strengths, to expand its customer base and
increase its market penetration with current customers.
Consolidation of Pressed Powder Metal Parts Industry. The pressed powder
metal parts industry in North America and Europe has and is continuing to
undergo consolidation due to the trend in the automotive industry toward
long-term contracts with sole-source suppliers who can provide global
manufacturing and distribution capabilities, increasing customer demands for a
broad product line and the increasing financial resources needed to satisfy the
stringent quality and performance specifications of many customers, particularly
in the automotive industry. The Company believes that this trend towards
consolidation will continue and presents the Company with the opportunity to
make strategic acquisitions.
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BUSINESS
The Company is the world's largest independent manufacturer of precision
pressed powder metal parts. With the Acquisitions, the Company manufactures and
markets over 4,000 different pressed powder metal parts for use principally in
the automotive industry in North America and Europe and, to a lesser extent, for
use in the lawn and garden, power tool and home appliance industries in North
America and Europe. The Company has completed eight acquisitions since 1991,
which, together with internally generated growth, have resulted in net sales of
the Company growing at a compound annual rate of approximately 62% from $50.8
million in 1991 to $353.4 million in 1995 on the pro forma basis described
herein. See "Unaudited Pro Forma Financial Information."
Approximately 74% of the Company's net sales in 1995 were made to the
automotive industry. The Company is the largest supplier of pressed powder metal
parts to Ford, Chrysler, Volkswagen, BMW and Daimler Benz and the second largest
supplier of such parts to General Motors. Approximately 95% of the Company's
sales to automotive customers are made on a sole source basis. Management
believes that automotive customers seek suppliers, such as the Company, who are
able to offer broad product lines, higher value-added innovative products, low
costs, reliable service and, increasingly, global distribution capability. As
these customers continue to reduce the number of suppliers, the Company's
ability to meet their requirements becomes an increasingly important competitive
advantage.
The Company operates 18 manufacturing facilities in the United States,
Germany, Sweden and Canada. At these facilities, the Company uses powder
metallurgy to transform metal alloys in powdered form into high quality metal
parts such as gears, bearings and sprockets. Pressed powder metal parts are
increasingly being substituted for metal parts manufactured using more
traditional technologies such as forging and casting, particularly in the
automotive industry. The reasons for this trend are: (i) pressed powder metal
parts can be produced at a lower per unit cost due to the elimination or
significant reduction in secondary machining and raw material waste as well as
lower material costs; (ii) pressed powder metal parts have performance
attributes comparable to parts produced through other metalworking processes;
and (iii) powder metallurgy can manufacture parts with complex shapes and
dimensional tolerances that would be impractical or impossible to produce using
other metalworking processes.
COMPETITIVE STRENGTHS
The Company believes that it is a leading manufacturer of pressed powder
metal parts in North America and Europe and attributes this position and its
continued opportunities for growth and profitability to the following
competitive strengths:
- Broad Geographic Scope and Manufacturing Capabilities. The Company is
the world's largest independent pressed powder metal parts manufacturer
with a significant manufacturing and marketing presence in both North
America and Europe. Due to the opportunity for improved product quality
and consistency and cost savings, the trend among automotive OEMs has
been to consolidate their number of suppliers and require their suppliers
to manufacture parts or components in multiple geographic markets. The
Company believes that its geographic scope, which includes ten
manufacturing facilities in North America and eight in Europe, is unique
in the highly fragmented pressed powder metal parts industry and that it
is well-positioned to capitalize on these trends. As a result, the
Company believes that it should be able to increase its sales and profits
from the automotive industry even without long-term growth in this
industry. Furthermore, the Company believes that its broad geographic
scope should enable it to better withstand the effect of cyclical
downturns in any individual automotive market. Additionally, the Company
believes that the scope of its manufacturing facilities also allows it to
reduce or eliminate delays in satisfying customer orders because of
equipment problems and provides it with an opportunity to increase
capacity in the future without incurring additional capital expenditures.
- Technological and Engineering Expertise. The Company is an industry
leader in the development of engineering systems, processes and
technologies which allow the manufacturing of more complex and
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larger pressed powder metal parts that have higher densities, wear
resistance and strength than parts produced by more traditional powder
metallurgical processes. The Company's technological and engineering
capabilities have allowed it to develop new, higher value added products
for its customers, improve production processes to reduce per unit costs
and achieve the quality and reliability required by its major automotive
customers. Such capabilities enhance the Company's ability to win sole
source contracts, reduce operating costs and improve margins. For
example, the Company was the first pressed powder metal parts
manufacturer to introduce a new processing technology, known as HPP
processing, which expands the range of densities for pressed powder metal
parts that the Company can produce, while reducing the per product unit
cost than has been historically possible with other available processes.
To maintain and enhance its reputation as a technological leader, the
Company has made substantial investments in research and development.
- Broad, Stable Customer Base. The Company is a leading supplier of
pressed powder metal parts in North America and Europe to most major
automotive OEMs and a significant supplier of such parts to
non-automotive industrial manufacturers such as Frigidaire, John Deere
and Electrolux. The Company believes that its commitment to quality,
innovation, service and just-in-time delivery has enabled it to build and
maintain strong and stable customer relationships. In particular, the
Company believes that its strong relationships with its automotive OEM
customers allow it to identify business opportunities and customer needs
at the early stages of vehicle part design. Once an automotive OEM
designates the Company to supply pressed powder metal parts for a
specific program, the OEM usually will continue to purchase those parts
from the Company for the life of the program. The Company believes that
its broad customer base should also enable it to withstand the effects of
any downturn in business with any particular customer.
- Financial Resources. The pressed powder metal industry is
capital-intensive, requiring significant financial resources in order to
make the investments in facilities, equipment and technology necessary to
satisfy increasingly stringent customer demands for quality, global
manufacturing capability, reliability and cost control. With the
completion of the New Credit Facility and the Offering, together with
cash flow from operations, the Company believes that it will be able to
maintain and enhance its leadership position in the pressed powder metal
parts industry compared to smaller competitors with more limited
resources and capabilities.
- Proven Management Team With Successful Track Record. The Company's
senior management team has consistently increased sales and operating
profitability since 1991 by recognizing and acting on growth and
consolidation opportunities in the pressed powder metal parts industry,
introducing higher value added products, improving manufacturing
processes, reducing overhead and administrative costs and effecting and
integrating strategic acquisitions. The Company's senior management team
(Messrs. Carreras, LeVault and Kestner) collectively own 777,406 shares
of Class A Common Stock on a fully diluted basis (7.7% of total shares
outstanding giving effect to the Offering).
GROWTH STRATEGY
The Company's business objective is to enhance its leadership position in
the pressed powder metal parts industry. To achieve this objective, the Company
will continue to pursue a growth strategy based on the following elements:
- Expanding and Penetrating its Customer Base. The Company believes that
there are significant growth opportunities in the pressed powder metal
parts industry driven principally by (i) the increasing use of pressed
powder metal parts by automotive and other industrial manufacturers and
(ii) the automotive industry's trend towards supplier consolidation and
globalization. The Company also believes that since no supplier controls
a significant share of the pressed powder metal parts market in either
North America or Europe, the Company has a significant opportunity to
increase its market share because of its geographic scope, technical
expertise, broad range of products and financial resources. To capitalize
on the Acquisitions, the Company intends to leverage its relationships
with
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Ford, Chrysler and General Motors to increase Krebsoge's sales to
American manufacturers in Europe. Similarly, the Company intends to
leverage Krebsoge's relationships with Volkswagen, Daimler Benz and other
European manufacturers to enhance the Company's marketing efforts in
North America with these European manufacturers. The Company also
believes that its broad geographic scope should enable it to increase its
customer base as it integrates its newly acquired foreign operations and
increases its marketing presence in new geographic regions.
- Expanding Product Lines. Since 1995, the Company has expanded its
traditional product line of over 4,000 pressed powder metal parts by
introducing more than 100 new pressed powder metal parts into the market.
As a result of the Company's continued emphasis on innovative research
and development, a number of its recent product introductions have
targeted markets in high growth areas such as completed integrated
subassemblies. Through the Acquisitions, the Company has expanded its
product line to include powder metallurgical applications such as filters
made of highly porous sintered metals, powder forged parts, high-speed
steel and highly engineered plastics and composites. Furthermore, the
Company is introducing new product lines, which are based upon powder
metal injection molding, friction materials and high performance aluminum
alloys. The Company believes that there are significant growth
opportunities associated with these additional product lines.
- Improving Operating Efficiencies. Based on its experience with
integrating prior acquisitions, the Company believes that significant
opportunities exist to increase the operating efficiency of both PMH and
Krebsoge. The Company also believes that the Acquisitions will allow it
to increase the operating efficiency of the Company as a result of the
significant increase in the scale of the Company's operations, both
geographically and in terms of equipment, products lines, customer base
and financial resources. As part of integrating the Acquisitions, the
Company intends to implement changes in its operations, including
restructuring its management information systems, modifying Krebsoge's
and PMH's production processes to more closely resemble Sinter's,
centralizing its marketing and purchasing departments and coordinating
its research and development activities. The Company intends to
facilitate communication and share best practices among its world-wide
operations so that research and development ideas and accumulated
knowledge is shared among such operations. The Company also intends to
continue to foster an environment of continuous improvement by
benchmarking the attributes of its products and processes to those of its
competitors and customers in terms of quality, cost, efficiency and
delivery. The Company uses the results of such benchmarking to make
adjustments necessary to continue to be a leader in the manufacture,
marketing and distribution of pressed powder metal parts.
- Pursuing Strategic Acquisitions. The pressed powder metal parts industry
is highly fragmented in North America and Western Europe with over 250
participants, most of which have annual sales of less than $50 million.
The pressed powder metal parts industry has and is continuing to undergo
consolidation as evidenced by the Acquisitions and Sinter's most recent
acquisition of certain assets of Delco Remy America, Inc. The Company
intends to take advantage of such opportunities by selectively pursuing
additional acquisitions in its existing as well as new markets.
- Achieving Cost Reductions. The Company has historically been able to
achieve cost reductions through the integration of its acquisitions.
Integrating the Acquisitions will enable the Company to eliminate
duplicative functions currently being performed by each of Sinter, PMH
and Krebsoge in the areas of administration, finance, sales, marketing,
purchasing, technical and field services and management information
systems. Management believes that cost savings of at least $4.5 million
can be achieved annually through eliminating duplicative facilities as
well as research and development and engineering personnel. The Company
is in the process of identifying additional cost savings, such as
purchasing, marketing and processing synergies that would increase
potential savings. There can be no assurance that such cost savings will,
in fact, be realized.
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PRODUCTS
The Company manufactures and markets over 4,000 different pressed powder
metal parts and has introduced over 100 new parts since 1995. The Company
focuses on the manufacture of large, complex pressed powder metal parts that
have higher-densities, wear resistance and strength than parts produced by
traditional powder metallurgical processes.
Pressed Powder Metal Parts. The Company produces a wide variety of pressed
powder metal parts for use primarily in engines, transmissions and other drive
mechanisms. These parts include gears, sprockets, bearings, clutch mechanisms,
oil pump gears and rotors, pulleys, sensor rings and other structural parts
suitable for high-stress applications. The Company focuses on manufacturing
pressed powder metal parts suitable for such high-stress applications because
such parts generally provide higher margins and involve less competition than
traditional high volume, undifferentiated pressed powder metal parts, which
typically require less engineering and less sophisticated production techniques.
Pressed powder metal parts can typically be manufactured at a lower per
unit cost as compared to similar parts produced using wrought steel or iron
technologies due to (i) a reduction in the amount of additional capital, labor,
energy and overhead costs required and (ii) the reduction or elimination of raw
material scrap or waste that is inherent in secondary manufacturing processes.
In addition to cost savings, powder metallurgy permits the manufacture of parts
to close dimensional tolerances and of complex or unique shapes which would be
impractical or impossible to produce using other metalworking processes.
Additional Products. The Company has expanded its traditional product line
to include powder metallurgical applications such as filters made of highly
porous sintered metals, powder forged parts, high-speed steel and highly
engineered plastics and composites. The Company is also introducing new product
lines to the market which are based upon powder metal injection molding,
friction materials and high performance aluminum alloys.
- Sintered Filters. Highly porous filters, primarily for use in the
chemical and processing industries, are manufactured using pressed metal
technology and either bronze, stainless steel fibers or powders, nickel
based alloys or titanium.
- Powder Forging. Powder forging adds a forging step to a pre-formed
pressed powder metal part resulting in a product that is comparable to a
conventionally forged steel part.
- Plastics and Composites. Precision parts made of high thermo-set
material which are corrosion resistant, light weight and provide wide
design flexibility.
- Powder Metal Injection Molding. Metal injection molding involves a
mixture of metal powder and plastic binder which is injection molded and
sintered, and enables the Company to manufacture small pressed powder
metal parts in intricate shapes with tight tolerances.
- Aluminum Alloys. Aluminum parts are manufactured using substantially the
same procedure as conventional pressed powder metal parts, except the
sintering process is performed at a lower temperature.
The Company believes that there are significant growth opportunities
associated with these additional product lines.
Product Cycles. In the automotive market, the Company principally competes
for new business at the beginning of the development of new products, which
generally begins two to five years prior to full scale production, and the
redesign of existing products which also involves long lead times. During this
pre-production period, the Company usually works with its customers to develop
the parts and tooling required to meet the customers' specifications. Once the
parts are developed, they are subjected to rigorous customer testing to confirm
that such parts meet its specifications and quality standards. Because of the
time and costs involved in developing and testing new parts, once an automotive
OEM designates the Company to supply
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pressed powder metal parts for a new vehicle program, the OEM will usually
continue to purchase those parts from the Company for the life of the program,
although not necessarily for a redesign. As a result, the life cycle for a
typical pressed powder metal part for use by an automotive OEM is about five to
ten years, although the exact time period may vary based on the particular part
or the success of the specific OEM platform. The Company believes that it has
developed strong relationships with its automotive OEMs which allows it to
identify business opportunities and customer needs at early stages of vehicle
design and has helped the Company develop a significant backlog of business.
The pre-production phase for the Company's non-automotive parts is
typically shorter than for automotive parts, while the production phase for
non-automotive parts generally runs significantly longer, in some cases as long
as twenty to twenty-five years. However, because there are less start-up costs
and shorter lead times involved, non-automotive parts are generally more
price-sensitive and do not create as much customer loyalty as do automotive
parts.
MANUFACTURING
The Company uses powder metallurgy to transform powdered metal alloys into
high quality pressed powder metal parts using the following three steps:
- MIXING/COMPOUNDING: Elemental or alloyed metal powders, lubricants and
certain other additives are blended together according to formulas, many
of which are proprietary, designed to produce specific performance
characteristics. The Company often collaborates with pressed powder metal
suppliers, equipment manufacturers and customers in developing new
mixtures that will produce pressed powder metal parts with greater
strength, hardness and durability.
- MOLDING/COMPACTING: A specific amount of the powder formulation is
automatically fed into a cavity within a precision die in a molding
press. The material is then compacted under pressures up to 60 tons per
square inch. This produces a "green part" of the size and shape of the
finished component when ejected from the die but requires sintering to
bond the materials together.
- SINTERING: After compacting, the green part is sent through a controlled
atmosphere furnace where it is heated to a specific temperature which
metallurgically bonds the metal powders while retaining the shape of the
compacted part. The sintering process hardens and strengthens the pressed
powder metal part.
In certain circumstances, the pressed powder metal part undergoes
additional processing operations to attain customer specifications for tighter
dimensional tolerances, greater density, increased hardness or corrosion
resistance. These operations include heat treatment, coining, turning, drilling,
grinding or applying a corrosion resistant coating. These additional processing
operations are typically performed by the Company or, in certain instances, are
subcontracted to outside processors.
The Company's manufacturing capabilities are enhanced by its expertise in
the development, engineering and production of precision tools and dies for use
in its own production operations, which enables the Company to produce
higher-quality, low cost pressed powder metal parts while minimizing down time
and accelerating turnaround time in production. For example, the Company is
often able to design a die that minimizes the need for additional machining of a
particular product, which in turn lowers the overall production costs associated
with such products. The Company also maintains state-of-the-art technology to
improve its tool and die capabilities and has computerized most of the design
and engineering portions of its tool and die production process.
SALES AND MARKETING
The Company's sales are handled through a combination of independent sales
representatives and in-house account representatives and technical advisors. The
independent sales representatives' primary responsibility is to develop new
business by understanding each customer's product development plans to involve
the Company in the development stage of new products and to suggest replacements
for competitors' products. In
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addition, the independent sales representatives serve each account after the
sale has been made to ensure continued customer satisfaction. The Company's
in-house account representatives, together with Company technical advisors,
provide technical expertise and advice needed in the development stage of new
products and serve as troubleshooters for customers with respect to existing
products. As of December 15, 1996, the Company had 35 independent sales
representatives and 30 in-house account representatives.
The Company intends to restructure its sales and marketing department in
order to centralize its world-wide sales and marketing efforts. As part of this
restructuring, the Company established the position of director of marketing to
take responsibility for, among other things, coordinating and enhancing the
sales and marketing efforts of the Company's in-house and independent sales
representatives. The Company has decided to use its in-house sales
representatives principally for its automotive customers in North America, and
its independent sales representatives for its non-automotive customers in North
America. These changes are intended to better align the Company's sales force
with the needs of its customers. In Europe, the Company intends to continue
using a combination of in-house and independent sales representatives to market
its products.
The Company currently markets and sells its products principally in the
Northeast, Midwest and Southeast, and internationally, principally in Germany
and Sweden. International sales accounted for approximately 45% of the Company's
net sales in 1995 on a pro forma basis.
CUSTOMERS
Sales to the automotive industry have historically constituted a
substantial portion of the net sales of the Company. The majority of the
Company's remaining sales are distributed among the lawn and garden, home
appliance and power tool industries. In 1995, on a pro forma basis, sales to the
automotive industry accounted for approximately 74% of the net sales of the
Company with Ford, General Motors, Chrysler and Volkswagen accounting for
approximately 18%, 13%, 9% and 5% of the Company's net sales, respectively. No
other customer accounted for over 5% of the Company's net sales in 1995 on a pro
forma basis. The Company's top five customers accounted for approximately 49% of
its net sales in 1995 giving effect to the Acquisitions. No single part sold to
a customer accounted for more than 5% of Sinter's or, giving effect to the
Acquisitions, the Company's net sales in 1995. On a pro forma basis, over the
past ten years, the Company has not lost any customer accounting for over 5% of
net sales.
The Company works closely with its major customers during the development
and redesign stages of their products. The Company believes that its commitment
to quality, service and just-in-time delivery has enabled it to build and
maintain strong and stable customer relationships. In addition, the Company has
received preferred supplier awards from many of its customers, including General
Motors, Ford and Chrysler.
SUPPLIERS AND RAW MATERIALS
The basic raw materials required for the Company's pressed powder metal
operations are ferrous and nonferrous powder metals. The Company obtains these
powder metals from a number of powder metal producers, including Hoeganaes U.S.,
Hoganas Sweden, Mannesmann AG and Quebec Metal Powder. Giving effect to the
Acquisitions, Hoeganaes U.S. and Quebec Metal Powder supplied the Company with
approximately 45% and 30%, respectively, of its powder metal requirements in the
United States in 1995, while Hoganas Sweden and Mannesmann AG supplied the
Company with approximately 50% and 36%, respectively, of its powder metal
requirements in Europe in 1995. The Company believes that it is one of the
largest customers of Hoeganaes U.S., Hoganas Sweden and Mannesmann.
The Company typically enters into purchase contracts with its principal
suppliers which generally have two-year terms. In North America, these contracts
provide for adjustments in the prices paid by the Company depending upon the
price of scrap metal. In Europe, the price paid by the Company for powder metal
is fixed at the time the contract is executed. In September 1996, Sinter entered
into a two-year supply minimum purchase contract with Hoeganaes U.S. None of the
Company's contracts with other suppliers provide for minimum purchase
requirements. The Company has generally been able to obtain adequate supplies of
powder metal for its operations.
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In an effort to ensure a continued source of supply of powder metal at
competitive prices, the Company concentrates on developing relationships with
its suppliers and becoming an important customer to such suppliers. In many
instances, the Company works in close consultation with its suppliers in the
development of new combinations of powder metal. The Company believes that its
relationships with its suppliers are good.
TECHNOLOGY AND QUALITY CONTROL
The Company believes that it is an industry leader in the development of
engineering systems, processes and technologies to allow the manufacturing of
more complex and larger pressed powder metal parts that have higher densities,
wear resistance and strength than parts produced by more traditional powder
metallurgical processes. In many instances, the Company works with its suppliers
and customers, as well as with others, to develop new processes and
technologies. The Company was the first pressed powder metal parts manufacturer
to introduce a new pressed powder metal processing technology, known as HPP
processing, which expands the range of densities for pressed powder metal parts
that the Company can produce, at a lower cost per product unit than has been
possible to date with other available processes. In addition, Sinter has
considerable production experience in pressed aluminum and stainless steel
technologies, which allow reductions in weight of parts when substituted for
steel products. Krebsoge has successfully developed a proprietary powder forging
process, which has been an important contributor to its growth, and powder metal
injection molding. Krebsoge, through its joint venture PEAK, is currently also
marketing a high performance aluminum alloy product.
General Motors and Chrysler have each indicated that beginning in 1997 they
will not award new or additional business to companies that are not QS 9000
certified or actively working toward QS 9000 certification. As a result of
Sinter's efforts with respect to quality control, in December 1995, Sinter
received QS 9000 and ISO 9002 standard certifications at the Company's Emporium,
Pennsylvania facilities. The Company's facility in Sweden has also achieved ISO
9002 certification. Krebsoge's two main facilities have achieved ISO 9001
certification, while PMH's Salem, Indiana and St. Thomas, Ontario facilities
have achieved ISO 9002 and QS 9000 certification. The Company focuses
substantial effort on quality control. Its Quality Control Department has helped
the Company virtually eliminate product failures in parts delivered to
customers. In order to produce parts that need minimal machining, the Company
relies on quality control systems that provide a high degree of measurement
consistency and precision. The Company uses a variety of equipment, such as an
electronic measuring system and computer controlled testing machines to ensure
tight tolerances. In addition, the Company uses statistical process controls as
an integral part of its quality control systems. The computerized statistical
processes provide for real time feedback through each of the manufacturing
processes.
COMPETITION
The Company operates in a highly competitive, fragmented industry, with no
participant other than the Company having greater than a 5% market share in
North America or Western Europe. Competition is based largely on product quality
and performance attributes, customer service, price, new product innovation and
timely delivery. The Company competes with a number of local and regional
competitors both in North America and in Europe, most of which have annual sales
of less than $50 million. However, as the pressed powder metal parts industry
continues to consolidate, the Company will increasingly compete against larger
companies like itself, which have the financial resources, national and
international manufacturing presence and high quality products that are required
by major customers, such as automobile OEMs. In addition, the Company competes
with companies using wrought steel or casting technologies since the Company's
technological advancements are increasing the instances in which the Company's
parts may be substituted for wrought steel and iron parts. Also, a number of
large industrial manufacturers, particularly in Japan, produce pressed powder
metal parts for their internal use. Some or all of these manufacturers may have
greater financial resources than the Company. Although such manufacturers do not
currently market their pressed powder metal parts in North America or Europe, no
assurance can be given that such manufacturers will not do so in the future.
43
<PAGE> 46
ENVIRONMENTAL MATTERS
The Company's operations are subject to frequently changing environmental
laws and related regulation applicable in the jurisdiction of their respective
locations. This extensive regulatory framework imposes significant compliance
burdens and risks on the Company. Notwithstanding these burdens, the Company
believes that it is in material compliance with all laws and regulations
governing its present operations. Based upon the Company's experience to date,
the cost of compliance with environmental laws has not had and is not expected
to have a material adverse effect on the Company's financial condition,
liquidity or results of operations. However, future events, such as changes in
existing laws and regulations, may give rise to additional compliance costs that
could have a material adverse effect on the Company's financial condition,
liquidity or results of operations.
In the United States, the Company is subject to, among other requirements,
the Clean Air Act, the Clean Water Act, the Resource Conservation and Recovery
Act, the Safe Drinking Water Act, and similar federal, state or local laws
regulating air emissions, water discharges, and solid and hazardous waste
generation, treatment, storage and disposal. The Comprehensive Environmental
Response, Compensation and Liability Act ("CERCLA") and similar state laws can
impose joint and several liability for releases of hazardous substances into the
environment, without regard to fault or the lawfulness of the original activity.
Categories of potentially responsible parties under CERCLA include current or
former owners and operators of a contaminated site and companies that generated
waste at or sent waste to a site. The Company believes that it is in material
compliance with the U.S. laws and regulations described above.
With respect to its facilities located in Germany, the Company is subject
to, among other requirements, the following acts and regulations: the federal
Pollution Control Act (including Technical Instructions Air, Noise, and Waste
regulations), the Water Resources Management Act and the Waste Act. Pursuant to
such acts and regulations, the authorities are entitled to inspect production
sites every one to three years. Furthermore, the Company's German facilities
must comply with the Plant Security Act, Employment Security Act, Regulations
for the Prevention of Accidents and the Toxic Substances Control Act, which
includes the technical regulations on hazardous substances and the Dangerous
Chemicals Ordinance. The Company believes that it is in material compliance with
the German laws and regulations described above.
Prior to the consummation of the Acquisitions, the Company conducted a
Phase I environmental review of each of PMH's facilities. Based upon the results
of these Phase I reviews, the Company anticipates that it will incur
expenditures at the St. Thomas, Ontario facility to address historical
environmental issues associated with groundwater and soil contamination. The
source of contamination have not been positively identified and may be related
to either past facility operations or off-site origins. As the successor to PMH,
the Company could be required to expend funds under Ontario's Environmental
Protection Act to address the soil and groundwater at this facility. The Company
also anticipates that it may be required to make capital expenditures to improve
the St. Thomas facility's environmental performance to ensure compliance with
sewer use by-law criteria, air emission criteria and PCB disposal.
The Company has also been informed of the existence of historical soil and
groundwater contamination at PMH's Van Wert, Ohio facility. Under the terms of
an October 31, 1988 indemnity agreement, Chrysler Corporation has assumed
responsibility for all contamination at the site in existence prior to October
31, 1988, for which it receives notice by October 31, 1998. Pursuant to this
indemnity agreement, Chrysler has performed a risk assessment concerning the
known soil and groundwater contamination at the facility, and has concluded that
no threat to human health or the environment exists. To date, the Ohio
Environmental Protection Agency has not formally concurred with Chrysler's
conclusions. In the event remediation of this historical contamination is
required under Ohio law or under CERCLA, Chrysler would be liable for the cost
of such remediation under the indemnity agreement. If Chrysler defaults in its
indemnification obligations, the Company could incur liability under CERCLA for
the remediation of the contamination based upon the Company's status as the
owner of the property.
The Company is indemnified by MAAG for certain environmental liabilities
with respect to PMH and Krebsoge under the respective purchase agreements.
However, the Company's indemnification rights under the PMH purchase agreement
are subject to certain limitations, and therefore no assurances can be made that
44
<PAGE> 47
such indemnification will be sufficient to address the Company's potential
liability with respect to the St. Thomas or Van Wert facilities. Furthermore,
there can be no assurance that additional environmental issues will not be
discovered which were not brought to light by the Phase I site assessments
referred to above or which come to light as the operations of PMH and Krebsoge
become integrated with Sinter's operations. As a result, over time the Company
may incur additional expenditures at these and its other facilities to improve
their environmental performance and to address historical contamination.
EMPLOYEES
As of December 15, 1996, the Company had approximately 3,300 employees,
1,800 of which were located in North America and 1,462 of which were located in
Europe. All of the Company's operations are non-union except for operations
located in Sweden; Germany; Van Wert, Ohio; and St. Thomas, Ontario. The
Company's employees located in Germany are represented by the National Metal
Workers Union under a series of regional contracts that run one to two years.
The Company's employees at its Sinterteknik subsidiary are members of a Swedish
labor union whose contract expires in February 1998. The collective bargaining
agreements covering the Company's other employees expire as follows: Van Wert
March 1, 1997; and St. Thomas May 17, 1998. There has been no recent history of
labor strikes or unrest at any of its facilities and the Company believes that
its employee relations are good.
LEGAL PROCEEDINGS
The Company is involved in various lawsuits arising in the ordinary course
of business. In management's opinion, the outcome of these matters will not have
a material adverse effect on the Company's business, financial condition or
results of operations.
PROPERTIES
The Company operates 18 manufacturing facilities in the United States,
Germany, Sweden and Canada. As of September 30, 1996, Sinter operated
manufacturing and office space in the United States and Sweden with a total
floor space of approximately 575,000 square feet. Of this footage approximately
484,000 square feet are owned and approximately 91,000 square feet are leased.
As a result of the Acquisitions, the Company acquired 11 manufacturing
facilities with a total floor area of approximately 1.2 million square feet and
a tooling facility located in Indianapolis, Indiana. The manufacturing
facilities acquired in connection with the Acquisitions are located in Germany
(seven), Indiana, Ohio, Connecticut and Ontario, Canada.
The Company's corporate headquarters are located in Cleveland, Ohio and
occupy approximately 3,500 square feet of leased office space under a lease
expiring in April 2006. The Company has begun consolidating operations at PMH's
former Livonia, Michigan headquarters. The Company anticipates that this
consolidation will be completed in the first quarter of 1997.
The Company believes that substantially all of its property and equipment
is in good condition and that it has sufficient capacity to meet its current and
projected operational needs in the foreseeable future. All of the
45
<PAGE> 48
Company's owned facilities currently are pledged as collateral under the New
Credit Facility. The following table describes the Company's manufacturing
facilities as of December 20, 1996:
<TABLE>
<CAPTION>
OWNED OR EXPIRATION
LOCATION LEASED OF LEASE SQUARE FEET
- ----------------------------------------------------- -------- --------------- -----------
<S> <C> <C> <C>
SINTER
Emporium, Pennsylvania (3 facilities).............. Owned -- 289,000
Conover, North Carolina............................ Leased 8/11/97 63,000
Richton Park, Illinois(1).......................... Owned -- 64,000
Riverdale, Illinois(1)............................. Leased 7/19/99 28,000
Zeeland, Michigan.................................. Owned -- 67,000
Kolsva, Sweden..................................... Owned -- 64,000
PMH
Salem, Indiana..................................... Owned -- 152,000
Van Wert, Ohio..................................... Owned -- 206,000
St. Thomas, Ontario................................ Owned -- 185,000
KREBSOGE
Radevormwald, Germany (3 facilities)............... Owned -- 398,000
Bad Bruckenau, Germany............................. Owned -- 127,000
Lubeck, Germany.................................... Owned -- 25,000
Bad Langensalza, Germany........................... Owned -- 37,000
Bonn, Germany...................................... Leased One year term; 89,000
renews annually
Terryville, Connecticut............................ Owned -- 25,000
</TABLE>
- ---------------
(1) In January 1997, the Company shall commence manufacturing operations at its
Richton Park, Illinois facility and terminate manufacturing operations at
its Riverdale, Illinois facility. The Riverdale facility will be used for
distribution.
46
<PAGE> 49
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The name, age, current principal position or employment of each director
and executive officer of the Company are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ------------------------------- --- ------------------------------------------------------------
<S> <C> <C>
Joseph W. Carreras............. 43 Chairman of the Board and Chief Executive Officer
Donald L. LeVault.............. 61 President, Chief Operating Officer, Director and Secretary
Michael T. Kestner............. 42 Vice President, Chief Financial Officer and Secretary
E. Joseph Hochreiter(1)(2)..... 50 Director
Mary Lynn Putney............... 48 Director
William H. Roj (1)(2).......... 47 Director
Charles E. Volpe............... 59 Director
David Y. Howe (1)(2)........... 32 Director
</TABLE>
- ---------------
(1) Member of the Audit Committee.
(2) Member of the Compensation Committee.
Executive officers are elected by and serve at the discretion of the Board
of Directors until their successors are duly elected and qualified. There are no
family relationships between or among any Directors or executive officers of the
Company.
JOSEPH W. CARRERAS has been Chairman of the Board of the Company since
June 1993, Chief Executive Officer since January 1994 and a Director since the
Company's formation in December 1991. Prior to December 1993, Mr. Carreras was a
Vice President with CVC, one of the principal stockholders of the Company. Mr.
Carreras joined CVC in 1984 and held various executive positions in addition to
Vice President.
DONALD L. LEVAULT has been the President and a Director of the Company
since its formation in December 1991. From 1981 to 1989, Mr. LeVault served as
Vice President and General Manager of Ajay Enterprises Corporation, a division
of Fuqua Corporation. Mr. LeVault also serves as a director of Omega
Pultrusions, Inc., a manufacturer of specialized fiberglass products.
MICHAEL T. KESTNER has been the Vice President and Chief Financial Officer
of the Company since January 1995. Prior to joining the Company and since 1992,
Mr. Kestner was a Vice President of Banc One Capital Partners. From 1988 to
1992, Mr. Kestner served as a financial executive of Wolfensohn Ventures, L.P.
Mr. Kestner is a certified public accountant.
E. JOSEPH HOCHREITER has been a Director of the Company since its
formation in December 1991. Mr. Hochreiter is currently the Chairman and Chief
Executive Officer of Lanxide Precision, Inc., a microprecision machining and
engineered products company, and chairman of National Recovery Systems, an
on-site metal oxide recovery company. Prior to August 1994, Mr. Hochreiter was
the President, Chief Operating Officer and director of Fisher & Porter Company,
a manufacturer of process control systems and equipment. From 1987 to 1991, Mr.
Hochreiter was the President of HMA Investments, a private investment firm of
which he was the principal founder.
DAVID Y. HOWE has been a Director of the Company since November 1994.
Since 1993, Mr. Howe has been employed by CVC in its venture capital division.
From 1990 to 1993, Mr. Howe was employed by Butler Capital Corporation, a
private investment company. Mr. Howe serves on the Board of Directors of Aetna
Industries, Inc., Cable Systems International, Inc., Brake-Pro Inc.,
Copes-Vulcan, Inc., Milk Specialties Company and American Italian Pasta Company.
47
<PAGE> 50
MARY LYNN PUTNEY has been a Director of the Company since December 1994.
Ms. Putney is currently a Managing Director of Citibank, N.A., in its private
banking division. Ms. Putney has been employed by Citibank, which is the parent
corporation of CVC, for 27 years.
WILLIAM H. ROJ has been a Director of the Company since February 1994. Mr.
Roj was a partner in the law firm of Jones, Day, Reavis & Pogue from 1983 until
December 31, 1995. Mr. Roj is currently the President of ERICO International
Corporation, a construction machinery manufacturing company. Mr. Roj is also a
director of DNX Corporation, which conducts research, develops therapeutic
products and provides biological testing services on transgenic animals.
CHARLES E. VOLPE has been a Director of the Company since November 1994.
Until 1996, Mr. Volpe was an Executive Vice President, Chief Operating Officer
and director of KEMET Electronics Corporation and its parent, KEMET Corporation,
which manufactures tantalum and ceramic capacitors. Mr. Volpe has served as a
director of KEMET Electronics Corporation since April 1987 and serves as a
director of Encad, Inc.
OTHER SIGNIFICANT EMPLOYEES OF THE COMPANY
Other significant employees of the Company are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ------------------------------ --- ---------------------------------------------------
<S> <C> <C>
Lars-Erik Dahlgren............ 55 Managing Director -- Kolsva Sinterteknik AB
Dr. Ing. Lothar
Albano-Muller............... 57 President and Chief Executive Officer -- Krebsoge
Dr. Manfred Weber............. 46 Director of Central Sales and Marketing -- Krebsoge
Dr. Volker Arnhold............ 47 Director of Research and Development -- Krebsoge
Ronald G. Campbell............ 35 Treasurer and Assistant Secretary -- Sinter
Alex Garcia................... 49 Vice President of Operations -- Sinter
Ian B. Hessel................. 31 Vice President -- Controller -- Sinter
</TABLE>
LARS-ERIK DAHLGREN has been the Managing Director of Kolsva Sinterteknik
AB (Kolvsa, Sweden) since 1981. Prior to joining Sinterteknik, Mr. Dahlgren
headed the finance division of Swedbank, Stockholm. From 1975 to 1981, Mr.
Dahlgren was Managing Director for Scandinavian Operations of Tenneco-
Automotive. From 1981 to 1984, Mr. Dahlgren was Managing Director, European
Operations for the Walker division of Tenneco.
DR. ING. LOTHAR ALBANO-MULLER has been the President and Chief Executive
Officer of Krebsoge since 1979. Dr. Albano-Muller also has served as Manager of
R&D and Marketing and Director of R&D of Krebsoge. Dr. Albano-Muller is
currently the President of the Board, German Association of Powder Metallurgy
and President, European PM Association.
DR. MANFRED WEBER has been the Director of Central Sales and Marketing of
Krebsoge Group since 1990. Dr. Weber also serves as Vice President Technology of
MWU and deputy Vice President of two major facilities. Dr. Weber has been with
Krebsoge since 1984.
DR. VOLKER ARNHOLD has been the Director of Research and Development of
the Krebsoge Group since 1987. Dr. Arnhold also serves as Quality Management
Representative and Vice President Technology of Metallwerk Langensalza GmbH and
Pressmetall Krebsoge GmbH. Dr. Arnhold has been with Krebsoge since 1981.
RONALD G. CAMPBELL has been the Treasurer since December 1996 and
Assistant Secretary since February 1996. Mr. Campbell had previously been
Assistant Treasurer since May 1995. Prior to joining the Company and since 1991,
Mr. Campbell was Director-Corporate Finance for PT Unggul Indah Corporation, a
chemical manufacturer in Jakarta, Indonesia. From 1984 to 1991, Mr. Campbell was
with Citicorp/Citibank in the United States and Singapore, where he specialized
in leveraged and structured transactions and held various executive positions in
addition to Vice President.
48
<PAGE> 51
ALEX GARCIA has been the Vice President-Operations of the Company since
August 1996. Prior to joining the Company and since 1987, Mr. Garcia was with
the Forming Technologies operations of Masotech Forming Technologies. Since
1994, he was Director of Operations of Masotech.
IAN B. HESSEL has been the Vice President-Controller of the Company since
October 1996. Prior to joining the Company and since 1989, Mr. Hessel was with
Arthur Andersen LLP. Mr. Hessel is a certified public accountant.
49
<PAGE> 52
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The table below provides information relating to compensation for the
Company's last two fiscal years for the Chief Executive Officer and the other
named executive officers of the Company who received compensation in excess of
$100,000 in those years (collectively, the "Named Executive Officers"). The
amounts shown include compensation for services in all capacities that were
provided to the Company and its subsidiaries.
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION AWARDS
--------------------------------------
ANNUAL COMPENSATION (1) RESTRICTED SECURITIES
-------------------------- STOCK UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS(2) AWARDS(3) OPTIONS COMPENSATION
- ------------------------------ ---- -------- -------- ---------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Joseph W. Carreras(4)......... 1995 $249,995 $125,000 -- -- --
Chairman of the Board 1994 200,000 -- -- 65,000 --
and Chief Executive Officer
Donald L. LeVault............. 1995 173,857 85,000 -- -- $ 10,894(5)(6)
President 1994 168,000 80,000 $1,032,245 25,000 7,500(6)
1993 157,000 100,000 13,768 -- 9,260(6)
Michael T. Kestner............ 1995 120,200 50,000 -- 25,000 36,079(5)
Vice President,
Chief Financial Officer
and Secretary
Richard A. McLean............. 1995 89,611 11,000 -- -- 5,871(6)
Vice President, 1994 79,418 27,876 474,865 2,000 5,095(6)
Group Controller
</TABLE>
- ---------------
(1) Unless otherwise indicated, no executive officer named in the Summary
Compensation Table received personal benefits or perquisites in excess of
the lesser of $50,000 or 10% of his aggregate salary and bonus.
(2) Represents cash bonuses received by the applicable executive officers in
March 1996, February 1995 and March 1994 as a result of the operating
performance of the Company in 1995, 1994 and 1993, respectively.
(3) Represents the estimated fair market value at the time of grant of shares of
Class B Common Stock (which were converted into shares of Class A Common
Stock) awarded to Messrs. LeVault and McLean under the Company's Management
Incentive Stock Plan (the "Stock Plan"). The Stock Plan was terminated at
the time of the Company's initial public offering. Fair market value was
determined by the Company to be equal to book value at the time of grant
with respect to the awards in January 1994 and April 1993 and the initial
public offering price with respect to the award in November 1994. An
aggregate of 31,187 and 28,689 restricted shares issued to Messrs. LeVault
and McLean, respectively, under the Stock Plan are fully vested. At the end
of the Company's last completed fiscal year, Messrs. LeVault and McLean held
an aggregate of 93,474 and 42,997 shares, respectively, of restricted stock,
which had an estimated fair market value of approximately $1,156,741 and
$532,088, respectively, at such time. Mr. LeVault's restricted shares are
scheduled to vest on January 1, 1998 and Mr. McLean's restricted shares vest
at the rate of one-third per year commencing on January 1, 1995.
(4) Pursuant to the terms of a consulting agreement, Mr. Carreras received
annual compensation of $200,000 for serving as the Company's Chairman of the
Board in fiscal 1994. The consulting agreement was terminated, effective
January 1, 1995, and Mr. Carreras now serves as a full-time employee of the
Company.
(5) The Company paid $3,394 and $36,079 for the moving expenses of Mr. LeVault
and Mr. Kestner, respectively.
50
<PAGE> 53
(6) The amounts listed for 1994 and 1993 were contributed by the Company to the
Company's qualified profit sharing plan, as profit sharing and matching
contributions relating to before-tax contributions made by Messrs. LeVault
and McLean. In 1995, the Company contributed $7,500 and $5,871 to the
Company's qualified profit sharing retirement plan, as profit sharing and
matching contributions relating to before-tax contributions made by Messrs.
LeVault and McLean, respectively.
1994 KEY EMPLOYEE STOCK INCENTIVE PLAN
The Company's 1994 Key Employee Stock Incentive Plan (the "Plan")
authorized grants to officers and other key employees of the Company and its
subsidiaries of (i) stock options that are intended to qualify as "incentive
stock options" within the meaning of the Internal Revenue Code and (ii)
nonqualified stock options. The Plan authorizes the granting of stock options
for up to an aggregate of 474,705 shares of Class A Common Stock, subject to
adjustments upon the occurrence of certain events to prevent dilution. Incentive
stock options are exercisable for up to ten years at an option price either more
than, less than or equal to the fair market value of such shares, as determined
by the Board of Directors. Nonqualified stock options may be granted for up to
ten years at such exercise price and upon such terms and conditions as the Board
of Directors or the Compensation Committee may determine at the time of grant.
Options are exercisable for up to ten years from the date of grant. As of
December 20, 1996, Sinter had granted stock options for an aggregate of 340,000
shares of Class A Common Stock to 21 employees, with Messrs. Carreras, Kestner
and LeVault holding stock options for an aggregate of 130,000, 50,000 and 45,000
shares of Class A Common Stock, respectively. These stock options have an
exercise price equal to the fair market value of Sinter's Class A Common Stock
on the date such options were granted.
EMPLOYMENT AGREEMENTS
Donald L. LeVault. Pursuant to an employment agreement with the Company,
Mr. LeVault has agreed to serve as President of the Company through April 1997,
subject to an annual, automatic one-year extension unless either party elects to
discontinue such extensions. Mr. LeVault has indicated to the Company that he
will continue to serve as President of the Company through April 1998. Mr.
LeVault receives an annual base salary of at least $150,000, or a higher amount
determined by the Board of Directors, $168,000 for 1994 and $173,875 for 1995,
plus an annual bonus as determined by the Board of Directors of the Company
based upon the operating performance of the Company. Under the terms of the
agreement, Mr. LeVault may not engage in any competitive business while he is
employed by the Company or for a period of one year thereafter.
Dr. Albano-Muller. Pursuant to an employment agreement with the Company,
Dr. Albano-Muller serves as a managing director of Krebsoge until December 31,
1997, subject to an automatic one-year extension unless either party terminates
the employment agreement upon twelve months' notice. Dr. Albano-Muller receives
an annual base salary of DM 315,000 plus an annual bonus as determined by the
stockholders's committee of Krebsoge. The bonus is based on the operating
performance of Krebsoge and the personal efforts of Dr. Albano-Muller. Under the
terms of the agreement Dr. Albano-Muller may not engage in any competitive
business while he is employed by Krebsoge and for a period of two years
thereafter. Dr. Albano-Muller also entered into employment agreements with two
subsidiaries of Krebsoge, Sintermetallwerk Krebsoge GmbH and Metallwerk
Unterfranken GmbH, where he also serves as a managing director. He does not
receive additional compensation for his services under these agreements.
Dr. Manfed Weber. Pursuant to an employment agreement with the Company, Dr.
Weber serves as a president of the area "Central Sales and Marketing" of
Krebsoge until December 31, 1997, subject to an automatic one-year extension
unless either party terminates the employment agreement upon twelve months'
notice. Dr. Weber receives an annual base salary of DM 246,000, which will be
increased to DM 280,000 effective as of January 1, 1997, and an annual bonus as
determined by the stockholder's committee of Krebsoge. The bonus is based on the
operating performance of Krebsoge and the personal efforts of Dr. Weber. Under
the terms of the agreement, Dr. Weber may not engage in any competitive business
while he is employed by Krebsoge and for a period of two years thereafter. Dr.
Weber also entered into employment agreements with two subsidiaries of Krebsoge,
Sintermetallwerk Krebsoge GmbH and Metallwerk Unter-
51
<PAGE> 54
franken GmbH, where he also serves as a managing director. He does not receive
additional compensation for his services under these agreements.
Dr. Volker Arnhold. Pursuant to an employment agreement with the Company,
Dr. Arnhold directs the Research and Development and the Quality Management
Departments of Krebsoge until December 31, 1997, subject to an automatic
one-year extension unless either party terminates the employment agreement upon
twelve months' notice. Dr. Arnhold receives an annual base salary of DM 183,600
plus an annual bonus as determined by the stockholder's committee of Krebsoge.
The bonus is based on the performance of Krebsoge and the personal efforts of
Dr. Arnhold. Under the terms of the agreement, Dr. Arnhold may not engage in any
competitive business while he is employed by Krebsoge or for a period of two
years thereafter. Dr. Arnhold also serves as a managing director of two
subsidiaries of Krebsoge, Pressmetall Krebsoge GmbH and Metallwerk Langensalza
GmbH. He does not receive additional compensation for his services for the
subsidiaries.
STOCK OPTION HOLDINGS
The following table sets forth information with respect to the Named
Executive Officers concerning the unexercisable stock options held as of
December 20, 1996. There were no stock options exercised during the last fiscal
year of the Company. Sinter granted additional stock options to certain
employees, including three Named Executive Officers, in September 1996. See
"Executive Compensation -- 1994 Key Employee Stock Incentive Plan."
AGGREGATED FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS AT OPTIONS AT
FISCAL YEAR-END FISCAL YEAR-END
----------------- ----------------
EXERCISABLE/ EXERCISABLE/
NAME UNEXERCISABLE UNEXERCISABLE
- ------------------------------------- ----------------- ----------------
<S> <C> <C>
Joseph W. Carreras................... 43,333/86,667 $736,661/$758,339
Donald L. LeVault.................... 16,667/28,333 $283,339/$261,661
Michael T. Kestner................... 16,667/33,333 $283,339/$291,661
Richard A. McLean.................... 1,333/2,667 $22,661/$23,339
</TABLE>
52
<PAGE> 55
PRINCIPAL STOCKHOLDERS
STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND OTHER EXECUTIVES
The following table sets forth information, as of December 20, 1996,
regarding the beneficial ownership of Class A Common Stock and Class B Common
Stock by (i) those persons known to the Company to be the beneficial owners of
more than 5% of the outstanding shares of Class A Common Stock and Class B
Common Stock, (ii) each of the Company's directors and the Named Executive
Officers and (iii) all directors and executive officers as a group.
<TABLE>
<CAPTION>
CLASS A CLASS B
COMMON STOCK (1)(2) COMMON STOCK (1)
---------------------- ----------------------
DIRECTORS, EXECUTIVE OFFICERS NUMBER OF PERCENT NUMBER OF PERCENT
AND 5% STOCKHOLDERS SHARES OF CLASS SHARES OF CLASS
- ------------------------------------------------ --------- -------- --------- --------
<S> <C> <C> <C> <C>
Stockholders Agreement Group (3)(4)............. 1,756,684 35.1% 2,543,381 100.0%
c/o Sinter Metals, Inc.
50 Public Square, Suite 3200
Cleveland, Ohio 44113
Citicorp Venture Capital Ltd. (4)............... 903,325 18.0 2,543,381 100.0
399 Park Avenue, 14th Floor
New York, New York 10043
Joseph W. Carreras.............................. 528,585 10.6 -- --
50 Public Square, Suite 3200
Cleveland, Ohio 44113
Skyline Asset Management, L.P. (6).............. 380,400 7.6 -- --
311 South Wacker Drive, Suite 4500
Chicago, Illinois 60606
Wellington Management Company (7)............... 303,500 6.1 -- --
75 State Street
Boston, Massachusetts 02109
T. Rowe Price Associates, Inc. (8).............. 287,200 5.7 -- --
100 E. Pratt Street
Baltimore, Maryland 21202
Cumberland Associates (5)....................... 250,000 5.0 -- --
1114 Avenue of the Americas
New York, New York 10036
Donald L. LeVault............................... 219,380 4.2 -- --
E. Joseph Hochreiter............................ 30,323 * -- --
Ronald G. Campbell.............................. 11,000 * -- --
David Y. Howe................................... 1,200 * -- --
Mary Lynn Putney................................ 3,250 * -- --
William H. Roj.................................. 1,000 * -- --
Charles E. Volpe................................ 5,000 * -- --
Michael T. Kestner.............................. 29,441 * -- --
Richard A. McLean............................... 105,394 2.1 -- --
All Directors and executive officers as a group 829,179 16.6 -- --
(8 persons)...................................
</TABLE>
- ---------------
* Less than one percent.
(1) The Class A Common Stock is the only voting security of the Company and
entitles the holder thereof to one vote per share. The Class B Common Stock
is nonvoting and is convertible on a one-for-one basis into Class A Common
Stock at the option of each holder thereof.
53
<PAGE> 56
(2) Includes with respect to each of the following individuals and groups the
following number of shares of Common Stock which may be acquired upon
exercise of options within 60 days of December 20, 1996: Stockholders
Agreement Group (61,333 shares); Joseph W. Carreras (43,333); Donald L.
LeVault (16,667 shares); Michael T. Kestner (16,667 shares); Ronald G.
Campbell (3,333); Richard A. McLean (1,333 shares); and all directors and
executive officers as a group (76,667 shares).
(3) The Company, Citicorp, and Messrs. Carreras, LeVault and McLean have entered
into a stockholders' agreement relating to the shares of Common Stock owned
by each of them (the "Stockholders' Agreement"). See "Principal
Stockholders -- Stockholders' Agreement." As a result, the parties to the
Stockholders' Agreement may be deemed to have acquired beneficial ownership
of all the shares of Common Stock subject to the Stockholders' Agreement, an
aggregate of 4,269,099 shares, as a "group" as defined under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"). Each of the parties
to the Stockholders' Agreement disclaims any beneficial ownership with
respect to shares of Common Stock held by the other parties to the
Stockholders' Agreement. The number of shares of Common Stock shown for each
of the parties to the Stockholders' Agreement named separately in the table
does not include shares that may be deemed to be beneficially owned by such
individuals solely as a result of the Stockholders' Agreement.
(4) Assuming the conversion of each share of Class B Common Stock held by CVC
into one share of Class A Common Stock in accordance with Rule 13d-3(d)
under the Exchange Act, CVC would beneficially own 3,446,706 shares of Class
A Common Stock, which represents approximately 45.7% of the outstanding
Class A Common Stock. CVC is subject to certain banking regulations that
limit the amount of the Company's voting securities it can hold.
(5) Cumberland Associates ("Cumberland') reported sole voting power with respect
to 207,500 shares of Class A Common Stock and shared voting power with
respect to 42,500 shares of Class A Common Stock. In addition, Cumberland
reported sole dispositive power with respect to 207,500 of such shares and
shared dispositive power with respect to 42,500 of such shares. This
information was obtained by the Company from Cumberland's Schedule 13D filed
with the Commission in October 31, 1996.
(6) Skyline Asset Management, L.P. ("Skyline") reported, as of December 31,
1995, shared voting and dispositive power with respect to these shares of
Class A Common Stock, which are held by Skyline as investment advisor to
certain client accounts over which Skyline exercises discretion. This
information was obtained by the Company from Skyline's Schedule 13G filed
with the Commission in February 1996.
(7) Wellington Management Company ("Wellington") reported, as of December 31,
1995, shared voting power with respect to 78,000 shares of Class A Common
Stock and shared dispositive power with respect to 303,500 shares of Class A
Common Stock. Wellington is an investment advisor, and the 303,500 shares of
Class A Common Stock are held by numerous investment clients. This
information was obtained by the Company from Wellington's Schedule 13F filed
with the Commission in September 30, 1996.
(8) These securities are owned by various individual and institutional investors
including T. Rowe Price Small Cap Value Fund, Inc. (which owns 287,200
shares, representing 3.8% of the shares outstanding), which T. Rowe Price
Associates, Inc. ("Price Associates") serves as investment advisor with
power to direct investments and/or sole power to vote the securities. For
purposes of the reporting requirements of the Exchange Act, Price Associates
is deemed to be a beneficial owner of such securities; however, Price
Associates expressly disclaims that it is, in fact, the beneficial owner of
such securities. This information was obtained by the Company from Price
Associate's Schedule 13F filed with the Commission in February 1996.
STOCKHOLDERS' AGREEMENT
The Company, CVC, and Messrs. Carreras, LeVault and McLean entered into the
Stockholders' Agreement on October 18, 1994. The Stockholders' Agreement
provides that each of the parties thereto will not vote their respective shares
of Class A Common Stock in favor of any proposal to change the number of members
of the Board of Directors from its current size of seven persons. In addition,
the Stockholders' Agreement provides that each of the parties will vote their
respective shares of Class A Common Stock in favor of the election of Directors
for (i) one individual designated by CVC, provided that CVC continues to
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<PAGE> 57
own 10% or more of the Company's outstanding Common Stock, (ii) an additional
individual designated by CVC, provided that CVC continues to own at least 25% of
the Company's outstanding Common Stock, (iii) Messrs. Carreras and LeVault, so
long as each serves as an officer of the Company, and (iv) three Directors (two
of whom will not be affiliates or employees of the Company) nominated by the
Directors then in office. Further, the Company granted the parties thereto
certain "piggyback" registration rights to participate in future registrations
of equity securities of the Company. The parties have agreed, however, not to
otherwise effect any public or private sale of the Company's equity securities
during or following any public offerings by the Company upon the written request
of the Company for a period determined by the Company. The Stockholders'
Agreement provides that the Company will pay all expenses incurred in connection
with any such registrations other than any underwriting discounts and
commissions with respect to the shares sold for such stockholder's account and
for the costs for any counsel retained by such stockholder. Under the
Stockholders' Agreement, holders of approximately 4.3 million shares of Common
Stock have been granted "piggyback" registration rights. The holders of such
"piggyback" registration rights have agreed to waive such rights with respect to
the Offering.
CERTAIN TRANSACTIONS
In July 1996, Sinter acquired SinterForm. Prior to and subsequent to this
acquisition, SinterForm engaged Locke Bros. to act as a sales representative on
its behalf. Ted A. Mueller, a partner in Locke Bros., is the brother-in-law of
Michael T. Kestner, the Company's Vice President and Chief Financial Officer.
Total commissions to be paid to Locke Bros. by SinterForm are anticipated to
aggregate approximately $120,000 for 1996, of which $50,000 was paid subsequent
to Sinter's acquisition of SinterForm.
On December 16, 1996, the Company purchased substantially all of the assets
of the Powder Metal Forge Unit of Delco Remy America, Inc. for an aggregate
purchase price of $7.5 million. At the closing, the Company paid $5.0 million in
cash and issued a $2.5 million promissory note payable on the earlier of June
1998 and the date on which certain of the acquired assets are relocated to a
newly-constructed facility in Emporium, Pennsylvania and such facility commences
operations. CVC, which owns approximately 46% of the Company's Common Stock,
owns approximately 85% of the outstanding stock of Delco Remy America, Inc.
On December 19, 1996, the Company and a syndicate of banks, including
Citibank, N.A., London ("Citibank"), Citicorp, USA, Inc. ("Citicorp USA"),
Salomon Brothers Holding Company Inc. ("SBHC"), and Salomon Brothers Inc
("SBI"), entered into the New Credit Facility. CVC, an affiliate of Citibank and
Citicorp, owns approximately 46% of the outstanding shares of the Company's
Common Stock. Salomon Brothers Inc, which is acting as an underwriter of the
Offering, acted as arranger and syndication agent with respect to the New Credit
Facility and received a fee of $5.5 million from the Company in consideration of
such services. Citibank, Citicorp and SBHC are lenders under the New Credit
Facility and, respectively, provided loans and/or commitments to the Company. As
lenders under the Revolving Facility and German Revolving Facility, Citicorp and
Citibank received, on a pro rata basis with all other lenders under such
facilities, facility fees and letter of credit participation fees under the New
Credit Facility. The net proceeds of the Offering will be applied to prepay
$14.2 million of the Tranche A facility and $40.4 million of the Tranche B
facility. As a result, Citicorp USA will receive approximately $1.8 million as a
result of the prepayment of the Tranche A facility and SBHC will receive
approximately $3.5 million as a result of the prepayment of the Tranche B
facility.
DESCRIPTION OF CAPITAL STOCK
The Company's authorized capital stock consists of 20,000,000 shares of
Class A Common Stock, par value $.001 per share; 5,000,000 shares of Class B
Common Stock, par value $.001 per share; and 5,000,000 shares of preferred
stock, par value $.001 per share (the "Serial Preferred Stock"). Upon completion
of the Offering, the Company will have 7,209,747 shares of Class A Common Stock
issued and outstanding; 2,543,381 shares of Class B Common Stock issued and
outstanding and no shares of Serial Preferred Stock issued and outstanding.
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<PAGE> 58
COMMON STOCK
The rights of holders of Class A Common Stock and Class B Common Stock are
identical except for voting and convertibility. The holders of Common Stock are
entitled to receive dividends when, if and as declared from time to time by the
Board of Directors out of funds legally available therefor. See "Dividend
Policy." Upon the liquidation, dissolution or winding up of the Company, the
holders of Common Stock will be entitled to receive ratably the net assets of
the Company available after the payment of all debts and other liabilities and
subject to the prior rights of any holders of any outstanding Serial Preferred
Stock. The shares of Common Stock have no preemptive rights or conversion rights
(except as described herein) and are not subject to further calls or assessments
by the Company. There are no redemption or sinking fund provisions applicable to
the Common Stock. The holders of Class A Common Stock are entitled to one vote
per share on all matters to be voted upon by the stockholders. The holders of
Class B Common Stock are not entitled to vote, except as required by law. The
holders of Class A Common Stock do not have the right to vote cumulatively in
the election of Directors. Subject to certain limitations, the Class B Common
Stock is convertible on a one-for-one basis into Class A Common Stock at the
option of the holder thereof. The outstanding shares of Common Stock are, and
the shares of Class A Common Stock being offered hereby will be upon payment
therefor, fully paid and nonassessable. The rights, preferences and privileges
of the holders of Common Stock are subject to the rights of the holders of
shares of any Serial Preferred Stock.
SERIAL PREFERRED STOCK
Under the Certificate, the Board of Directors are authorized, without
further action by the stockholders, to issue, from time to time, Serial
Preferred Stock in one or more series and to fix or alter the voting powers,
designations, preferences and relative, participating, optional or other special
rights, if any, and qualifications, limitations or restrictions thereof,
including, without limitation, dividend rights and whether dividends are
cumulative, conversion rights, if any, rights and terms of redemption, including
sinking fund provisions, if any, redemption price and liquidation preferences of
any unissued shares or wholly unissued series of Serial Preferred Stock. In
addition, the Board of Directors may establish the number of shares constituting
any such class or series and the designation thereof, and increase or decrease
the number of shares any such series subsequent to the issuance of shares of
such series, but not below the number of shares of such series. The issuance of
Serial Preferred Stock may adversely effect the voting rights and other rights
of the holders of Common Stock. The Company currently has no shares of Serial
Preferred Stock outstanding and has no present plans to issue any Serial
Preferred Stock.
CERTAIN EFFECTS OF AUTHORIZED BUT UNISSUED STOCK
Under the Company's Certificate, upon completion of the Offering, there
will be approximately 15.2 million shares of Common Stock and approximately 5
million shares of Serial Preferred Stock available for future issuance without
stockholder approval. These additional shares may be utilized for a variety of
corporate purposes, including future public offerings to raise additional
capital or to facilitate corporate acquisitions.
One of the effects of the existence of unissued and unreserved Common Stock
and Serial Preferred Stock may be to enable the Board of Directors to issue
shares to persons friendly to current management which could render more
difficult or discourage an attempt to obtain control of the Company by means of
a merger, tender offer, proxy contest or otherwise, and thereby protect the
continuity of the Company's management. Such additional shares also could be
used to dilute the stock ownership of persons seeking to obtain control of the
Company.
The Board of Directors is authorized without any further action by the
stockholders to determine the rights, preferences, privileges and restrictions
of the unissued Serial Preferred Stock. The purpose of authorizing the Board of
Directors to determine such rights and preferences is to eliminate delays
associated with a stockholder vote on specific issuances. The Board of Directors
may issue Serial Preferred Stock with voting and conversion rights which could
adversely affect the voting power of the holders of Common Stock,
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<PAGE> 59
and which could, among other things, have the effect of delaying or deferring a
change in control of the Company.
The Company does not currently have any plans to issue additional shares of
Common Stock or Serial Preferred Stock other than shares of Common Stock which
may be issued upon the exercise of options which have been granted or which may
be granted in the future to the Company's employees or in conversion for other
shares of Common Stock.
CERTAIN CHARTER PROVISIONS AND DELAWARE LAW
The Company's Certificate and By-Laws, as amended, provide, in general,
that (i) stockholder action can be taken only at an annual or special meeting of
stockholders and not by written consent in lieu of a meeting; (ii) special
meetings of the stockholders may be called only by the Chairman of the Board,
the President or the Secretary of the Company, by a majority of the total number
of directors of the Company (assuming no vacancies) or by the holders of a
majority of the Company's voting stock; and (iii) the provisions of Section 203
of the Delaware General Corporation Law (as described below) are made part of
the Company's Certificate. The By-Laws also require that stockholders desiring
to bring any business, including nominations for directors, before an annual
meeting of stockholders deliver written notice thereof to the Secretary of the
Company not later than 60 days in advance of the meeting of stockholders;
provided, however, that in the event that the date of the meeting is not
publicly announced by the Company by press release or inclusion in a report
filed with the Commission or furnished to stockholders more than 75 days prior
to the meeting, notice by the stockholder to be timely must be delivered to the
Secretary of the Company not later than the close of business on the tenth day
following the day on which such announcement of the date of the meeting was so
communicated. The ByLaws further require that the notice by the stockholder set
forth a description of the business to be brought before the meeting and the
reasons for conducting such business at the meeting and certain information
concerning the stockholder proposing such business and the beneficial owner, if
any, on whose behalf the proposal is made, including their names and addresses,
the class and number of shares of the Company that are owned beneficially and of
record by each of them, and any material interest of either of them in the
business proposed to be brought before the meeting.
Under applicable provisions of Delaware law, the approval of a Delaware
corporation's board of directors, in addition to stockholder approval, is
required to adopt any amendment to the corporation's certificate of
incorporation, but a corporation's by-laws may be amended either by action of
its stockholders or, if the corporation's certificate of incorporation so
provides, its board of directors. The Company's Certificate and ByLaws provide
that the provisions summarized above may not be amended by the stockholders, nor
may any provision inconsistent therewith be adopted by the stockholders, without
the affirmative vote of the holders of at least 80% of the Company's voting
stock, voting together as a single class.
Under Section 203 of the Delaware General Corporation Law, certain
"business combinations" between a Delaware corporation, whose stock generally is
publicly traded or held of record by more than 2,000 stockholders, and an
"interested stockholder" are prohibited for a three-year period following the
date that such stockholder became an interested stockholder, unless (i) the
business combination was approved by the board of directors of the corporation
before the other party to the business combination became an interested
stockholder, (ii) upon consummation of the transaction that made it an
interested stockholder, the interested stockholder owned at least 85% of the
voting stock of the corporation outstanding at the commencement of the
transaction (excluding voting stock owned by directors who are also officers or
held in employee benefit plans in which the employees do not have a confidential
right to tender or vote stock held by the plan); or (iii) the business
combination was approved by the board of directors of the corporation and
ratified by holders of 66 2/3% of the voting stock which the interested
stockholder did not own. The three-year prohibition also does not apply to
certain business combinations proposed by an interested stockholder following
the announcement or notification of certain extraordinary transactions involving
the corporation and a person who had not been an interested stockholder during
the previous three years or who became an interested stockholder with the
approval of a majority of the corporation's directors.
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The term "business combination" is defined generally to include mergers or
consolidations between a Delaware corporation and an "interested stockholder,"
transactions with an "interested stockholder" involving the assets or stock of
the corporation or its majority-owned subsidiaries and transactions which
increase an interested stockholder's percentage ownership of stock. The term
"interested stockholder" is defined generally as any stockholder who becomes the
beneficial owner of 15% or more of a Delaware corporation's voting stock.
It is possible that these provisions and the ability of the Board of
Directors to issue Serial Preferred Stock or additional shares of Common Stock
will discourage other persons from making a tender offer for or acquisitions of
substantial amounts of the Company's Common Stock, or may delay changes in
control or management of the Company.
DIRECTOR AND OFFICER INDEMNIFICATION AND LIABILITY
The Company's Certificate provides that Directors and officers, or each
person who is or was serving or who had agreed to serve at the request of the
Board of Directors or an officer of the Company as an employee or agent of the
Company or as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise (including the heirs,
executors, administrators or estate of such person), shall be indemnified by the
Company to the fullest extent permitted by the Delaware General Corporation Law
or any other applicable laws as presently or hereafter in effect. The Company is
authorized under the Certificate to enter into one or more agreements with any
person which provide for indemnification greater or different than that provided
under the Certificate.
In addition, the Certificate provides that, to the fullest extent permitted
by the Delaware General Corporation Law or any other applicable laws presently
or hereafter in effect, no director of the Company will be personally liable to
the Company or its stockholders for or with respect to any acts or omissions in
the performance of his or her duties as a director of the Company.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the Class A Common Stock is Chemical
Mellon Shareholder Services, New York, New York.
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of the Offering, the Company will have 7,209,747 shares of
Class A Common Stock outstanding (assuming no exercise of the Underwriters'
over-allotment option) and 2,543,381 shares of Class B Common Stock outstanding.
Of these shares, 4,750,000 shares of Class A Common Stock will be freely
tradeable without further restriction or further registration under the
Securities Act. The remaining 2,459,747 shares of Class A Common Stock and all
of the shares of Class B Common Stock and any shares acquired in the Offering by
an "affiliate" of the Company (an "Affiliate") as the term is defined in Rule
144 under the Securities Act ("Rule 144"), are "restricted securities" as
defined in Rule 144, and may only be sold in the public market if such shares
are registered under the Securities Act or sold in accordance with Rule 144 or
another exemption from registration under the Securities Act.
In general, under Rule 144, a person (or group of persons whose shares are
aggregated) who has beneficially owned restricted securities for at least two
years, including persons who may be deemed "affiliates" of the Company, will be
entitled to sell within any three month period, a number of shares that does not
exceed the greater of (i) 1% of the then outstanding shares of the Class A
Common Stock (approximately 7,209,747 shares immediately after the Offering) or
(ii) the average weekly reported volume of trading of the Class A Common Stock
on the NYSE during the four calendar weeks preceding the filing of a Form 144
with respect to such sale. Sales under the Rule 144 are also subject to certain
requirements pertaining to the manner of such sales, notices of such sales and
the availability of current public information concerning the Company. A person
who has not been an "affiliate" of the Company for the 90 days preceding a sale
and who has beneficially owned restricted securities for at least three years
will be entitled to sell such restricted securities in the public market without
restriction. Restricted securities properly sold in reliance
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<PAGE> 61
upon Rule 144 are thereafter freely tradeable without restrictions or
registration under the Securities Act, unless thereafter held by an "affiliate"
of the Company.
In addition, under the Stockholders' Agreement, the Company has granted
certain "piggyback" registration rights to holders of approximately 4.3 million
shares of Common Stock. The Stockholders' Agreement generally provides the
parties thereto with a limited right to cause the Company to use its best
efforts to register in connection with an offering of its equity securities,
subsequent to the Company's initial public offering in October 1994, under the
Securities Act the shares of Common Stock owned by each such person. The Company
will pay all expenses in connection with the preparation and filing of the
registration statement. The selling stockholder is responsible for payment of
any underwriting discounts or commissions with respect to shares sold for its
account. The parties to the Stockholders Agreement have agreed to waive their
respective "piggyback" registration rights with respect to the Offering.
The Company is unable to estimate the amount, timing or nature of future
sales of outstanding Class A Common Stock or Class B Common Stock. Although the
shares of Class A Common Stock offered hereby will trade separately from the
shares of Class B Common Stock, sales of substantial amounts of either Class A
or Class B Common Stock in the public market may have an adverse effect on the
market price of the Class A Common Stock. The Company and its executive
officers, directors and principal stockholders, including the parties to the
Stockholders' Agreement, have agreed that for a period of 90 days after the date
of this Prospectus they will not, without the prior written consent of the
representatives of the Underwriters, offer, sell, contract to sell or otherwise
dispose of any shares of Class A Common Stock, or any securities convertible
into or exercisable or exchangeable for Common Stock, except pursuant to the
Underwriting Agreement. See "Underwriters."
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CERTAIN UNITED STATES FEDERAL TAX CONSIDERATIONS
FOR NON-U.S. HOLDERS OF CLASS A COMMON STOCK
The following discussion concerns the material United States federal income
and estate tax consequences of the ownership and disposition of shares of Class
A Common Stock applicable to Non-U.S. Holders of such shares of Class A Common
Stock. In general a "Non-U.S. Holder" is any holder other than (i) a citizen or
resident of the United States, (ii) a corporation or partnership created or
organized in the United States or under the law of the United States or any
State or (iii) an estate or trust whose income is includible in gross income for
United States federal income tax purposes regardless of its source. The
discussion is based on current law, which is subject to change retroactively or
prospectively, and is for general information only. The discussion does not
address all aspects of federal income and estate taxation and does not address
any aspects of state, local or non-U.S. tax laws. The discussion does not
consider any specific facts or circumstances that may apply to a particular
Non-U.S. Holder (including the fact that in the case of a Non-U.S. Holder that
is a partnership, the United States tax consequences of holding and disposing of
shares of Class A Common Stock may be affected by certain determinations made at
the partner level). Accordingly, prospective investors are urged to consult
their tax advisors regarding the United States federal, state, local and
non-U.S. income and other tax consequences of holding and disposing of shares of
Class A Common Stock.
Dividends. Dividends, if any (see "Dividend Policy"), paid to a Non-U.S.
Holder generally will be subject to United States withholding tax at a 30% rate
(or a lower rate as may be prescribed by an applicable tax treaty) unless the
dividends are effectively connected with a trade or business of the Non-U.S.
Holder within the United States. Dividends effectively connected with a trade or
business will generally not be subject to withholding (if the Non-U.S. Holder
properly files an executed United States Internal Revenue Service ("IRS") Form
4224 with the payor of the dividend) and generally will be subject to United
States federal income tax on a net income basis at regular graduated rates. In
the case of a Non-U.S. Holder which is a corporation, such effectively connected
income also may be subject to the branch profits tax (which is generally imposed
on a foreign corporation on the repatriation from the United States of
effectively connected earnings and profits). The branch profits tax may not
apply if the recipient is a qualified resident of certain countries with which
the United States has an income tax treaty. To determine the applicability of a
tax treaty providing for a lower rate of withholding dividends paid to a
stockholder's address of record in a foreign country are presumed, under the
current IRS positions to be paid to a resident of that country, unless the payor
has knowledge that such presumption is not warranted or an applicable tax treaty
(or United States Treasury Regulations thereunder) requires some other method
for determining a Non-U.S. Holder's residence. However, recently proposed U.S.
Treasury Regulations, if adopted, would modify the forms and procedures for this
certification.
Sale of Class A Common Stock. Generally, a Non-U.S. Holder will not be
subject to United States federal income tax on any gain realized upon the
disposition of such holder's shares of Class A Common Stock unless (i) the gain
is effectively connected with a trade or business carried on by the Non-U.S.
Holder with the United States (in which case the branch profits tax may apply);
(ii) the Non-U.S. Holder is an individual who holds the shares of Class A Common
Stock as a capital asset and is present in the United States for 183 days or
more in the taxable year of the disposition and to whom such gain is United
States source; (iii) the Non-U.S. Holder is subject to tax pursuant to the
provisions of U.S. tax law applicable to certain former United States citizens
or residents; or (iv) the Company is or has been a "U.S. real property holding
corporation" for federal income tax purposes (which the Company does not believe
that it is or is likely to become) at any time during the five-year period
ending on the date of disposition (or such shorter period that such shares were
held) and, subject to certain exceptions, the Non-U.S. Holder held, directly or
indirectly, more than five percent of the Common Stock.
Estate Tax. Shares of Class A Common Stock owned or treated as owned by an
individual who is not a citizen or resident (as specifically defined for United
States federal estate tax purposes) of the United States at the time of death
may be subject to United States federal estate tax.
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BACKUP WITHHOLDING AND INFORMATION REPORTING
Dividends. The Company must report annually to the IRS and to each
Non-U.S. Holder the amount of dividends paid to and the tax withheld, if any,
with respect to such holder. These information reporting requirements apply
regardless of whether withholding was reduced by an applicable tax treaty.
Copies of these information returns may also be available under the provisions
of a specific treaty or agreement with the tax authorities in the country in
which the Non-U.S. Holder resides. Dividends that are subject to United States
withholding tax at the 30% statutory rate or at a reduced tax treaty rate and
dividends that are effectively connected with the conduct of a trade or business
in the United States (if certain certification and disclosure requirements are
met) are exempt from backup withholding of U.S. federal income tax. In general,
backup withholding at a rate of 31% and information reporting will apply to
other dividends paid on shares of Class A Common Stock to holders that are not
"exempt recipients" and fail to provide in the manner required certain
identifying information (such as the holder's name, address and taxpayer
identification number). Generally, individuals are not exempt recipients,
whereas corporations and certain other entities generally are exempt recipients.
Dispositions of Class A Common Stock. The payment of the proceeds from the
disposition of shares of Class A Common Stock through the United States office
of a broker will be subject to information reporting and backup withholding
unless the holder, under penalties of perjury, certifies, among other things,
its status as a Non-U.S. Holder, or otherwise establishes an exemption.
Generally, the payment of the proceeds from the disposition of shares of Class A
Common Stock to or through a non-U.S. office of a broker will not be subject to
backup withholding and will not be subject to information reporting. In the case
of the payment of proceeds from the disposition of shares of Class A Common
Stock through a non-U.S. office of a broker that is a U.S. person or a
"U.S.-related person," existing regulations require information reporting (but
not backup withholding) on the payment unless the broker receives a statement
from the owner, signed under penalties of perjury, certifying, among other
things, its status as a Non-U.S. Holder, or the broker has documentary evidence
in its files that the owner is a Non-U.S. Holder and the broker has no actual
knowledge to the contrary. For tax purpose, a "U.S.-related person" is (i) a
"controlled foreign corporation" for United States federal income tax purposes
or (ii) a foreign person 50% or more of whose gross income from all sources for
the three year period ending with the close of its taxable year preceding the
payment (or for such part of the period that the broker has been in existence)
is derived from activities that are effectively connected with the conduct of a
United States trade or business.
Any amount withheld from a payment to a Non-U.S. Holder under the backup
withholding rules will be allowed as a credit against such holder's United
States federal income tax liability and may entitle such holder to a refund,
provided that the required information is furnished to the IRS. Non-U.S. Holders
should consult their tax advisors regarding the application of these rules to
their particular situations, the availability of an exemption therefrom and the
procedures for obtaining such an exemption, if available.
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UNDERWRITERS
Under the terms and subject to conditions contained in an Underwriting
Agreement dated the date hereof, the U.S. Underwriters named below, for whom
Morgan Stanley & Co. Incorporated and Salomon Brothers Inc are serving as U.S.
Representatives, have severally agreed to purchase and the International
Underwriters named below, for whom Morgan Stanley & Co. International Limited
and Salomon Brothers International Limited are serving as International
Representatives (collectively with the U.S. Representatives, the
"Representatives"), have severally agreed to purchase the respective number of
shares of Class A Common Stock that in the aggregate equal the number of shares
set forth opposite the names of such Underwriters below:
<TABLE>
<CAPTION>
NUMBER
NAME OF SHARES
------------------------------------------------------------------------ ---------
<S> <C>
U.S. Underwriters:
Morgan Stanley & Co. Incorporated.....................................
Salomon Brothers Inc..................................................
---------
Subtotal......................................................
---------
International Underwriters:
Morgan Stanley & Co. International Limited............................
Salomon Brothers International Limited................................
---------
Subtotal......................................................
---------
Total....................................................... 2,200,000
=========
</TABLE>
The U.S. Underwriters and the International Underwriters are collectively
referred to as the "Underwriters." The Underwriting Agreement provides that the
obligations of the several Underwriters to pay for and accept delivery of the
shares of Class A Common Stock offered hereby are subject to the approval of
certain legal matters by their counsel and to certain other conditions,
including the conditions that no stop order suspending the effectiveness of the
Registration Statement is in effect and no proceedings for such purpose are
pending before or threatened by the Commission and that there has been no
material adverse change or any development involving a prospective material
adverse change in the earnings, results of operations or financial condition of
the Company, taken as a whole, from that set forth in the Registration
Statement. The Underwriters are obligated to take and pay for all of the shares
of Class A Common Stock offered hereby (other than those covered by the
over-allotment option described below) if any such shares are taken.
Pursuant to the Agreement Between U.S. and International Underwriters, each
U.S. Underwriter has represented and agreed that, with certain exceptions set
forth below, (i) it is not purchasing any U.S. Shares (as defined below) for the
account of anyone other than a United States or Canadian Person (as defined
below) and (ii) it has not offered or sold, and will not offer or sell, directly
or indirectly, any U.S. Shares or distribute any Prospectus relating to the U.S.
Shares (as defined below) outside the United States or Canada or to anyone other
than a United States or Canadian Person. Pursuant to the Agreement Between U.S.
and International Underwriters, each International Underwriter has represented
and agreed that, with certain exceptions set forth below, (a) it is not
purchasing any International Shares (as defined below) for the account of any
United States or Canadian Person and (b) it has not offered or sold, and will
not offer or sell, directly or indirectly, any International Shares or
distribute any prospectus relating to the International Shares within the United
States or Canada or to any United States or Canadian Person. The foregoing
limitations do
62
<PAGE> 65
not apply to stabilization transactions or to certain other transactions
specified in the Agreement Between U.S. and International Underwriters. As used
herein, "United States or Canadian Person" means any national or resident of the
United States or Canada or any corporation, pension, profit-sharing or other
trust or other entity organized under the laws of the United States or Canada or
of any political subdivision thereof (other than a branch located outside of the
United States and Canada of any United States or Canadian Person) and includes
any United States or Canadian branch of a person who is not otherwise a United
States or Canadian Person, and "United States" means the United States of
America, its territories, its possessions and all areas subject to its
jurisdiction. All shares of Class A Common Stock to be offered by the U.S.
Underwriters and International Underwriters under the Underwriting Agreement are
referred to herein as the "U.S. Shares" and the "International Shares,"
respectively.
Pursuant to the Agreement Between U.S. and International Underwriters,
sales may be made between the U.S. Underwriters and the International
Underwriters of any number of shares of Class A Common Stock to be purchased
pursuant to the Underwriting Agreement as may be mutually agreed. The per share
price and currency settlement of any shares of Class A Common Stock so sold
shall be the public offering price range set forth on the cover page hereof, in
United States dollars, less an amount not greater than the per share amount of
the concession to dealers set forth below.
Pursuant to the Agreement Between U.S. and International Underwriters, each
U.S. Underwriter has represented that it has not offered or sold, and has agreed
not to offer or sell, any shares of Class A Common Stock, directly or
indirectly, in Canada in contravention of the securities laws of Canada or any
province or territory thereof and has represented that any offer of such shares
in Canada will be made only pursuant to an exemption from the requirement to
file a prospectus in the province or territory of Canada in which such offer is
made. Each U.S. Underwriter has further agreed to send to any dealer who
purchases from it any shares of Class A Common Stock a notice stating in
substance that, by purchasing such shares, such dealer represents and agrees
that it has not offered or sold, and will not offer or sell, directly or
indirectly, any of such shares in Canada in contravention of the securities laws
of Canada or any province or territory thereof and that any offer of shares of
Class A Common Stock in Canada will be made only pursuant to an exemption from
the requirement to file a prospectus in the province or territory of Canada in
which such offer is made, and that such dealer will deliver to any other dealer
to whom it sells any of such shares a notice to the foregoing effect.
Pursuant to the Agreement Between U.S. and International Underwriters, each
International Underwriter has represented that (i) it has not offered or sold
and will not offer or sell any shares of Class A Common Stock to persons in the
United Kingdom except to persons whose ordinary activities involve them in
acquiring, holding, managing or disposing of investments (as principal or agent)
for the purposes of their businesses or otherwise in circumstances which have
not resulted and will not result in an offer to the public in the United Kingdom
within the meaning of the Public Offers of Securities Regulations 1995 (the
"Regulations"); (ii) it has complied and will comply with all applicable
provisions of the Financial Services Act 1986 and the Regulations with respect
to anything done by it in relation to such shares in, from or otherwise
involving the United Kingdom; and (iii) it has only issued or passed on and will
only issue or pass on to any person in the United Kingdom any document received
by it in connection with the issue of such shares, if that person is of a kind
described in Article 11(3) of the Financial Services Act 1986 (Investment
Advertisements) (Exemptions) Order 1995, or is a person to whom such document
may otherwise lawfully be issued or passed on.
Pursuant to the Agreement Between U.S. and International Underwriters, each
International Underwriter has represented and agreed that it has not offered or
sold, and will not offer or sell, directly or indirectly, in Japan or to or for
the account of any resident thereof, any shares of Class A Common Stock acquired
in connection with the Offering, except for offers or sales of Japanese
International Underwriters or dealers and except pursuant to any exemption from
the registration requirements of the Securities and Exchange Law of Japan. Each
International Underwriter has further agreed to send to any dealer who purchases
from it any of such shares of Class A Common Stock a notice stating in substance
that such dealer may not offer or sell any of such shares, directly or
indirectly, in Japan or to or for the account of any resident thereof, except
pursuant to any exemption from the registration requirements of the Securities
and Exchange Law of Japan, and that such dealer will send to any other dealer to
whom it sells any of such shares a notice to the foregoing effect.
63
<PAGE> 66
The Underwriters propose to offer part of the shares of Common Stock
offered hereby directly to the public at the public offering price set forth in
the cover page hereof and part to certain dealers at a price which represents a
concession not in excess of $ per share under the public offering
price. The Underwriters may allow, and such dealers may re-allow, a concession
not in excess of $ per share to other Underwriters or to certain other
dealers. After the initial offering of the shares of Common Stock, the offering
price and other selling terms may from time to time be varied by the
Representatives.
Pursuant to the Underwriting Agreement, the Company has granted to the U.S.
Underwriters an option, exercisable for 30 days from the date of this
Prospectus, to purchase up to an additional shares of Common Stock at the
public offering price set forth on the cover page hereof, less underwriting
discounts and commissions. The U.S. Underwriters may exercise such option to
purchase solely for the purpose of covering over-allotments, if any, incurred in
the sale of the shares of Common Stock offered hereby. To the extent such option
is exercised, each U.S. Underwriter will become obligated, subject to certain
conditions, to purchase approximately the same percentage of such additional
shares as the number set forth next to such U.S. Underwriters' name in the
preceding table bears to the total number of shares of Common Stock offered
hereby to the U.S. Underwriters.
The Representatives have informed the Company that the Underwriters do not
intend to confirm sales to accounts over which they exercise discretionary
authority.
The Company and the Underwriters have agreed to indemnify each other
against certain liabilities, including liabilities under the Securities Act.
See "Shares Eligible for Future Sale" for a description of certain
arrangements by which all officers and directors and certain stockholders of the
Company have agreed not to sell or otherwise dispose of Common Stock or
convertible securities of the Company for a period of 90 days after the date of
this Prospectus without the prior consent of Morgan Stanley & Co. Incorporated.
The Company has agreed in the Underwriting Agreement that they will not,
directly or indirectly, without the prior written consent of Morgan Stanley &
Co. Incorporated, offer, pledge for a period of 90 days from the date of this
Prospectus, sell, contract to sell, sell any option or contract to purchase,
purchase any option or contract to sell, grant any option, right or warrant to
purchase or otherwise transfer or dispose of any shares of Common Stock or any
securities convertible into or exchangeable for Common Stock, except under
certain circumstances.
The rules of the National Association of Securities Dealers, Inc. (the
"NASD") provide that no NASD member shall participate in a public offering of an
issuer's securities where more than 10% of the net offering proceeds are
intended to be paid to members participating in the distribution of the
offering, or entities associated or affiliated with such members, unless a
"qualified independent underwriter" shall have been engaged on the terms
provided in such rules. Salomon Brothers Inc's affiliate, SBHC, provided loans
to the Company pursuant to the New Credit Facility aggregating $27.5 million, of
which approximately $3.5 million will be repaid with the proceeds of the
Offering. See "Use of Proceeds" and "Certain Transactions."
In view of such use of the proceeds of the Offering, the Offering is being
conducted in accordance with the rules of the NASD and Morgan Stanley & Co.,
Incorporated is acting as "qualified independent underwriter" within the meaning
of such rules. In connection therewith, Morgan Stanley & Co, Incorporated has
participated in the preparation of the Registration Statement of which this
Prospectus forms a part. It has exercised its usual standards of "due diligence"
with respect thereto and has recommended the maximum price at which the Class A
Common Stock may be offered.
LEGAL MATTERS
The validity of the shares of Class A Common Stock offered hereby will be
passed upon by Jones, Day, Reavis & Pogue, Cleveland, Ohio. Certain legal
matters will be passed upon for the Underwriters by Katten Muchin & Zavis,
Chicago, Illinois.
64
<PAGE> 67
EXPERTS
The audited financial statements of Sinter as of December 31, 1995 and 1994
and for each of the three years in the period ended December 31, 1995 included
in this Prospectus and elsewhere in the Registration Statement have been audited
by Arthur Andersen LLP, independent public accountants, as indicated in their
reports with respect thereto and are included herein in reliance upon the
authority of said firm as experts in giving said reports.
The consolidated financial statements of PMH as of December 31, 1995 and
November 22, 1996 and for the two years ended December 31, 1995 and the period
January 1, 1996 through November 22, 1996 included in this Prospectus have been
audited by Deloitte & Touche LLP, independent auditors, as stated in their
reports appearing herein and elsewhere in the Registration Statement and have
been so included in reliance upon the reports of such firm given upon their
authority as experts in accounting and auditing.
The consolidated financial statements of Krebsoge as of December 31, 1995
and for the year then ended included in this Prospectus have been so included in
reliance on the report of Price Waterhouse GmbH, independent auditors, given on
the authority of said firm as experts in auditing and accounting.
The consolidated financial statements of Krebsoge as of December 31, 1994
and for the two years in the period ending December 31, 1994 included in this
Prospectus have been audited by BDO Grunewalder Treuhard GmbH, independent
auditors, as stated in their reports appearing in this Registration Statement
and have been included in reliance upon the reports of such firm given their
authority as experts in accounting and auditing.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Exchange
Act, and in accordance therewith files reports, proxy statements and other
information with the Commission. Such reports, proxy statements and other
information filed by the Company can be inspected and copied at the public
reference facilities maintained by the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549, and at the following regional offices of the Commission:
Citicorp Center, 500 Madison Street, Suite 1400, Chicago, Illinois 60661 and
Seven World Trade, Suite 1300 New York, New York 10048. 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. The Commission
maintains a World Wide Web site (http://www.sec.gov) that contains reports,
proxy and information statements and other information regarding registrants,
such as the Company, that submit electronic filings to the Commission. The
Company's Class A Common Stock is listed on the New York Stock Exchange, and
reports, proxy and information statements and other information concerning the
Company may also be inspected at the offices of the New York Stock Exchange,
Inc., 20 Broad Street, New York, New York 10005.
The Company has filed with the Commission a Registration Statement under
the Securities Act of 1933, as amended, with respect to the Class A Common Stock
offered hereby (the "Registration Statement"). This Prospectus does not contain
all of the information set forth in the Registration Statement, certain parts of
which are omitted in accordance with the rules and regulations of the
Commission. Reference is made to the Registration Statement and to the exhibits
relating thereto for further information with respect to the Company and the
Class A Common Stock offered hereby. Statements made in this Prospectus as to
the contents of any contract, agreement or other document referred to are not
necessarily complete; and with respect to each such contract, agreement or other
document filed as an exhibit to the Registration Statement, reference is made to
the exhibit for a more complete description of the matter involved and each such
statement shall be deemed qualified in its entirety by such reference.
65
<PAGE> 68
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
SINTER METALS, INC. AND SUBSIDIARIES
Report of Independent Public Accountants..................................... F-2
Consolidated Balance Sheets as of December 31, 1994 and 1995................. F-3
Consolidated Statements of Operations for the years ended December 1993, 1994
and 1995.................................................................. F-5
Consolidated Statements of Changes in Stockholders Equity for the years ended
December 31, 1993, 1994 and 1995.......................................... F-6
Consolidated Statements of Cash Flows for the years ended December 31, 1993,
1994 and 1995............................................................. F-7
Notes to Consolidated Financial Statements................................... F-8
KREBSOGE SINTERHOLDING GMBH (GERMAN GAAP)
Report of Independent Auditors............................................... F-15
Report of Independent Auditors............................................... F-16
Consolidated Balance Sheets as of December 31, 1994 and 1995................. F-17
Consolidated Statements of Income for the years ended December 31, 1993, 1994
and 1995.................................................................. F-18
Consolidated Statements of Cash Flows for the years ended December 31, 1993,
1994 and 1995............................................................. F-19
Notes to the Consolidated Financial Statements............................... F-20
POWDER METAL HOLDING, INC. AND SUBSIDIARIES
Independent Auditors' Report................................................. F-43
Consolidated Balance Sheets as of December 31, 1995 and November 22, 1996.... F-44
Consolidated Statements of Income for the years ended December 31, 1994 and
1995 and the period January 1, 1996 through November 22, 1996............. F-45
Consolidated Statements of Shareholders' Deficit for the years ended December
31, 1994 and 1995 and the period January 1, 1996 through November 22,
1996...................................................................... F-46
Consolidated Statements of Cash Flows for the years ended December 31, 1994
and 1995 and the period January 1, 1996 through November 22, 1996......... F-47
Notes to Consolidated Financial Statements................................... F-48
</TABLE>
F-1
<PAGE> 69
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors
of Sinter Metals, Inc.:
We have audited the accompanying consolidated balance sheets of Sinter
Metals, Inc.(a Delaware corporation) and Subsidiaries as of December 31, 1995
and 1994, and the related consolidated statements of operations, changes in
stockholders' equity and cash flows for each of the three years in the period
ended December 31, 1995. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Sinter Metals, Inc. and
Subsidiaries as of December 31, 1995 and 1994, 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.
ARTHUR ANDERSEN LLP
Cleveland, Ohio,
February 7, 1996 (except with
respect to the matters discussed
in Note 3 and Note 12, as to which the
date is December 19, 1996).
F-2
<PAGE> 70
SINTER METALS, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
------------------- SEPTEMBER 30,
1994 1995 1996
------- ------- -------------
(UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT SHARE
DATA)
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents................................ $ 78 $ 1,462 $ 1,752
Accounts receivable, net of allowance of $111, $100 and
$100 (unaudited), respectively........................ 9,077 11,129 14,611
Inventories.............................................. 7,069 10,194 13,751
Other current assets..................................... 340 643 775
------- ------- -------
Total current assets............................. 16,564 23,428 30,889
------- ------- -------
PROPERTY, PLANT AND EQUIPMENT:
Land..................................................... 264 586 788
Buildings and building improvements...................... 3,675 6,251 7,465
Machinery and equipment.................................. 28,773 32,757 36,835
Construction in progress................................. 284 1,113 5,619
------- ------- -------
32,996 40,707 50,707
Less accumulated depreciation......................... (8,188) (12,024) (15,664)
------- ------- -------
Total property, plant and equipment.............. 24,808 28,683 35,043
------- ------- -------
OTHER ASSETS:
Restricted cash.......................................... -- -- 5,856
Intangible assets, net................................... 11,963 12,977 17,773
Other assets............................................. -- 132 552
------- ------- -------
Total other assets............................... 11,963 13,109 24,181
------- ------- -------
TOTAL ASSETS............................................... $53,335 $65,220 $90,113
======= ======= =======
</TABLE>
F-3
<PAGE> 71
SINTER METALS, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
------------------- SEPTEMBER 30,
1994 1995 1996
------- ------- -------------
(UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT SHARE
DATA)
<S> <C> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of long-term debt..................... $ 28 $ 267 $ 154
Accounts payable......................................... 7,592 7,068 10,055
Accrued payroll and vacation............................. 1,195 1,241 2,353
Accrued benefits......................................... 2,805 3,080 3,602
Other accrued expenses................................... 1,204 1,996 1,862
Income taxes payable..................................... 1,610 648 1,498
------- ------- -------
Total current liabilities........................ 14,434 14,300 19,524
------- ------- -------
LONG-TERM OBLIGATIONS:
Term loans............................................... 136 2,291 9,316
Borrowings under revolving credit agreement.............. 2,600 2,141 6,505
Other liabilities........................................ 938 1,000 810
Deferred income taxes.................................... 2,983 4,026 5,379
------- ------- -------
Total long-term obligations...................... 6,657 9,458 22,010
------- ------- -------
Total liabilities................................ 21,091 23,758 41,534
------- ------- -------
STOCKHOLDERS' EQUITY:
Common stock
Class A, par value $.001 per share -- Authorized,
20,000,000 shares; issued and outstanding,
4,762,646, 5,004,747 and 5,009,747 (unaudited)
shares, respectively................................ 5 5 5
Class B, par value $.001 per share -- Authorized,
5,000,000 shares; issued and outstanding, 2,685,482,
2,543,381 and 2,543,381 (unaudited) shares,
respectively........................................ 2 2 2
Additional paid-in capital............................... 26,838 27,838 27,925
Cumulative translation adjustments....................... -- 331 373
Retained earnings........................................ 5,399 13,286 20,274
------- ------- -------
Total stockholders' equity....................... 32,244 41,462 48,579
------- ------- -------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY................. $53,335 $65,220 $90,113
======= ======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE> 72
SINTER METALS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
(UNAUDITED)
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
--------------------------- -----------------
1993 1994 1995 1995 1996
------- ------- ------- ------- -------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
NET SALES......................................... $68,584 $82,479 $94,310 $69,392 $83,068
COST OF SALES..................................... 54,061 64,765 73,245 53,930 64,205
------- ------- ------- ------- -------
Gross profit.................................... 14,523 17,714 21,065 15,462 18,863
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES...... 6,442 8,212 7,698 5,476 7,322
AMORTIZATION OF INTANGIBLE ASSETS................. 308 302 332 242 300
------- ------- ------- ------- -------
Income from operations.......................... 7,773 9,200 13,035 9,744 11,241
INTEREST EXPENSE.................................. 5,107 1,956 287 220 288
OTHER EXPENSE, NET................................ 11 166 111 109 (60)
------- ------- ------- ------- -------
Income before income taxes and extraordinary
charge....................................... 2,655 7,078 12,637 9,415 11,013
PROVISION FOR INCOME TAXES........................ 2,370 2,900 4,750 3,600 4,025
------- ------- ------- ------- -------
Net income before extraordinary charge.......... 285 4,178 7,887 5,815 6,988
EXTRAORDINARY CHARGE, net of tax.................. -- (580) -- -- --
------- ------- ------- ------- -------
Net income...................................... 285 3,598 7,887 5,815 6,988
PREFERRED DIVIDENDS............................... (242) (202) -- -- --
------- ------- ------- ------- -------
NET INCOME APPLICABLE TO COMMON STOCK............. $ 43 $ 3,396 $ 7,887 $ 5,815 $ 6,988
======= ======= ======= ======= =======
PER SHARE DATA
Income before extraordinary charge.............. $ .01 $ .72 $ 1.05 $ .78 $ .93
Extraordinary charge, net of tax................ -- (.11) -- -- --
------- ------- ------- ------- -------
Net income...................................... $ .01 $ .61 $ 1.05 $ .78 $ .93
======= ======= ======= ======= =======
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING........ 5,099 5,533 7,500 7,483 7,549
======= ======= ======= ======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE> 73
SINTER METALS, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL CUMULATIVE
----------------- PAID-IN RETAINED TRANSLATION
CLASS A CLASS B CAPITAL EARNINGS ADJUSTMENTS TOTAL
------- ------- ---------- -------- ----------- -------
(DOLLARS IN THOUSANDS EXCEPT SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
BALANCE AT DECEMBER 31, 1992.......... $ -- $ 4 $ 3,074 $ 1,960 $ -- $ 5,038
Issuance of 24,526 shares of Class A
and 309,134 shares of Class B
common stock at $.70 per share... 232 232
Employee notes receivable related to
purchase of stock................ (31) (31)
Issuance of 60,805 shares of Class B
common stock under the stock
award plan valued at $5.21 per
share............................ 317 317
Net income.......................... 285 285
Preferred stock dividends payable
($8 per share)................... (242) (242)
-------- -------- -------- -------- -------- --------
BALANCE AT DECEMBER 31, 1993.......... -- 4 3,592 2,003 -- 5,599
Issuance of 1,804,000 shares of
Class A common stock at $10 per
share, net....................... 2 14,760 14,762
Issuance of 303,725 shares of Class
A common stock under the stock
award plan valued at $10 per
share............................ 3,036 3,036
Conversion of 1,764,761 shares of
Class B common stock to Class
A................................ 2 (2)
Issuance of 541,986 shares of Class
A common stock upon conversion of
preferred stock and subordinated
notes............................ 1 5,419 5,420
Repayment of employee loans......... 31 31
Preferred stock dividends payable
($6.60 per share)................ (202) (202)
Net income.......................... 3,598 3,598
-------- -------- -------- -------- -------- --------
BALANCE AT DECEMBER 31, 1994.......... 5 2 26,838 5,399 -- 32,244
Issuance of 100,000 shares of Class
A common stock at $10 per
share............................ 1,000 1,000
Net income.......................... 7,887 7,887
1995 translation adjustments........ 331 331
-------- -------- -------- -------- -------- --------
BALANCE AT DECEMBER 31, 1995.......... 5 2 27,838 13,286 331 41,462
Issuance of 5,000 shares of Class A
common stock at 17.40 per share
(unaudited)...................... 87 87
Net income (unaudited).............. 6,988 6,988
1996 translation adjustments
(unaudited)...................... 42 42
-------- -------- -------- -------- -------- --------
BALANCE AT SEPTEMBER 30, 1996
(UNAUDITED)......................... $ 5 $ 2 $ 27,925 $ 20,274 $ 373 $48,579
======== ======== ======== ======== ======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-6
<PAGE> 74
SINTER METALS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
(UNAUDITED)
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
--------------------------- ------------------
1993 1994 1995 1995 1996
------- ------- ------- ------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income.............................................. $ 285 $ 3,598 $ 7,887 $ 5,815 $ 6,988
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization......................... 3,256 3,759 4,272 2,915 3,930
Increase in value of capital appreciation rights...... 2,908 -- -- -- --
Extraordinary charge on early extinguishment of
debt................................................ -- 580 -- -- --
Deferred income taxes................................. (146) (1,188) 868 487 464
Compensation expense under the stock award plan....... 916 2,435 -- -- --
Other................................................. -- 251 134 330 (228)
Cash provided (used) by working capital items, net of
acquisition:
Accounts receivable, net.............................. (1,001) (967) (670) (1,950) (2,205)
Inventories........................................... (1,383) (738) (1,477) (1,717) (2,126)
Other current assets.................................. (32) (30) (196) (162) (24)
Accounts payable...................................... 1,142 1,390 (975) (1,056) 1,799
Accrued payroll and benefits.......................... 1,407 420 321 -- --
Other accrued expenses................................ (105) 255 (473) 523 1,160
Accrued taxes......................................... 704 463 (962) (205) 850
-------- -------- -------- ------- --------
- - -
Net cash provided by operating activities........ 7,951 10,228 8,729 4,980 10,608
-------- -------- -------- ------- --------
- - -
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property, plant and equipment.............. (4,198) (4,160) (4,301) (2,727) (6,023)
Acquisition of business, net of cash acquired........... (200) (3,070) (4,043) (4,043) (9,802)
Restricted cash......................................... -- -- -- -- (5,856)
-------- -------- -------- ------- --------
- - -
Net cash used by investing activities............ (4,398) (7,230) (8,344) (6,770) (21,681)
-------- -------- -------- ------- --------
- - -
CASH FLOWS FROM FINANCING ACTIVITIES:
Term debt borrowings (repayments), net.................. (5,735) (14,500) 458 138 6,912
(Decrease) increase in borrowings under revolving credit
line, net............................................. 3,186 (586) (459) 1,466 4,364
Preferred stock and subordinated notes issuance
(repurchase).......................................... 1,598 (2,238) -- -- --
Issuance of common stock, net........................... 232 14,762 1,000 1,000 87
Repurchase of capital appreciation rights............... (3,687) -- -- -- --
Payment of preferred stock dividend..................... (242) (444) -- -- --
-------- -------- -------- ------- --------
- - -
Net cash provided (used) by financing
activities..................................... (4,648) (3,006) 999 2,604 11,363
-------- -------- -------- ------- --------
- - -
Net increase (decrease) in cash.................. (1,095) (8) 1,384 814 290
Cash, beginning of period................................. 1,181 86 78 78 1,462
-------- -------- -------- ------- --------
- - -
Cash, end of period....................................... $ 86 $ 78 $ 1,462 $ 892 $ 1,752
====== ======= ======= ======= ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash payments for interest.............................. $ 1,830 $ 2,134 $ 333 $ 177 $ 276
====== ======= ======= ======= ========
Cash payments for income taxes.......................... $ 1,809 $ 3,291 $ 5,091 $ 3,372 $ 2,556
====== ======= ======= ======= ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-7
<PAGE> 75
SINTER METALS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1993, 1994 AND 1995
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1. ORGANIZATION:
The Company's principal business consists of the design, engineering and
production of precision pressed metal components for use primarily in the
automotive, home appliance, lawn and garden and power tool industries. The
Company manufactures over 1,000 different components such as gears, bearings and
sprockets, for use in engines, transmissions and other drive mechanisms.
In October 1994, the Company successfully completed an initial public
offering of its Class A Common Stock raising net proceeds of approximately $14.7
million after consideration of transaction expenses. The Company used the net
proceeds from the initial public offering together with borrowings of
approximately $2.0 million under the Company's revolving credit facility to
repay all of its then outstanding senior indebtedness, to repay a portion of its
subordinated indebtedness and to redeem a portion of its preferred stock. The
balance of the preferred stock and subordinated indebtedness was converted to
shares of Class A Common Stock.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
The accompanying consolidated financial statements reflect the application
of the following significant accounting policies:
Principles of Consolidation
The consolidated financial statements include the accounts of the Company
and its wholly owned subsidiaries, PPMI, Midwest and Kolsva Sinterteknik. All
significant intercompany transactions and accounts have been eliminated in the
accompanying consolidated financial statements. Effective January 1, 1996, all
of the Company's domestic operating subsidiaries, including PPMI and Midwest,
were merged into Sinter Metals.
Cash Equivalents
The Company considers all short-term investments with original maturities
of three months or less to be cash equivalents. Cash equivalents are stated at
cost, which approximates fair market value.
Inventories
Inventories are valued at the lower of cost, as determined principally on
the LIFO (last-in, first-out) method, or market for both book and tax purposes.
Inventory cost includes material, labor and overhead.
Accounts Receivable
Revenues are principally generated from the automotive, lawn and garden and
power tool industries. The Company grants credit to customers based upon
management's assessment of their creditworthiness. The automotive, lawn and
garden, and power tool industries account for 61.0%, 8.1% and 7.1%,
respectively, of accounts receivable at December 31, 1995. Additionally,
accounts receivable from the Company's five largest customers aggregated
approximately $4,960,000 as of December 31, 1995.
Property, Plant and Equipment
Additions to property, plant and equipment are stated at cost. Expenditures
for replacements are capitalized, and repairs and maintenance costs are expensed
as incurred. When assets are sold or otherwise disposed of, the related cost and
accumulated depreciation are removed from the accounts and any gain or loss is
included in income.
F-8
<PAGE> 76
SINTER METALS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Depreciation is computed, for financial reporting purposes, using the
straight-line method over estimated useful lives, which are as follows:
<TABLE>
<S> <C>
Buildings and building improvements................................. 15-30 years
Machinery and equipment............................................. 5-10 years
</TABLE>
Depreciation expense was $2,606,000, $3,175,000 and $3,940,000 for the
three years ended December 31, 1993, 1994 and 1995, respectively.
Intangible Assets
Intangible assets consist primarily of goodwill, which represents the
excess of cost over net assets acquired and is being amortized on a
straight-line basis primarily over 40 years.
Income Taxes
Income taxes are provided in accordance with Statement of Financial
Accounting Standards No. 109, which requires the use of an asset and liability
method of accounting for current and expected future tax consequences of events
that have been recognized in the financial statements or tax returns.
No provision is made for U.S. income taxes applicable to undistributed
earnings of foreign subsidiaries that are indefinitely reinvested in foreign
operations.
Share Information
Per share computations are based upon the weighted average common shares
outstanding of 5,099,000 in 1993, 5,533,000 in 1994 and 7,500,000 in 1995, which
include the dilutive effects of shares issued or to be issued within one year
prior to the initial public offering totaling 650,815 shares and 253,104 shares,
in 1993 and 1994, respectively.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting periods. Actual results could differ from the estimates.
Reclassifications
Certain balances in 1994 and 1993 have been reclassified to conform to the
current year presentation.
3. INVESTMENT IN PMH:
As part of its business strategy, in 1993 in simultaneous transactions, the
Company purchased a 30% interest in Powder Metal Holding, Inc. (PMH), a
nonoperating holding company, that owns 100% of ICM/Krebsoge (ICM/K) (a domestic
manufacturer of pressed metal products) and repurchased the Capital Appreciation
Right (CAR) held by a creditor of PMH.
The combined consideration of $3,887,000 was allocated for financial
reporting purposes as $200,000 to the investment and $3,687,000 to the buyout.
The Company also entered into a conditional merger agreement (the
Conditional Agreement) and a shareholders' agreement (the Shareholders'
Agreement) with PMH. ICM/K has operating facilities located
F-9
<PAGE> 77
SINTER METALS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
in Indiana, Ohio and Canada. The most recent audited financial statements
indicate PMH had total assets of $59,094,000, net sales of $101,671,000 and net
income of $2,172,000 as of and for the period January 1, 1996 through November
22, 1996.
While PMH returned to profitability in 1994, 1995 and 1996, the net worth
of PMH remains a negative $26,331,000 at November 22, 1996. Accordingly, the
Company wrote off its recorded investment in PMH in 1994 and has not recognized
its pro rata share of PMH's 1994, 1995 and 1996 net income.
Each party's obligation to consummate the merger under the Conditional
Agreement is subject to a number of conditions including ICM/K and the Company
meeting certain financial and operating targets as of and for the year ended
December 31, 1995. While the Company has met the prescribed operating targets,
ICM/K has not. Accordingly, the Conditional Agreement which expires on April 30,
1996 may expire before a merger can be consummated.
The Shareholders' Agreement gives the Company a right of first refusal on
the sale of the balance of PMH stock. If the Company continues to maintain its
stock position in PMH it may, after December 31, 1998, sell its position to PMH
based on a prescribed formula that is dependent upon the performance of PMH for
the twelve months preceding such sale. The Shareholders' Agreement also requires
unanimous consent of the shareholders for most major corporate actions,
including but not limited to the following, (i) any merger, consolidation or
reorganization of PMH, (ii) the disposition of any property in excess of $1
million, (iii) capital contributions in excess of $2 million and (iv) the
approval of executive compensation.
In addition to providing board representation for the Company, the
Shareholders' Agreement also provides that at any time on or before the merger
has been consummated, the Board of Directors of PMH may require its stockholders
to purchase an additional pro rata number of its shares in order to permit PMH
to make a capital contribution to ICM/K. The Company's pro rata maximum share of
this capital call is $600,000.
4. INVENTORIES:
The major components of inventories are as follows (dollars in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
----------------
1994 1995
------ -------
<S> <C> <C>
Raw materials..................................................... $2,099 $ 2,945
Work-in-process................................................... 2,334 4,481
Finished goods.................................................... 2,624 3,105
------ ------
7,057 10,531
LIFO reserve...................................................... 12 (337)
------ -------
$7,069 $10,194
====== =======
</TABLE>
5. INTANGIBLE ASSETS:
Goodwill of $12,891,000 and $14,228,000 at December 31, 1994 and 1995
represents costs in excess of net assets acquired and is amortized on a
straight-line basis over a 40-year period. Accumulated amortization related to
goodwill aggregated $928,000 and $1,251,000, respectively. At each balance sheet
date, the Company evaluates the realizability of goodwill based upon
expectations of undiscounted cash flows and operating income of the related
business unit. Based upon its most recent analysis, the Company believes that no
impairment of goodwill exists at December 31, 1995 and the amortization period
remains appropriate.
F-10
<PAGE> 78
SINTER METALS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
6. LONG-TERM DEBT:
Long-term debt consisted of the following (dollars in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
-------------
1994 1995
---- ------
<S> <C> <C>
Term loan............................................................ $ -- $2,231
Equipment loans...................................................... 164 327
----- ------
Total term loans..................................................... 164 2,558
Less current portion of long-term debt............................... (28) (267)
----- ------
Long-term debt -- noncurrent......................................... $136 $2,291
==== ======
</TABLE>
Concurrent with the Company's initial public offering, the Company entered
into a new revolving line of credit aggregating $22.5 million. The revolving
line of credit was subsequently amended and expanded in January 1996 (the New
Revolver). The New Revolver is a $30 million unsecured facility and matures in
January 1999. The New Revolver contains various affirmative and negative
covenants customary for unsecured revolving credit financing, and bears interest
at optional rates as defined. The rate was 6.875% at December 31, 1995. The
Company had $2.1 million and $2.6 million outstanding under the revolving credit
facilities as of December 31, 1995 and 1994, respectively. Based on the
borrowing rates currently available to the Company for bank loans with similar
terms and average maturities, the fair value of long-term debt was substantially
the same as its carrying value at December 31, 1995 and 1994.
The term loan was assumed in conjunction with the Company's acquisition of
Kolsva Sinterteknik. The debt is secured by a blanket lien on the assets in
Sweden. The interest rate on the term loan is fixed at 10.5% and is scheduled to
mature on September 30, 1998. Contractual terms of the debt preclude prepayment.
The Company has deemed the value of the debt to be the fair value based on the
restrictive nature and terms of the debt.
The Company's prior credit agreement, which included a term loan and
revolving credit facility, and a portion of the Company's 12% subordinated notes
were retired utilizing the net proceeds from the Company's initial public
offering in October 1994. The balance of the subordinated notes and certain
shares of preferred stock were converted to Class A Common Stock. In conjunction
with the repayments, the unamortized loan discount and deferred financing costs
aggregating $580,000 were charged off and recognized, in the accompanying 1994
statement of operations, as an extraordinary charge.
7. EMPLOYEE BENEFIT PLANS:
Profit Sharing Plan
The Company sponsors a defined contribution and profit sharing plan with
contributions based on years of service and level of compensation. The expense
pertaining to this plan was approximately $896,000, $890,000 and $818,000 during
1995, 1994 and 1993, respectively.
The Company does not provide any postretirement or postemployment benefits
other than those to be received from such defined contribution plan.
Management Incentive Stock Plan
At December 31, 1991, the Company adopted a management incentive stock plan
for certain eligible employees. The Company reserved 405,038 shares of Class B
Common Stock to be issued over the five years of the plan. The Company achieved
the equity measurement requiring the maximum award level for 1993, and 60,805
shares were awarded. Concurrent with the Company's initial public offering, the
balance of the shares,
F-11
<PAGE> 79
SINTER METALS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
aggregating 303,725 shares, were issued and the plan was terminated.
Compensation expense related to the plan aggregated $916,000 and $2,435,000 for
1993 and 1994, respectively.
1994 Key Employee Stock Incentive Plan
Concurrent with the Company's initial public offering, the Company
established the Key Employee Stock Incentive Plan. Under this plan, the Company
may grant options to officers and other key employees to purchase an aggregate
of 474,505 shares of Class A Common Stock. During 1995 and 1994, the Company
granted stock options to purchase an aggregate of 11,000 and 149,000 shares at
exercise prices from $10.13 to $10.63 and $10.00 per share, the fair market
values of such shares at the dates of grant. These options vest ratably over a
three year period. At December 31, 1995, 50,000 options were exercisable and no
options were exercised or forfeited during the period.
8. INCOME TAXES:
The provision for income tax expense includes current and deferred taxes as
follows (dollars in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------
1993 1994 1995
------ ------ ------
<S> <C> <C> <C>
United States Federal
Current................................................... $1,855 $3,271 $3,367
Deferred.................................................. (117) (950) 352
State....................................................... 632 579 877
Foreign..................................................... -- -- 154
------- ------- ------
Total....................................................... $2,370 $2,900 $4,750
====== ====== ======
</TABLE>
The provision for income taxes differs from the amounts computed by
applying the federal statutory rate as follows (dollars in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------
1993 1994 1995
------ ------ ------
<S> <C> <C> <C>
Income tax at federal statutory rate........................ $ 903 $2,407 $4,297
State tax, net.............................................. 186 425 579
Foreign income rate differential............................ -- -- (75)
Nondeductible interest charge to income..................... 1,163 -- --
Other, net.................................................. 118 68 (51)
------ ------ ------
Provision for income taxes.................................. $2,370 $2,900 $4,750
====== ====== ======
</TABLE>
Components of deferred taxes consist of the following (dollars in
thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------
1994 1995
------- -------
<S> <C> <C>
Accelerated depreciation......................................... $(4,894) $(5,063)
Inventory........................................................ (458) (458)
-------- --------
Total tax deferred liabilities................................... (5,352) (5,521)
Accrued expenses not deductible until paid....................... 2,518 1,680
Other............................................................ (149) (185)
-------- --------
Total tax deferred assets........................................ 2,369 1,495
-------- --------
Net deferred tax liabilities..................................... $(2,983) $(4,026)
======== ========
</TABLE>
F-12
<PAGE> 80
SINTER METALS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
9. COMMITMENTS AND CONTINGENCIES:
The Company is involved in various matters relating to contingencies and
other commitments, the principal items of which are as follows:
Environmental Matters
The Company is subject to various federal, state and local environmental
laws and regulations primarily involving its property ownership and plant
operations. The Company has made, and will continue to make, expenditures to
comply with such environmental regulations. The Company monitors and reviews its
procedures and policies for compliance with environmental laws.
Based upon present laws and regulations and the Company's experience to
date, the cost of compliance with environmental laws has not had, and is not
expected to have, a material adverse effect on the Company's financial condition
or results of operations. Future changes in laws and regulations could give rise
to additional environmental costs in future periods.
Litigation
In the ordinary course of business, the Company is involved in various
identified legal proceedings, including workers' compensation and personal
injury claims and product liability disputes. The Company has established a
reserve that it believes is adequate to address its exposure for these items.
Management is of the opinion that the ultimate resolution of these matters will
not have a material adverse effect on the results of operations or financial
position of the Company.
10. STOCKHOLDERS' EQUITY:
The holders of Class A Common Stock have the right to vote on all matters
to be voted on by the stockholders of the Company. No holder of Class B Common
Stock has voting rights. Each share of Class B Common Stock is convertible into
a share of Class A Common Stock on a share-for-share basis at the option of the
holder thereof.
Concurrent with the Company's initial public offering, the Company
increased the number of shares of authorized capital to 20,000,000 shares of
Class A Common Stock and 5,000,000 shares of Class B Common Stock. In addition,
the Company authorized 5,000,000 shares of preferred stock, none of which are
issued and outstanding. The Company also effected a stock split of 14.385 shares
to 1 and changed the par value of Common Stock to $.001 per share. The Company's
stockholders' equity amounts and per share amounts in the accompanying
consolidated financial statements have been retroactively adjusted for these
changes.
11. ACQUISITIONS:
Kolsva Sinterteknik AB
Effective June 26, 1995, the Company purchased the stock of Kolsva
Sinterteknik for a combination of $3.8 million in cash and 100,000 shares of the
Company's Class A Common Stock. The cash portion of the transaction was financed
through the Company's revolving credit facility. As a part of the transaction,
the Company assumed long-term debt of Sinterteknik aggregating approximately
$1.9 million.
Midwest Sintered Products Corporation
Effective July 29, 1994, the Company purchased the stock of Midwest
Sintered Products Corporation for consideration totaling approximately $3.1
million. The transaction was financed through borrowings from the Company's
revolving credit facility.
F-13
<PAGE> 81
SINTER METALS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Both transactions were recorded utilizing the purchase method of accounting
and, accordingly, the gross purchase price has been allocated to the tangible
and intangible assets acquired and liabilities assumed, based upon their
estimated fair value at the date of acquisition.
Proforma financial operating results as if both acquisitions had been
completed on January 1, 1994, are as follows (dollars in thousands, except per
share data):
<TABLE>
<CAPTION>
1994 1995
------- -------
(UNAUDITED)
<S> <C> <C>
Net sales........................................................ $94,203 $99,032
Net income before extraordinary charge........................... 4,979 8,299
Net income applicable to common stock............................ 4,197 8,299
Net income per common share...................................... $ .76 $ 1.10
</TABLE>
12. SUBSEQUENT EVENT:
On December 19, 1996, the Company acquired the remaining 70% interest in
PMH and approximately 98.2% of the outstanding capital stock of Krebsoge, a
German entity, for aggregate cash consideration of $215 million, subject to
certain closing and post-closing adjustments. In order to fund the acquisitions,
including repayment of certain indebtedness of PMH and Krebsoge, and to
refinance the Company's indebtedness, the Company entered into a new $275
million credit facility.
13. QUARTERLY RESULTS OF OPERATIONS (UNAUDITED):
A summary of the unaudited quarterly results of operations for the years
ended December 31, 1995 and 1994 are as follows (dollars in thousands except
share data):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1995
-------------------------------------
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
------- ------- ------- -------
<S> <C> <C> <C> <C>
Net sales................................................. $24,624 $22,104 $22,664 $24,918
Gross profit.............................................. 5,556 4,843 5,063 5,603
Income from operations.................................... 3,573 3,108 3,063 3,291
Net income................................................ 2,112 1,870 1,833 2,072
Share data:
Net income.............................................. $ .28 $ .25 $ .24 $ .27
Weighted average shares outstanding..................... 7,448 7,454 7,548 7,548
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1994
-------------------------------------
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
------- ------- ------- -------
<S> <C> <C> <C> <C>
Net sales................................................. $20,832 $20,142 $20,274 $21,231
Gross profit.............................................. 4,885 4,398 4,078 4,354
Income from operations.................................... 3,188 2,929 2,365 718
Income before extraordinary charge........................ 1,508 1,362 1,023 285
Extraordinary charge...................................... -- -- -- 580
Net income (loss)......................................... 1,508 1,362 1,023 (295)
Share data:
Income before extraordinary charge...................... .28 .26 .19 .04
Extraordinary charge.................................... -- -- -- (.09)
Net income (loss)....................................... $ .28 $ .26 $ .19 $ (.05)
Weighted average shares outstanding..................... 5,102 5,102 5,102 6,811
</TABLE>
F-14
<PAGE> 82
REPORT OF INDEPENDENT AUDITORS
To the Board of Management and
Shareholders of Krebsoge Sinterholding GmbH
We have audited the consolidated balance sheet of Krebsoge Sinterholding
GmbH as of December 31, 1995, and the related statements of income and cash
flows for the year then ended. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards in Germany, which are substantially the same as those followed in the
United States. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our
opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
Krebsoge Sinterholding GmbH as of December 31, 1995, and the consolidated
results of its operations and cash flows for the year then ended in conformity
with generally accepted accounting principles in Germany.
Generally accepted accounting principles in Germany vary in certain
significant respects from generally accepted accounting principles in the United
States. Application of generally accepted accounting principles in the United
States would have affected the result of operations for the year ended December
31, 1995, and shareholders' equity as of December 31, 1995 to the extent
summarized in Note 26 to the consolidated financial statements.
The consolidated financial statements of Krebsoge Sinterholding GmbH for
the years ended December 31, 1994 and 1993 were audited by other independent
auditors whose report dated February 17, 1995 and December 12, 1996 expressed an
unqualified opinion on those statements.
Dusseldorf,
February 16, 1996, except Note 26, Reconciliation with US GAAP and Note 27,
Subsequent Event, as to which the date is December 12, 1996
Price Waterhouse GmbH
Wirtschaftsprufungsgesellschaft
Dr. H. Schmick
Wirtschaftsprufer
F-15
<PAGE> 83
REPORT OF INDEPENDENT AUDITORS
To the Board of Management and
Shareholders of Krebsoge Sinterholding GmbH
We have audited the consolidated balance sheets of Krebsoge Sinterholding
GmbH as of December 31, 1993 and 1994, and the related statements of income and
cash flows for the years then ended. These consolidated financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these consolidated financial statements based on our audit.
We conducted our audits in accordance with generally accepted auditing
standards in Germany, which are substantially the same as those followed in the
United States. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
Krebsoge Sinterholding GmbH as of December 31, 1993 and 1994, and the
consolidated results of its operations and cash flows for the years then ended
in conformity with generally accepted accounting principles in Germany.
Generally accepted accounting principles in Germany vary in certain
significant respects from generally accepted accounting principles in the United
States. Application of generally accepted accounting principles in the United
States would have affected the result of operations for the year ended December
31, 1994, and shareholders' equity as of December 31, 1994 to the extent
summarized in Note 26 to the consolidated financial statements.
Dusseldorf,
February 17, 1995, except Note 26, Reconciliation with US GAAP and Note 27,
Subsequent Event, as to which the date is December 12, 1996
BDO GRUNEWALDER TREUHAND GMBH
Wirtschaftsprufungsgesellschaft
<TABLE>
<S> <C>
Dr. F. Nehles Dr. G. Kaulen
Wirtschaftsprufer Wirtschaftsprufer
</TABLE>
F-16
<PAGE> 84
KREBSOGE SINTERHOLDING GMBH
CONSOLIDATED BALANCE SHEETS
(in thousands of DM)
<TABLE>
<CAPTION>
AT DECEMBER 31,
---------------------
NOTE 1994 1995
-------- --------
<S> <C> <C> <C>
ASSETS
Non-Current Assets
Intangible assets......................................... 2 1,711 1,706
Property, plant and equipment............................. 3 48,685 55,754
Financial assets.......................................... 4 1,122 485
-------- --------
Total noncurrent assets................................. 51,518 57,945
-------- --------
Current Assets
Inventories............................................... 5 20,572 31,371
Receivables and other assets.............................. 6 23,958 30,300
Cash...................................................... 4,184 3,038
-------- --------
Total current assets................................. 48,714 64,709
-------- --------
Prepaid expenses............................................. 7 714 652
Cumulative loss in excess of equity.......................... 8 66,274 54,905
-------- --------
Total assets and cumulative loss in excess
of equity.......................................... 167,220 178,211
-------- --------
SHAREHOLDERS' EQUITY AND LIABILITIES
Shareholders' Equity
Subscribed capital........................................ 30,000 33,700
Capital reserve........................................... 10,000 10,000
Cumulative translation adjustment......................... (216) (329)
Accumulated loss brought forward.......................... (106,058) (98,276)
Cumulative loss in excess of equity....................... 66,274 54,905
-------- --------
Total shareholders' equity........................... 8 -- --
-------- --------
Accruals
Accruals for pensions..................................... 9 6,798 15,124
Tax accruals.............................................. 10 1,666 2,949
Other accruals............................................ 11 5,254 10,508
-------- --------
Total accruals....................................... 13,718 28,581
-------- --------
Liabilities
Liabilities to banks...................................... 74,421 68,801
Payments received on account of orders.................... -- 567
Trade payables............................................ 6,999 9,739
Liabilities on bills accepted and drawn................... 2,016 2,070
Payable to affiliated enterprises......................... 55,500 53,672
Payable to associated enterprises......................... 813 634
Other liabilities......................................... 13,449 13,903
-------- --------
Total liabilities.................................... 12 153,198 149,386
-------- --------
Deferred income........................................... 13 304 244
-------- --------
Total shareholders' equity and liabilities........... 167,220 178,211
======== ========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-17
<PAGE> 85
KREBSOGE SINTERHOLDING GMBH
CONSOLIDATED STATEMENTS OF INCOME
(in thousands of DM)
<TABLE>
<CAPTION>
YEAR ENDED AT DECEMBER 31,
----------------------------------
NOTE 1993 1994 1995
-------- -------- --------
<S> <C> <C> <C> <C>
Net sales........................................... 16 164,836 178,936 224,798
Increase (decrease) in inventories of finished
products
and work in progress.............................. (2,023) (733) 1,614
Other self-manufactured items capitalized........... 1,415 1,420 1,448
-------- -------- --------
Total output................................. 164,228 179,623 227,860
Other operating income.............................. 17 4,041 3,028 4,231
Cost of materials................................... 18 (46,428) (50,819) (67,738)
Personnel expenses.................................. 19 (78,384) (79,366) (105,448)
Depreciation and amortization....................... (13,897) (12,207) (12,092)
Other operating expenses............................ 20 (19,749) (21,272) (29,937)
Financial income (expense).......................... 21 (13,727) (10,127) (8,862)
-------- -------- --------
Result from ordinary business activities..... (3,916) 8,860 8,014
Extraordinary income (expense)...................... 22 (466) (1,850) 1,700
-------- -------- --------
(4,382) 7,010 9,714
Taxes on income..................................... 23 (17) (2,340) (1,627)
Other taxes......................................... (296) (254) (305)
-------- -------- --------
Consolidated net income (loss)............... (4,695) 4,416 7,782
======== ======== ========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-18
<PAGE> 86
KREBSOGE SINTERHOLDING GMBH
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands of DM)
<TABLE>
<CAPTION>
YEAR ENDED AT DECEMBER 31,
------------------------------------
1993 1994 1995
-------- --------- ---------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss)...................................... (4,695) 4,416 7,782
Adjustments to reconcile net income (loss) to net cash
provided by operating activities
Depreciation and amortization..................... 13,897 12,207 12,242
(Gain) loss on sale of fixed assets............... (1,302) (24) 20
(Gain) loss from waiver/reversal of waiver of
liability
to affiliated enterprise....................... (1,850) 1,850 --
(Increase) decrease in receivables and other
assets......................................... 325 (2,488) 4,310
(Increase) decrease in inventories................ 3,016 1,049 (2,385)
(Increase) decrease in prepaid expenses........... (64) 243 62
Less gain due to merger........................... -- -- (2,700)
Increase (decrease) in accruals for pensions...... 398 262 191
Increase (decrease) in total liabilities.......... (1,096) 1,834 (7,345)
Increase (decrease) in accruals................... (463) 1,859 2,889
Other............................................. (431) (33) 12
-------- --------- ---------
Total adjustments.............................. 12,430 16,759 7,296
-------- --------- ---------
Cash provided by operating activities.................... 7,735 21,175 15,078
-------- --------- ---------
Cash flows from investing activities:
Repayment of financial assets.......................... 414 301 967
Proceeds from sales of tangible and intangible
assets.............................................. 1,427 44 133
Capital expenditures................................... (6,638) (7,942) (12,092)
-------- --------- ---------
Cash used by investing activities........................ (4,797) (7,597) (10,992)
-------- --------- ---------
Cash flows from financing activities:
Acquisition of financial assets........................ -- -- (420)
Cash from merger....................................... -- -- 572
Net repayment of financial liabilities to banks........ (6,505) (8,567) (5,272)
Increase (decrease) in liabilities to affiliated
enterprises......................................... 5,000 (3,150) --
-------- --------- ---------
Cash used by financing activities........................ (1,505) (11,717) (5,120)
Effect of foreign exchange rate changes.................. (100) 199 (112)
-------- --------- ---------
Net increase (decrease) in cash.......................... 1,333 2,060 (1,146)
Cash at beginning of the year............................ 791 2,124 4,184
-------- --------- ---------
Cash at year-end......................................... 2,124 4,184 3,038
======== ========= =========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-19
<PAGE> 87
KREBSOGE SINTERHOLDING GMBH
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS OF DM)
(1) SIGNIFICANT ACCOUNTING POLICIES
The consolidated financial statements of Krebsoge Sinterholding GmbH ("KSH"
or "the Company") have been prepared in accordance with the German Commercial
Code ("HGB") which represents generally accepted accounting principles in
Germany ("German GAAP") using the significant accounting policies described
hereunder. German GAAP varies in certain significant respects from generally
accepted accounting principles in the United States ("US GAAP"). See Note 26 for
a discussion of the significant differences between German GAAP and US GAAP. The
accounting principles and valuation methods of the group have been consistently
applied.
Nature of Operations
The Company is engaged in designing, engineering and manufacturing
precision pressed powder metal components for use in the automotive, machine,
power tool and home appliance industries.
Organization
The Company is owned by MAAG Holding AG (87.24%), SGL Carbon AG (10.98%),
and Dr. Lothar Albano Muller (1.28%). SGL Carbon AG acquired its interest in the
Company by exchanging its 100% interest in Ringsdorff Sinter GmbH, Bonn, with
effect from April 1, 1995.
Consolidation Principles
The following subsidiary companies, in addition to KSH, have been included
in the group accounts applying the full consolidation method:
<TABLE>
<CAPTION>
PERCENTAGE
HOLDING
NAME AND LOCATION OF SUBSIDIARY (%)
- ---------------------------------------------------------------------------------- ----------
<S> <C>
Sintermetallwerk Krebsoge GmbH, Radevormwald/Germany.............................. 100
Metallwerk Unterfranken GmbH, Bad Bruckenau/Germany............................... 100
Pressmetall Krebsoge GmbH, Radevormwald/Germany................................... 100
Sintermetallwerk Lubeck GmbH, Lubeck/Germany...................................... 100
Metallwerk Langensalza GmbH, Bad Langensalza/Germany.............................. 100
Krebsoge USA, Inc., Wilmington/USA................................................ 100
Newmet Krebsoge, Inc., Terryville/USA............................................. 100
</TABLE>
Results of operations for 1995 include the results of the former Ringsdorff
Sinter GmbH, Bonn, from the effective date, April 1, 1995 to December 31, 1995.
Ringsdorff Sinter GmbH was merged with KSH on April 1, 1995.
The 63% participation in Danyang Kaifuda Filters Co., Ltd., Jiangsu
Province/China, was not consolidated due to materiality considerations but
accounted for under the cost method.
The Company's 50% investment in PEAK Werkstoff GmbH, Velbert, is accounted
for as an associated enterprise according to the equity method.
The 26% participation in Sintered Metal Components (Pty.) Limited,
Bellville/South Africa, is accounted for according to the cost method due to
materiality considerations.
Capital consolidation for full consolidated subsidiaries has been performed
following the book value method under German GAAP. Under this method, the
purchase consideration for an acquisition is allocated
F-20
<PAGE> 88
KREBSOGE SINTERHOLDING GMBH
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS OF DM)
to the assets and liabilities acquired based on their book values. Any resulting
excess of the purchase consideration over the parent's interest in the book
value of net assets acquired is allocated to assets, liabilities or capitalized
as goodwill. In accordance with a transition rule of sec. 27 Implementation Law
for German Commercial Code ("EGHGB" in the case of Sintermetall Krebsoge GmbH
(SMK) and Pressmetall Krebsoge GmbH (PMK)) the excess of the acquisition costs
for shares over the book value of net assets was allocated exclusively to
goodwill rather than to any hidden reserves in net assets. Goodwill is amortized
over four years in accordance with sec. 309 No. 1 HGB in the case of SMK and
PMK, except for the American and all other subsidiaries, which is amortized over
its prospective 15 years useful life. See note 26 regarding German GAAP and U.S.
GAAP reconciliation.
Intra-group receivables and payables as well as revenues, income and
expense of transactions between consolidated entities have been eliminated.
Intangible Assets
Intangible assets consist mainly of purchased computer software and
goodwill. Purchased computer software is stated at cost and amortized over 3 to
5 years using the straight-line method. The treatment of goodwill is as
described above.
Property Plant and Equipment
Property plant and equipment is valued at acquisition or manufacturing
costs less accumulated depreciation. Taxable government grants have been
deducted from the purchase price of the assets, for which they were given.
Non-taxable government grants were taken to income in the year of the investment
for which they were received.
Depreciation is provided using the accelerated and straight-line method
generally over the following estimated useful lives: Buildings from 40 to 50
years, machinery from 2 to 20 years; furniture and equipment from 2 to 12 years.
Depreciation on additions during the first and second half of the year are
calculated using full or half-year rates, respectively.
Financial Assets
Financial assets are stated at lower of cost or market. Amortization is
provided as necessary for a permanent impairment of the value of assets.
Inventories
Raw materials and manufacturing supplies are stated at the lower of cost or
market, determined on a weighted average method. Work in progress and finished
products are valued at the lower of manufacturing cost or net realizable value,
and comprise direct material and labor and applicable manufacturing overheads
including depreciation charges.
Receivables and Other Assets
Accounts receivable are presented net of allowances for doubtful accounts.
Allowances include a provision for general risks inherent in trade receivables.
Generally, the Company does not require collateral on sales.
F-21
<PAGE> 89
KREBSOGE SINTERHOLDING GMBH
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS OF DM)
Cash and Cash Equivalents
Cash equivalents represent short-term investments with a maturity of three
months or less when purchased.
Prepaid Expenses
Prepaid expenses consist mainly to loan premiums which are amortized over
the term of the loan.
Pension Obligations
Accruals and provisions for pensions are actuarially determined and based
on discounted amounts.
Liabilities and Other Accruals
Liabilities are presented at their repayment amounts. Other accruals,
including those for product warranty risks and losses on sales, are provided.
Revenue Recognition
Revenue is recognized when title passes or services are rendered, net of
discounts and rebates granted.
Research and Development
The Company engages in product development and incurs costs in this regard
which are expensed. These expenses totalled 4,367 for 1995, and 3,835 and 4,858
in 1994 and 1993.
Foreign Currency Translation
The balance sheets of the American subsidiary have been translated at year
end to Deutsche Mark using exchange rates at the balance sheet date except for
equity which has been translated using historical rates. The income statements
have been translated at the average exchange rates for the years. Translation
adjustments have been recorded as a separate component of equity.
Foreign Currency Transactions
Foreign currency receivables and payables are recorded at historical rates
unless using the exchange rate at the fiscal year-end would result in an
unrealized foreign currency exchange loss. This results in unrealized losses
being recognized currently and unrealized gains being recognized when realized.
Earnings Per Share
The Company is a limited liability company under German law. Earnings per
share is not calculated due to the fact that a limited liability company
expresses ownership as a percentage of the subscribed capital.
Total Cost Method of Presentation
The statements of income have been presented using the total cost (or type
of expenditure) method of presentation which is the most common German GAAP
method in use. In this format, production and all other expenses incurred during
the period are classified by type of expense. Sales for the period and the net
increase (decrease) in inventories of finished products and work in progress and
other work capitalized is classified as Total Output.
F-22
<PAGE> 90
KREBSOGE SINTERHOLDING GMBH
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS OF DM)
Use of Estimates
The preparation of financial statements requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities, disclosure of contingent assets and liabilities and the reported
amounts of revenues and expenses during the reporting period. Actual results
could differ from those estimates.
(2) INTANGIBLE ASSETS
<TABLE>
<CAPTION>
INTELLECTUAL
PROPERTY AND
(SIMILAR
RIGHTS*) GOODWILL TOTAL
---------------- -------- --------
<S> <C> <C> <C>
ACQUISITION COSTS
Balance at January 1, 1994.................................. 3,848 111,117 114,965
Additions................................................... 493 -- 493
Reclassifications........................................... 3 -- 3
Disposals................................................... (40) -- (40)
Currency translation........................................ (11) -- (11)
------- -------- --------
Balance at December 31, 1994................................ 4,293 111,117 115,410
Additions due to merger..................................... 91 -- 91
Additions................................................... 375 -- 375
Reclassifications........................................... 1 -- 1
Disposals................................................... (664) -- (664)
Currency translation........................................ (8) -- (8)
------- -------- --------
Balance at December 31, 1995................................ 4,088 111,117 115,205
------- -------- --------
ACCUMULATED AMORTIZATION
at December 31, 1994........................................ (2,879) (110,820) (113,699)
------- -------- --------
at December 31, 1995........................................ (2,657) (110,842) (113,499)
------- -------- --------
AMORTIZATION FOR THE YEAR
ended December 31, 1993..................................... 387 23 410
=========== ======== ========
ended December 31, 1994..................................... 529 23 552
=========== ======== ========
ended December 31, 1995..................................... 385 23 408
=========== ======== ========
NET BOOK VALUE
at December 31, 1994........................................ 1,414 297 1,711
=========== ======== ========
at December 31, 1995........................................ 1,431 275 1,706
=========== ======== ========
</TABLE>
- ------------------
* Industrial and similar rights and assets and licences in such rights and
assets
F-23
<PAGE> 91
KREBSOGE SINTERHOLDING GMBH
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS OF DM)
Intellectual property and similar rights are comprised of the following:
<TABLE>
<CAPTION>
AT DECEMBER
31,
-------------
1994 1995
----- -----
<S> <C> <C>
Software............................................................. 740 850
Licences and intellectual property................................... 607 524
Other................................................................ 67 57
----- -----
1,414 1,431
===== =====
</TABLE>
Software relates to purchased software. Licences and intellectual property
consist of 41 (prior year 21) purchased patent rights and 483 (prior year 586)
purchased technical production know how.
The Goodwill results from the consolidation and refers to the following
entities:
<TABLE>
<CAPTION>
ACQUISITION ACCUMULATED NET BOOK
COST AMORTIZATION VALUE
----------- ----------- --------
<S> <C> <C> <C>
Sintermetallwerk Krebsoge GmbH................. 108,792 108,792 --
Pressmetall Krebsoge GmbH...................... 1,982 1,982 --
Krebsoge USA, Inc.............................. 343 68 275
------- ------- ---
Total Goodwill at December 31, 1995....... 111,117 110,842 275
======= ======= ===
</TABLE>
F-24
<PAGE> 92
KREBSOGE SINTERHOLDING GMBH
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS OF DM)
(3) PROPERTY, PLANT AND EQUIPMENT
<TABLE>
<CAPTION>
OTHER ADVANCE
TECHNICAL EQUIPMENT, PAYMENTS
EQUIPMENT FACTORY AND AND
LAND AND AND OFFICE CONSTRUCTION
BUILDINGS MACHINES EQUIPMENT IN PROGRESS TOTAL
--------- --------- ----------- ------------ --------
<S> <C> <C> <C> <C> <C>
ACQUISITION COSTS
Balance at January 1, 1994.................. 45,399 125,291 45,209 813 216,712
Additions................................... 538 3,728 1,674 1,509 7,449
Reclassifications........................... 98 (87) 616 (630) (3)
Disposals................................... (17) (2,062) (1,851) (3) (3,933)
Currency translation........................ (295) (376) (43) -- (714)
--------- --------- ----------- ------------ --------
Balance at December 31, 1994................ 45,723 126,494 45,605 1,689 219,511
Additions due to merger..................... 0 14,556 2,204 4 16,764
Additions................................... 1,046 6,212 2,230 2,439 11,927
Reclassifications........................... 587 198 683 (1,469) (1)
Disposals................................... 0 (1,520) (1,928) (91) (3,539)
Currency translation........................ (198) (257) (28) -- (483)
Write-ups................................... 12 12 -- -- 24
--------- --------- ----------- ------------ --------
Balance at December 31, 1995................ 47,170 145,695 48,766 2,572 244,203
--------- --------- ----------- ------------ --------
ACCUMULATED DEPRECIATION
at December 31, 1994........................ (22,604) (110,035) (38,187) -- (170,826)
======= ======== ======== ========= ========
at December 31, 1995........................ (23,666) (123,331) (41,452) -- (188,449)
======= ======== ======== ========= ========
DEPRECIATION FOR THE YEAR
ended December 31, 1993..................... 1,660 8,023 3,804 -- 13,487
======= ======== ======== ========= ========
ended December 31, 1994..................... 1,085 6,965 3,605 -- 11,655
======= ======== ======== ========= ========
ended December 31, 1995..................... 1,110 7,032 3,542 -- 11,684
======= ======== ======== ========= ========
NET BOOK VALUE
at December 31, 1994........................ 23,119 16,459 7,418 1,689 48,685
======= ======== ======== ========= ========
at December 31, 1995........................ 23,504 22,364 7,314 2,572 55,754
======= ======== ======== ========= ========
</TABLE>
F-25
<PAGE> 93
KREBSOGE SINTERHOLDING GMBH
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS OF DM)
(4) FINANCIAL ASSETS
<TABLE>
<CAPTION>
INVESTMENTS IN
NON INVESTMENTS IN LOANS TO THE
CONSOLIDATED ASSOCIATED ASSOCIATED OTHER OTHER
GROUP-COMPANIES ENTERPRISES ENTERPRISES INVESTMENTS LOANS TOTAL
--------------- -------------- ------------ ----------- ----- -----
<S> <C> <C> <C> <C> <C> <C>
ACQUISITION COSTS
Balance at January 1, 1994....... -- 650 1,250 11 14 1,925
Additions........................ -- -- -- -- -- --
Reclassifications................ -- -- -- -- -- --
Disposals........................ -- -- (300) -- (1) (301)
Currency translation............. -- -- -- -- -- --
--
--- ------ ------ ----- -----
Balance at December 31, 1994..... -- 650 950 11 13 1,624
Additions due to merger.......... -- -- -- -- 61 61
Additions........................ 420 -- -- -- -- 420
Reclassifications................ -- -- -- -- -- --
Disposals........................ -- -- (950) -- (18) (968)
Currency translation............. -- -- -- -- -- --
--
--- ------ ------ ----- -----
Balance at December 31, 1995..... 420 650 -- 11 56 1,137
--- ------ ------ -- ----- -----
ACCUMULATED AMORTIZATION
at December 31, 1994............. -- (500) -- -- (2) (502)
--
--- ------ ------ ----- -----
at December 31, 1995............. -- (650) -- -- (2) (652)
--
--- ------ ------ ----- -----
AMORTIZATION FOR THE YEAR
ended December 31,1 993.......... -- -- -- -- -- --
=== ====== ====== == ===== =====
ended December 31, 1994.......... -- -- -- -- -- --
=== ====== ====== == ===== =====
ended December 31, 1995.......... -- 150 -- -- -- 150
=== ====== ====== == ===== =====
NET BOOK VALUE
at December 31, 1994............. -- 150 950 11 11 1,122
=== ====== ====== == ===== =====
at December 31, 1995............. 420 -- -- 11 54 485
=== ====== ====== == ===== =====
</TABLE>
The investment in non-consolidated group companies relates to a 63%
participation in Danyang Kaifuda Filters Co., Ltd., Jiangsu Province/China,
according to a partnership agreement with Danyang Feida Industrial General
Corporation, Jiangsu Province/China. Total equity as of December 31, 1995
amounts to TDM 897, and the loss for the year amounts to TDM 38.
Investment in associated enterprises relate to the participations held by
Sintermetallwerk Krebsoge GmbH, Radevormwald, in the following companies:
<TABLE>
<CAPTION>
AT DECEMBER 31, 1995
-------------------- AT DECEMBER 31,
(LOSS) ---------------
EQUITY INCOME 1994 1995
------ ------- ---- ----
<S> <C> <C> <C> <C>
Sintered Metal Components (Pty.), Limited
Bellville/South Africa (26%)........... 2,385 570 -- --
PEAK Werkstoff GmbH, Velbert (50%)....... 300 (1,269) 150 --
---- ----
150 --
==== ====
</TABLE>
F-26
<PAGE> 94
KREBSOGE SINTERHOLDING GMBH
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS OF DM)
The participation in PEAK Werkstoff GmbH was written off in full in the
amount of 150 in 1995 due to the permanent loss situation of the Company. Bank
loans of PEAK Werkstoff GmbH amount to 2,200 as of December 31, 1995.
Loans to the associated enterprises relate to a loan granted by
Sintermetallwerk Krebsoge GmbH to PEAK Werkstoff GmbH, Velbert. The loan was
repaid in full in 1995.
(5) INVENTORIES
<TABLE>
<CAPTION>
AT DECEMBER 31,
-------------------
1994 1995
------- -------
<S> <C> <C>
Raw materials.................................................. 5,968 8,051
Work in progress............................................... 9,347 13,441
Finished goods and merchandise................................. 5,257 9,879
------- -------
20,572 31,371
======= =======
</TABLE>
(6) RECEIVABLES AND OTHER ASSETS
<TABLE>
<CAPTION>
AT DECEMBER 31,
-------------------
1994 1995
------- -------
<S> <C> <C>
Trade receivables.............................................. 22,498 28,626
Less allowance for doubtful accounts........................... (600) (893)
------- -------
Trade receivables, net......................................... 21,898 27,733
Receivables from affiliated enterprises........................ 119 97
Receivables from associated enterprises........................ 264 57
Receivables from shareholders.................................. -- 171
Other assets................................................... 1 ,677 2,242
------- -------
23,958 30,300
======= =======
</TABLE>
Receivables from affiliated enterprises are composed as follows and relate
to trade:
<TABLE>
<CAPTION>
AT DECEMBER 31,
---------------
1994 1995
---- ----
<S> <C> <C>
MAAG France S.A., Courbevoie/France.................................. -- 97
MAAG Overseas International N.V., Curacao/Netherland Antilles........ 118 --
MAAG Holding AG, Zurich/Switzerland.................................. 1 --
---- ----
119 97
==== ====
</TABLE>
Receivables from associated enterprises relate to equity investments and
are composed as follows:
<TABLE>
<CAPTION>
AT DECEMBER 31,
---------------
1994 1995
---- ----
<S> <C> <C>
PEAK Werkstoff GmbH, Velbert......................................... 264 57
==== ====
</TABLE>
The receivables relate to trade in the amount of 57 (prior year 182). In
1994 the receivable contained an amount of 82 of interest relating to the loan
included in financial assets amounting to 950. This loan and related interest
was repaid in full in 1995.
F-27
<PAGE> 95
KREBSOGE SINTERHOLDING GMBH
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS OF DM)
Receivables from shareholders are composed as follows:
<TABLE>
<CAPTION>
AT DECEMBER 31,
---------------
1994 1995
---- ----
<S> <C> <C>
SGL Carbon AG, Wiesbaden............................................. -- 171
==== ====
</TABLE>
The receivables relate to trade tax for the former Ringsdorff Sinter GmbH,
Bonn, in the first quarter 1995, which is still the responsibility of the
seller.
Other Assets are composed as follows:
<TABLE>
<CAPTION>
AT DECEMBER 31,
---------------
1994 1995
----- -----
<S> <C> <C>
Receivables from fiscal authorities.................................. 289 837
Cash surrender value of life insurance contracts..................... 677 702
Prepayments.......................................................... -- 347
Overpayments......................................................... 364 148
Other................................................................ 347 208
----- -----
1,677 2,242
===== =====
</TABLE>
Life insurance contracts are provided to cover a portion of the pension
obligations for key employees.
(7) PREPAID EXPENSES
The loan origination costs included in prepaid expenses amounts to 523
(prior year 597). The remaining balance relates to other accrued items such as
insurance.
(8) SHAREHOLDERS' EQUITY/CUMULATIVE LOSS IN EXCESS OF EQUITY
<TABLE>
<CAPTION>
CUMULATIVE ACCUMULATED CUMULATIVE
SHARE CAPITAL REVENUE TRANSLATION LOSS BROUGHT LOSS IN EXCESS
CAPITAL RESERVES RESERVES ADJUSTMENT FORWARD OF EQUITY TOTAL
------- -------- -------- ---------- ------------ -------------- -----
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE AT JANUARY 1, 1993......... 30,000 10,000 11 (182) (105,790) 65,961 --
Income of the year................. -- -- -- (4,695) 4,695 --
Currency translation............... -- -- -- 155 -- (155) --
------- -------- -------- ---------- ------------ ------- -----
BALANCE AT JANUARY 1, 1994......... 30,000 10,000 11 (27) (110,485) 70,501 --
Release of revenue reserves........ -- -- (11) -- 11 -- --
Income of the year................. -- -- -- -- 4,416 (4,416) --
Currency translation............... -- -- -- (189) -- 189 --
------- -------- -------- ---------- ------------ ------- -----
BALANCE AT DECEMBER 31, 1994....... 30,000 10,000 -- (216) (106,058) 66,274 --
Income of the year................. -- -- -- -- 7,782 (7,782) --
Currency translation............... -- -- -- (113) -- 113 --
Capital increase................... 3,700 -- -- -- -- (3,700) --
------- -------- -------- ---------- ------------ ------- -----
Balance of December 31, 1995....... 33,700 10,000 -- (329) (98,276) 54,905 --
====== ======= ======= ========= ========== =========== ====
</TABLE>
The cumulative loss in excess of equity is a result of the excess of the
purchase price over the net equity in the amount of 110,774 relating to the
purchase in 1986 of the investment of Sintermetallwerk Krebsoge GmbH and
Pressmetall Krebsoge GmbH which was treated as goodwill and amortized over four
years.
F-28
<PAGE> 96
KREBSOGE SINTERHOLDING GMBH
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS OF DM)
(9) ACCRUALS FOR PENSIONS
The Company operates a range of defined benefit pension plans for members
of the board of management, leading officers and employees which are based on
individually fixed DM amounts. The pension plans are unfunded and the
obligations from the plans are accrued for in the consolidated financial
statements. The accrual is determined based on the legal discount rate of 6%
using the entry age actuarial cost method. The plans are underaccrued by 525
(prior year 525) for German GAAP purposes.
(10) TAX ACCRUALS
<TABLE>
<CAPTION>
AT DECEMBER 31,
-----------------
1994 1995
------ ------
<S> <C> <C>
Trade tax.......................................................... 1,026 2,223
Corporate income tax............................................... 602 658
Net assets tax..................................................... 36 68
Other taxes........................................................ 2 --
------ ------
Tax accruals....................................................... 1,666 2,949
====== ======
</TABLE>
(11) OTHER ACCRUALS
<TABLE>
<CAPTION>
AT DECEMBER 31,
-----------------
1994 1995
------ ------
<S> <C> <C>
Vacation pay....................................................... 1,677 2,956
Severance and other salary payable................................. 50 1,578
Salary bonus....................................................... -- 1,407
Product warranties................................................. 967 1,177
Workman's compensation............................................. 438 722
Outstanding invoices............................................... 548 698
Estimated future losses on sales................................... 455 536
Deferred maintenance accrual....................................... 382 520
Audit fees......................................................... 263 287
Unemployment insurance............................................. -- 190
Commissions........................................................ 186 93
Interest........................................................... 101 167
Other.............................................................. 187 177
------ ------
5,254 10,508
====== ======
</TABLE>
Severance and other salary payable includes a charge for the period of
1,000 for a general manager of one of the groups companies.
F-29
<PAGE> 97
KREBSOGE SINTERHOLDING GMBH
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS OF DM)
(12) LIABILITIES
<TABLE>
<CAPTION>
OF WHICH DUE
--------------------------------------
WITHIN IN ONE TO AFTER
TOTAL ONE YEAR FIVE YEARS FIVE YEARS
------- -------- ---------- ----------
<S> <C> <C> <C> <C>
AT DECEMBER 31, 1994
Liabilities to banks.............................. 74,421 52,689 15,571 6,161
Trade payables.................................... 6,999 6,970 29 --
Liabilities on bills accepted and drawn........... 2,016 2,016 -- --
Payable to affiliated enterprises................. 55,500 55,500 -- --
Payable to associated enterprises................. 813 813 -- --
Other liabilities................................. 13,449 12,887 270 292
------- -------- ---------- ----------
TOTAL LIABILITIES.......................... 153,198 130,875 15,870 6,453
======= ======= ======== ========
AT DECEMBER 31, 1995
Liabilities to banks.............................. 68,801 49,778 13,976 5,047
Payments received on account of orders............ 567 567 -- --
Trade payables.................................... 9,739 9,719 20 --
Liabilities on bills accepted and drawn........... 2,070 2,070 -- --
Payable to affiliated enterprises................. 53,672 53,672 -- --
Payable to associated enterprises................. 634 634 -- --
Other liabilities................................. 13,903 13,345 272 286
------- -------- ---------- ----------
TOTAL LIABILITIES.......................... 149,386 129,785 14,268 5,333
======= ======= ======== ========
</TABLE>
Of total liabilities to banks (all DM denominated) 62,141(prior year
71,682) are secured by liens on land and buildings, investments in subsidiaries,
technical equipment and subordination of receivables from subsidiaries; 9,609 of
the total relates to current overdrafts. Average interest rate was 5.92% for the
year 1995. Loan fees were capitalized as prepaid expenses and are amortized over
the term of the loan. The Company has a line of credit amounting to 101,534.
Payable to affiliated enterprises are composed as follows:
<TABLE>
<CAPTION>
AT DECEMBER 31,
-----------------
1994 1995
------ ------
<S> <C> <C>
MAAG Overseas International N.V., Curacao/Netherland Antilles,
loans............................................................ 53,613 53,613
MAAG France S.A., Courbevoie/France................................ 37 59
MAAG Holding AG, Zurich/Switzerland, loan.......................... 1,850 --
------ ------
55,500 53,672
====== ======
</TABLE>
The loans from MAAG Overseas International N.V. are cancellable by MAAG
and, if so, would then become payable upon demand at the earliest at December
31, 1996 with three months notice and are as follows:
<TABLE>
<S> <C>
LOAN 1...................................................................... 18,613
LOAN 2...................................................................... 15,000
LOAN 3...................................................................... 20,000
------
53,613
======
</TABLE>
F-30
<PAGE> 98
KREBSOGE SINTERHOLDING GMBH
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS OF DM)
Interest is LIBOR plus 0.25%, but at least 5%.
Payables to associated enterprises in the amount of 634 (prior year 813)
relate to the assumption of the loss of the equity subsidiary PEAK Werkstoff
GmbH, Velbert, in 1995.
Other liabilities consist of:
<TABLE>
<CAPTION>
AT DECEMBER 31,
-----------------
1994 1995
------ ------
<S> <C> <C>
Loans from former shareholders (inclusive of accrued interest)..... 5,358 4,847
Loan from a shareholder (inclusive of accrued interest)............ 1,274 1,274
Taxes.............................................................. 2,590 2,394
Social costs....................................................... 1,534 2,159
Wages.............................................................. 1,577 1,618
Loan from Albano-Muller Unterstutzungskasse e.V.................... 629 627
Commissions payable................................................ -- 336
Government grants at risk.......................................... 182 151
Other.............................................................. 305 497
------ ------
13,449 13,903
====== ======
</TABLE>
The loans from former shareholders relate to outstanding debt in respect to
MAAG Holding AG's purchase of the company in 1986. The loan from a shareholder
relates to the loan granted from Dr. Lothar Albano-Muller, chairman of the
Krebsoge Sinterholding GmbH's Board of Management. The interest rate applicable
to the loans from former shareholders and loan from a shareholder is LIBOR plus
0.25% (at least 5%). The loans are renewed automatically on quarterly basis.
The other liabilities contain a loan from the Albano-Muller
Unterstutzungskasse e.V. in the amount of 627 (prior year 629). The Company
transfers amounts to the staff benevolent fund to provide for pension and other
financial assistance liabilities. The transferred amounts are transferred back
to the Company. This loan is repaid back by direct payments made by the Company
to the employees whose rights to pension or other financial benefits are
provided by the fund. The interest rate is the German Federal Reserve Bank's
discount rate (2.5% at December 31, 1995) plus 1%.
(13) DEFERRED INCOME
Deferred income refers to a payment in the amount of 750 received in 1983
from the Wupperverband electrical utility as compensation for non-compliance of
a contract according to which the Wupperverband had to provide electric energy
to the Company for several years under market price. The amount is being
released over 25 years. Current year income effect is 30.
F-31
<PAGE> 99
KREBSOGE SINTERHOLDING GMBH
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS OF DM)
(14) COMMITMENTS
The Company also leases certain facilities and machinery and equipment
under operating leases. Rent and minimum operating lease commitments in excess
of one year are as follows after December 31, 1995:
<TABLE>
<CAPTION>
YEAR AMOUNT
---- ------
<S> <C>
1996........................................................ 3,154
1997........................................................ 2,191
1998........................................................ 1,964
1999........................................................ 1,690
2000........................................................ 1,514
------
10,513
======
</TABLE>
Rent expense was 1,610, 1,510, and 1,649, in 1993, 1994 and 1995.
(15) CONTINGENCIES
In the normal course of business the Company has guaranteed approximately
1,700 of loans.
Financial contingencies relate to the issuance and transfer of bills of
exchange in the amount of 367 (1993: 256).
(16) SEGMENT SALES
Geographic composition
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
-------------------------------
1993 1994 1995
------- ------- -------
<S> <C> <C> <C>
Net sales:
Germany.............................................. 115,734 126,396 151,941
Other countries...................................... 51,213 56,309 74,660
------- ------- -------
166,947 182,705 226,601
Less discounts....................................... (2,111) (3,769) (1,803)
------- ------- -------
164,836 178,936 224,798
======= ======= =======
</TABLE>
Sales to one customer represented 17.6%, 13.9% and 11% of total net sales
in 1993, 1994, and 1995, respectively.
F-32
<PAGE> 100
KREBSOGE SINTERHOLDING GMBH
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS OF DM)
(17) OTHER OPERATING INCOME
Other operating income is comprised of the following:
<TABLE>
<CAPTION>
AT DECEMBER 31,
-------------------------
1993 1994 1995
----- ----- -----
<S> <C> <C> <C>
Income from release of provisions.......................... 226 158 1,783
Governments grants......................................... 1,139 1,220 920
Revenue from licenses...................................... 86 422 473
Cafeteria sales............................................ 179 127 152
Investment allowances...................................... 31 28 148
Reduction in allowances for doubtful accounts.............. 123 257 98
Exchange rate gain......................................... 222 71 55
Gain of disposal of fixed assets........................... 1,302 24 --
Credit notes............................................... -- 370 12
Release of untaxed special reserves........................ 405 -- --
Other...................................................... 328 351 590
----- ----- -----
4,041 3,028 4,231
===== ===== =====
</TABLE>
(18) COST OF MATERIALS
<TABLE>
<CAPTION>
AT DECEMBER 31,
----------------------------
1993 1994 1995
------ ------ ------
<S> <C> <C> <C>
Raw materials, consumables, supplies
and merchandise....................................... 41,383 44,536 55,319
Purchased services...................................... 5,045 6,283 12,419
------ ------ ------
46,428 50,819 67,738
====== ====== ======
</TABLE>
(19) PERSONNEL EXPENSES/EMPLOYMENT
<TABLE>
<CAPTION>
AT DECEMBER 31,
-----------------------------
1993 1994 1995
------ ------ -------
<S> <C> <C> <C>
Wages and salaries..................................... 65,514 66,328 88,234
Social security and pension expense (of which for
pensions 1,042 (1994: 810)........................... 12,870 13,038 17,214
------ ------ -------
78,384 79,366 105,448
====== ====== =======
Employment (weighted average number of employees)
</TABLE>
<TABLE>
<CAPTION>
1993 1994 1995
----- ----- -----
<S> <C> <C> <C>
Wage earners............................................... 815 787 1,007
Salaried employees......................................... 316 294 367
----- ----- -----
1,131 1,081 1,374
===== ===== =====
</TABLE>
F-33
<PAGE> 101
KREBSOGE SINTERHOLDING GMBH
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS OF DM)
(20) OTHER OPERATING EXPENSES
Other operating expenses are comprised of the following:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
----------------------------
1993 1994 1995
------ ------ ------
<S> <C> <C> <C>
Maintenance............................................. 3,664 4,555 6,925
Commissions............................................. 2,227 2,908 3,275
Freight expenses........................................ 1,531 1,615 2,713
Professional fees....................................... 1,533 1,729 2,516
Rent and leasing........................................ 1,610 1,510 1,649
Insurance............................................... 988 1,105 1,174
External services....................................... -- -- 1,069
Waste removal........................................... 442 772 1,050
Office supplies, literature............................. 357 293 968
Travel expenses......................................... 589 829 850
Advertising............................................. 100 398 620
Telephone postage....................................... 499 561 558
Additional personnel costs.............................. 696 487 540
Exchange rate loss...................................... 227 250 257
Additions to accruals................................... 281 264 333
Additions to allowances for doubtful accounts........... 501 147 192
Other................................................... 4,504 3,849 5,248
------ ------ ------
19,749 21,272 29,937
====== ====== ======
</TABLE>
(21) FINANCIAL INCOME (EXPENSE), NET
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
------------------------------
1993 1994 1995
------- ------- ------
<S> <C> <C> <C>
Income from long-term loans........................... 122 82 11
Other interest and similar income..................... 7 310 50
Assumption of loss from associated enterprises........ (1,259) (963) (634)
Write-down of investment due to impairment............ -- -- (150)
Interest and similar expenses......................... (12,597) (9,556) (8,139)
------- ------- ------
(13,727) (10,127) (8,862)
======= ======= ======
</TABLE>
Assumption of loss from associated enterprises relates to 50% net loss for
the year of the equity investment PEAK Werkstoff GmbH, Velbert.
The write-down of investment due to permanent impairment also relates to
the 50% equity investment in PEAK Werkstoff GmbH, Velbert.
F-34
<PAGE> 102
KREBSOGE SINTERHOLDING GMBH
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS OF DM)
(22) EXTRAORDINARY INCOME (EXPENSE)
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
----------------------------
1993 1994 1995
------ ------ ------
<S> <C> <C> <C>
Extraordinary income.................................... 1,850 -- 2,700
Extraordinary expense................................... (2,316) (1,850) (1,000)
------ ------ ------
(466) (1,850) 1,700
====== ====== ======
</TABLE>
As of April 4, 1995 Krebsoge Sinterholding GmbH (KSH) acquired the shares
of Ringsdorff Sinter GmbH, Bonn, effective April 1, 1995 from SGL Carbon AG in
exchange for issuance of 11% shares in KSH (nominal value 3,700). As of November
14, 1995 Ringsdorff Sinter GmbH was merged with KSH retroactively effective as
of April 1, 1995. The nominal value of the shares issued (3,700) under the book
value of assets and liabilities (6,400) was recorded as an extraordinary gain of
2,700 for German GAAP purposes. This gain is non-taxable.
The 1,850 extraordinary expense relates to a receivable from MAAG Holding
AG which was forgiven in 1993 and recognized as extraordinary income, upon
conditions that if the business improved to a certain point the Company would
have to pay the amount back. This happened in 1994 and the Company recognized
the expense. Both aspects of this transaction were non-taxable.
Extraordinary expenses in 1993 relate to social plans in connection with
the reduction of personnel.
(23) TAXES ON INCOME
The provision for income taxes follows:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
------------------------
1993 1994 1995
---- ----- -----
<S> <C> <C> <C>
Municipal trade tax on income............................... 2 1,934 1,813
Foreign income tax.......................................... 26 44 26
Solidarity tax.............................................. -- -- (8)
Corporate income tax........................................ (11) 362 (204)
---- ----- -----
17 2,340 1,627
==== ===== =====
</TABLE>
A reconciliation of income taxes determined using the statutory federal
German rate of 45% (50% in 1993) to actual income taxes provided is as follows:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
-----------------------------
1993 1994 1995
------ ------ -------
<S> <C> <C> <C>
Corporate rate at German federal statutory rate........ (2,340) 3,040 4,411
Municipal trade taxes, net of federal tax benefit...... 1 1,064 1,177
Non-taxable extraordinary gain......................... (925) -- (1,215)
Net operating loss utilization......................... -- (2,968)) (2,596)
Net operating loss carryforward........................ 2,961 452 --
Nondeductible extraordinary loss....................... -- 833 --
Nondeductible expenses................................. 40 (41) 36
Other.................................................. 280 (40) (186)
------ ------ -------
Provision for income taxes............................. 17 2,340 1,627
====== ====== =======
Effective rate......................................... -- 35% 18%
====== ====== =======
</TABLE>
F-35
<PAGE> 103
KREBSOGE SINTERHOLDING GMBH
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS OF DM)
German Corporation tax law applies the imputation system to the income
taxation of a corporation and its shareholders. Upon distribution of retained
earnings in the form of a dividend, shareholders receive an income tax credit
for taxes previously paid by the corporation.
In general, corporate income is initially subject to a federal tax rate of
45% (50% in 1993). Upon distribution of retained earnings to shareholders, the
corporate tax rate is adjusted to 30% (36% in 1993) by receiving a refund from
the government for taxes previously paid on income in excess of these rates (the
distributed earnings rate).
In addition, corporate income is subject to a municipal tax on income
varying in rates from 15% to 20% depending on municipality. Municipal tax on
income is deductible for corporate income tax purposes.
Corporate income tax loss carry forwards used in 1995 of 5,038 of former
Ringsdorff Sinter GmbH are challenged by revenue agents with an unpredictable
outcome. There are additional tax loss carry forwards of 10,830 of the former
Ringsdorff Sinter GmbH which will be challenged as well. The net operating loss
carryovers have an indefinite carryover period.
(24) RELATED PARTY TRANSACTIONS
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
-------------------------
1993 1994 1995
----- ----- -----
<S> <C> <C> <C>
Interest expense on loans/amounts due parent............... 4,375 3,091 2,763
Management fees............................................ 1,075 1,270 1,601
Sales...................................................... -- -- 492
Purchases.................................................. -- -- 227
</TABLE>
Other related party transactions consist of the interest paid for the loans
from shareholders and former shareholders of 263 for 1995, and 361 in 1994.
Management fees are included in professional fees in Note 20 Other
Operating Expense. For further information on related party transactions refer
to Notes 6 and 12.
(25) INFORMATION ABOUT FINANCIAL INSTRUMENTS
The following information is presented in accordance with SFAS No. 105,
"Disclosure of Information about Financial Instruments with Off-Balance-Sheet
Risk and Financial Instruments with Concentration of Credit Risk", and SFAS No.
107, "Disclosures about Fair Value of Financial Instruments". These statements
require the disclosure of off-balance-sheet instruments and estimated fair
values for all financial instruments.
The Company is a party to financial instruments with off-balance-sheet risk
in the normal course of business as a means of hedging its currency rate
exposure in regards to foreign currency trade receivables. Management does not
anticipate any material adverse affect on its financial position resulting from
its involvement in these instruments. The following is a summary of contract or
notional principal amounts outstanding at December 31, 1995 and 1994.
<TABLE>
<CAPTION>
NOTIONAL PRINCIPAL
AMOUNT
-------------------
1994 1995
----- -----
<S> <C> <C>
Forward foreign exchange contracts............................. -- 2,879
===== =====
</TABLE>
These instruments are executed with creditworthy financial institutions,
and all foreign currency contracts are denominated in currencies of major
industrial countries.
F-36
<PAGE> 104
KREBSOGE SINTERHOLDING GMBH
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS OF DM)
The fair value of forward exchange contracts was estimated based on
exchange rates at December 31, 1995. The estimated fair values of the Company's
financial instruments at December 31, 1995 follow:
<TABLE>
<CAPTION>
CARRYING FAIR
AMOUNT VALUE
-------- -----
<S> <C> <C>
Forward foreign exchange contracts................................ 2,879 2,878
====== =====
</TABLE>
Gains and losses are recorded currently.
(26) RECONCILIATION OF NET INCOME AND SHAREHOLDERS' EQUITY AS DETERMINED USING
U.S. GAAP
German GAAP varies in certain significant respects from generally accepted
accounting principles in the United States (U.S. GAAP). Application of U.S. GAAP
would have affected net income (loss) for the years ended December 31, 1994 and
1995 to the extent quantified below, as well as shareholders' equity (deficit)
at December 31, 1994 and 1995.
RECONCILIATION OF NET INCOME TO U.S. GAAP
The following is a reconciliation of the significant adjustments necessary
to reconcile net income (loss) in accordance with U.S. GAAP to the amounts
determined under German GAAP, for the years ended December 31, 1994 and 1995.
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
-------------------
1994 1995
------- -------
<S> <C> <C>
Net income as reported in the consolidated profit and loss account under
German GAAP............................................................ 4,416 7,782
Amortization of step-up -- MAAG purchase of KSH.......................... (10,848) (10,848)
Amortization of step-up -- former Ringsdorff Sinter GmbH................. -- (220)
Elimination of extraordinary gains on purchase of Ringsdorff............. -- (2,700)
Pensions and similar obligations......................................... (32) (753)
Non-taxable investment allowances........................................ 307 190
Reserves not required for U.S. GAAP...................................... 399 370
Anniversary payments..................................................... 13 (204)
Depreciation............................................................. (82) (580)
Deferred taxes on U.S./German differences
Pensions and similar obligations....................................... 14 324
Reserves not required for U.S. GAAP.................................... (172) (159)
Anniversary payments................................................... (6) 88
Depreciation........................................................... 35 249
Net operating loss carryforwards....................................... (2,605) (275)
Amortization of step-up of buildings................................... 167 167
Extraordinary item..................................................... 1,016 --
------- -------
Net loss in accordance with U.S. GAAP.................................... (7,378) (6,569)
======= =======
</TABLE>
F-37
<PAGE> 105
KREBSOGE SINTERHOLDING GMBH
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS OF DM)
INCOME STATEMENT PRESENTATION UNDER U.S. GAAP
Certain items in the type of expense profit and loss account would be
classified differently under U.S. GAAP. These items include reversals for
accrued expenses and allowances to doubtful accounts that would generally be
recorded as reductions to the original expense line items under U.S. GAAP rather
than as income.
The extraordinary expenses reported under German GAAP would be classified
as an expense charged to income from ordinary business activities under U.S.
GAAP.
The following is a presentation of certain income statement information in
accordance with U.S. GAAP.
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
-----------------
1994 1995
------ ------
<S> <C> <C>
Results from ordinary activities........................................... (3,487) (5,336)
Loss before income taxes................................................... (3,487) (5,336)
Income taxes............................................................... 3,891 1,233
------ ------
Net loss in accordance with U.S. GAAP...................................... (7,378) (6,569)
====== ======
</TABLE>
RECONCILIATION OF SHAREHOLDERS' DEFICIT TO U.S. GAAP
The following is a reconciliation of the significant adjustments necessary
to reconcile shareholders' equity (deficit) in accordance with U.S. GAAP to the
amounts determined under German GAAP, as of December 31, 1994 and 1995:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1994 1995
------- -------
<S> <C> <C>
Shareholders' equity (deficit) as reported in the consolidated balance
sheet under German GAAP................................................ -- --
Cumulative loss in excess of equity -- 1 January......................... (66,274) (54,905)
Amortization of step-up -- MAAG purchase of KSH.......................... 53,861 43,013
Amortization of step-up -- Ringsdorff.................................... -- 2,710
Elimination of extraordinary gain on purchase of Ringsdorff.............. -- (2,700)
Pensions and similar obligations......................................... (841) (1,594)
Non-taxable investment allowances........................................ (1,689) (1,499)
Reserves not required for U.S. GAAP...................................... 1,278 1,648
Anniversary payments..................................................... (893) (1,097)
Accumulated depreciation................................................. 25,727 25,147
Deferred taxes on U.S./German differences
Pensions and similar obligations....................................... 362 685
Reserves not required for U.S. GAAP.................................... (550) (709)
Anniversary payments................................................... 384 472
Depreciation........................................................... (11,063) (10,813)
Net operating loss carryforwards....................................... 1,879 1,604
Step-up of buildings................................................... (3,335) (3,167)
------- -------
Shareholders' deficit in accordance with U.S. GAAP....................... (1,154) (1,206)
======= =======
</TABLE>
F-38
<PAGE> 106
KREBSOGE SINTERHOLDING GMBH
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS OF DM)
RECONCILIATION OF CHANGES IN SHAREHOLDERS' EQUITY IN ACCORDANCE WITH US GAAP
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1994 1995
------- -------
<S> <C> <C>
Shareholders' equity (deficit), beginning of year........................ 6,413 (1,154)
Net loss in accordance with U.S. GAAP.................................... (7,378) (6,569)
Increase in share capital................................................ -- 3,700
Increase in capital attributable to the purchase of Ringsdorff Sinter
GmbH................................................................... -- 2,930
Difference from currency translation..................................... (188) (113)
------- -------
Shareholders' deficit.................................................... (1,154) (1,206)
======= =======
</TABLE>
BALANCE SHEET PRESENTATION UNDER U.S. GAAP
Under U.S. GAAP, all receivables due after one year and all liabilities
payable after one year are classified as non-current.
German GAAP does not require presentation of a classified balance sheet.
Summarized balance sheet information measured and classified in accordance with
U.S. GAAP is as follows:
<TABLE>
<CAPTION>
AT DECEMBER 31
-------------------
1994 1995
------- -------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents.............................................. 4,184 3,038
Other current assets................................................... 45,244 62,323
------- -------
Total current assets........................................... 49,428 65,361
Noncurrent assets........................................................ 131,106 126,114
------- -------
Total assets................................................... 180,534 191,475
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable....................................................... 22,685 26,913
Short-term debt and current portion of long-term debt.................. 108,190 102,872
Accruals............................................................... 6,920 13,457
------- -------
Total current liabilities...................................... 137,795 143,242
Noncurrent liabilities:
Long-term debt......................................................... 21,732 19,601
Other noncurrent liabilities........................................... 22,161 29,838
------- -------
Total long-term liabilities.................................... 43,893 49,439
Shareholders' deficit:
Shareholders' deficit.................................................. (1,154) (1,206)
------- -------
Total liabilities and shareholders' equity..................... 180,534 191,475
======= =======
</TABLE>
A brief explanation of the most significant differences follows.
F-39
<PAGE> 107
KREBSOGE SINTERHOLDING GMBH
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS OF DM)
(a) Cumulative loss in excess of equity
Under German GAAP, the cumulative loss in excess of net equity is reflected
as an asset. This is not permitted in U.S. GAAP, as this amount resides in
equity.
(b) Amortization of step-up -- MAAG purchase of KSH
The acquisition of 74% and 24% of KSH by MAAG Holding AG on September 22,
1986 and August 19, 1993, respectively, did not impact the financial statements
for German GAAP purposes. For U.S. GAAP purposes the purchase price paid by MAAG
has been allocated to the fair value of the assets and liabilities acquired. The
excess of the price paid by MAAG over the fair value of the assets and
liabilities acquired has been allocated to goodwill and is being amortized over
10 years.
(c) Amortization of step-up -- former Ringsdorff Sinter GmbH
Elimination of extraordinary gain on purchase of Ringsdorff
As of April 1, 1995 Krebsoge Sinterholding GmbH (KSH) acquired the shares
of Ringsdorff Sinter GmbH, Bonn from SGL Carbon AG in exchange for issuance of
11% of the outstanding shares in KSH with a nominal value 3,700. Under German
GAAP a nontaxable extraordinary gain of 2,700 was recorded for the excess of the
net equity of 6,400 of the acquired company over the nominal value of the
consideration given. U.S. GAAP requires the acquiring company to record an
acquisition on the basis of the fair value of the consideration given (8,950) or
the fair value of the acquired net assets whichever is more readily
determinable. The excess of the purchase price over net book value is allocated
to machinery and equipment and is amortized over ten years.
(d) Pensions and similar obligations
The pension obligations of KSH are provided for by a range of defined
benefit pensions plans. The amount of the accrual was calculated in accordance
with German GAAP and tax legislation, which does not take into account future
pay raises or inflation and uses the discount rate according to the legislation.
Under U.S. GAAP the accrual has been calculated by an actuary applying the
principles of SFAS 87.
For 1994 and 1995, the assumed discount rate and post-retirement pension
increases used in calculating the projected benefit obligation were 7.5% and
6.5%, respectively, and 2.5%.
The Company adopted SFAS 87, Employers Accounting for Pensions effective
December 31, 1992 because it was not feasible to apply the statement
retroactively to the year ended December 31, 1989, the applicable adoption date
specified in the standard. The portion of the transition obligation applicable
to periods prior to 1992 was not considered material.
(e) Non-taxable investment allowances
Under German GAAP tax free investment allowances are accounted for under
the flow-through method (taken to income) of which treatment is not consistent
under U.S. GAAP.
(f) Reserves not required for U.S. GAAP
(i) Deferred maintenance accrual
As required by German GAAP, the costs of maintenance performed within three
months following the year end have been accrued as liabilities at year end.
Under U.S. GAAP, the cost of maintenance is recognized in the periods incurred.
F-40
<PAGE> 108
KREBSOGE SINTERHOLDING GMBH
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS OF DM)
(ii) Estimated losses on future contracts
As required by German GAAP, the expected loss to be incurred on future
delivery contracts have been accrued as liabilities at year end. Such loss
considers all internal costs, including indirect selling and administrative.
Under U.S. GAAP, allocation of indirect costs for purposes of determining
inventoriable costs is not permitted.
(iii) Allowance for doubtful accounts
Under German GAAP, an allowance for doubtful accounts has been accrued in
the amount of 3% of outstanding receivables less VAT. Under U.S. GAAP an
allowance of 2% would be more appropriate as this more clearly approximates past
experience.
(iv) Warranty expense
Under German GAAP, an accrual for warranty expense has been provided in the
amount of 0.5% of sales. Under U.S. GAAP an accrual of 0.25% would be more
appropriate as this more closely approximates past experience.
(g) Anniversary payments
Under German GAAP, the Company expensed anniversary payments for long-term
service to the company as incurred. Under U.S. GAAP these costs are accrued
based on vesting.
(h) Deferred taxes
Under German GAAP, deferred tax assets are generally provided for temporary
differences using the partial liability method. Deferred taxes are not provided
for differences that are not expected to reverse in the foreseeable future, nor
are they recognized for the effects of NOLs.
Under U.S. GAAP, deferred taxes are provided for all temporary differences
between the financial reporting and tax bases of assets and liabilities that
will reverse during future taxable periods, including deferred tax assets
relating to NOLs. Deferred taxes are also provided for the income tax effects of
differences between U.S. GAAP and German GAAP. Deferred tax assets are reduced
by a valuation allowance when, in the opinion of management, it is more likely
than not that some portion or all of the deferred tax assets will not be
realized.
(i) Depreciation
Under German GAAP, accelerated methods of depreciation as well as straight
line depreciation are used. Estimates of the difference between accelerated
methods of depreciation were prepared by the company based on certain
assumptions of average useful lives. Assumed average useful lives were as
follows:
<TABLE>
<S> <C>
Land and buildings......................................... 40 years
Machinery and equipment.................................... 10 years
Office equipment........................................... 5 years
</TABLE>
(j) Special reserves for tax purposes
Under German GAAP, special reserves for tax purposes are recorded to defer
income in accordance with the German tax code. Under U.S. GAAP the special
reserves are not recorded and deferred tax is provided according to SFAS 109
"Accounting for Income Taxes."
F-41
<PAGE> 109
KREBSOGE SINTERHOLDING GMBH
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS OF DM)
OTHER MATTERS
a) Unrealized exchange gains
Under German GAAP, unrealized exchange gains are not recognized. Under U.S.
GAAP, unrealized exchange gains were not of a material amount.
(27) SUBSEQUENT EVENT
On October 7, 1996, Sinter Metals Inc. (SMI) signed a definitive purchase
agreement with MAAG Holding AG to purchase the Company for U.S. $150 million
(exchange rate DM 1.50 = U.S. $1.00), less net indebtedness of roughly DM 120
million.
These financial statements are prepared using the historical cost basis,
and do not reflect any purchase accounting or other decisions taken or to be
taken by SMI in connection with the purchase of the Company.
(28) KREBSOGE SINTERHOLDING GMBH'S BOARD OF MANAGEMENT
Dr.-Ing. Lothar Albano-Muller, Schwelm (Chairman)
Dipl.- Wirtsch.-Ing. Eckhard Hirschfeld, Remscheid-Lennep (until December
31, 1995)
Total remuneration of the management was 797 (1994: 777).
F-42
<PAGE> 110
INDEPENDENT AUDITORS' REPORT
To the Board of Directors of Powder Metal Holding, Inc.:
We have audited the accompanying consolidated balance sheets of Powder Metal
Holding, Inc. and subsidiaries (the "Company") as of December 31, 1995 and
November 22, 1996, and and the related consolidated statements of income,
shareholders' deficit and cash flows for the years ended December 31, 1994 and
1995 and for the period January 1, 1996 through November 22, 1996. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
consolidated financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of the Company as of November 22, 1996
and December 31, 1995, and the results of its operations and its cash flows for
the period January 1, 1996 through November 22, 1996, and the years ended
December 31, 1994 and 1995, in conformity with generally accepted accounting
principles.
As discussed in Note 2, effective January 1, 1995, the Company changed its
method of recognizing actuarial gains and losses related to its postretirement
benefit plans.
DELOITTE & TOUCHE LLP
Detroit, Michigan
December 19, 1996
F-43
<PAGE> 111
POWDER METAL HOLDING, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1995 AND NOVEMBER 22, 1996
(In Thousands, Except Per Share Data)
<TABLE>
<CAPTION>
DECEMBER 31, NOVEMBER 22,
1995 1996
------------ ------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash........................................................ $ 918 $ 905
Receivables:
Trade (net of allowance for doubtful accounts of $796 and
$384, respectively).................................... 13,256 15,758
Related party receivable (Note 2)........................ 444
Other (Note 2)........................................... 1,272 901
Inventories (Notes 2 and 3)................................. 9,114 7,930
Prepaid and other (Note 2).................................. 1,339 1,899
------- -------
Total current assets................................ 25,899 27,837
PROPERTY, PLANT AND EQUIPMENT, NET (Notes 2 and 4)............ 29,683 31,086
OTHER ASSETS (Note 2)......................................... 482 21
ASSETS HELD FOR DISPOSITION (Note 8).......................... 212
------- -------
TOTAL ASSETS (Note 6)......................................... $ 56,276 $ 58,944
======= =======
LIABILITIES AND SHAREHOLDERS' DEFICIT
CURRENT LIABILITIES:
Current portion of long-term debt (Note 6).................. $ 51,204 $ 51,592
Current portion of capital lease obligations (Note 7)....... 49 60
Accounts payable............................................ 9,479 11,139
Accrued liabilities (Note 5)................................ 4,890 5,274
------- -------
Total current liabilities........................... 65,622 68,065
LONG-TERM DEBT (Note 6)....................................... 2,600 2,600
POSTRETIREMENT BENEFITS OTHER THAN PENSIONS (Note 11)......... 2,728 2,925
PENSIONS (Note 10)............................................ 1,433 1,128
LONG-TERM CAPITAL LEASE OBLIGATIONS (Note 7).................. 159 95
DEBT AND ACCRUED INTEREST FORGIVEN BY LENDER, NET (Note 2).... 12,816 10,462
------- -------
Total liabilities................................... 85,358 85,275
COMMITMENTS AND CONTINGENCIES (Note 13)
SHAREHOLDERS' DEFICIT:
Class A common stock, par value $.01 per share; authorized
200,000 shares, issued and outstanding 10,000 shares
Class B common stock, par value $.01 per share; authorized
100,000 shares, issued and outstanding 6,334 shares
Additional paid-in capital.................................. 49,649 49,649
Accumulated deficit......................................... (79,607) (77,435)
Minimum pension liability adjustment (Note 10).............. (1,031) (461)
Accumulated translation adjustment.......................... 1,907 1,916
------- -------
Total shareholders' deficit......................... (29,082) (26,331)
------- -------
TOTAL LIABILITIES AND SHAREHOLDERS' DEFICIT................... $ 56,276 $ 59,094
======= =======
</TABLE>
See notes to consolidated financial statements.
F-44
<PAGE> 112
POWDER METAL HOLDING, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31, 1994 AND 1995, AND THE
PERIOD JANUARY 1, 1996 THROUGH NOVEMBER 22, 1996
(In Thousands)
<TABLE>
<CAPTION>
JANUARY 1,
1996
DECEMBER 31, THROUGH
--------------------- NOVEMBER 22,
1994 1995 1996
-------- -------- ------------
<S> <C> <C> <C>
SALES (Notes 2 and 8).................................. $107,803 $106,473 $101,671
COST OF GOODS SOLD (Note 8)............................ (95,348) (92,263) (90,730)
--------- --------- ---------
GROSS MARGIN (Note 8).................................. 12,455 14,210 10,941
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES (Note
8)................................................... (8,760) (7,677) (6,167)
RESTRUCTURING (Note 8)................................. 3,307 5,260
--------- --------- ---------
INCOME FROM OPERATIONS................................. 7,002 11,793 4,774
OTHER EXPENSES:
Interest (Note 6).................................... (1,602) (3,133) (2,314)
Other................................................ (6) (115) (250)
--------- --------- ---------
Total other expenses......................... (1,608) (3,248) (2,564)
--------- --------- ---------
INCOME BEFORE INCOME TAXES AND CUMULATIVE EFFECT OF
ACCOUNTING CHANGE.................................... 5,394 8,545 2,210
INCOME TAX (EXPENSE) CREDIT (Note 12).................. 253 (38)
CUMULATIVE EFFECT OF ACCOUNTING CHANGE (Note 2)........ 770
--------- --------- ---------
NET INCOME............................................. $ 5,394 $ 9,568 $ 2,172
========= ========= =========
</TABLE>
See notes to consolidated financial statements.
F-45
<PAGE> 113
POWDER METAL HOLDING, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' DEFICIT
YEARS ENDED DECEMBER 31, 1994 AND 1995 AND THE
PERIOD JANUARY 1, 1996 THROUGH NOVEMBER 22, 1996
(In Thousands)
<TABLE>
<CAPTION>
UNREALIZED
ACCUMULATED
FOREIGN MINIMUM
CLASS A CLASS B ADDITIONAL CURRENCY PENSION
COMMON COMMON PAID-IN ACCUMULATED TRANSLATION LIABILITY
STOCK STOCK CAPITAL DEFICIT ADJUSTMENT ADJUSTMENT TOTAL
------- ------- ---------- ----------- ----------- ---------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE, JANUARY 1, 1994............ -- -- $ 49,649 $ (94,569) None $ (170) $(45,090)
Net income........................ 5,394 5,394
Minimum pension liability
adjustment (Note 10)............ (119) (119)
---- ---- ------- --------- ------ -------- ---------
BALANCE, DECEMBER 31, 1994.......... -- -- 49,649 (89,175) None (289) (39,815)
Net income........................ 9,568 9,568
Reversal of recognition of
unrecognized accumulated foreign
currency translation adjustment
(Note 8)........................ 1,907 1,907
Minimum pension liability
adjustment (Note 10)............ (742) (742)
---- ---- ------- --------- ------ -------- ---------
BALANCE, DECEMBER 31, 1995.......... -- -- 49,649 (79,607) 1,907 (1,031) (29,082)
Net income........................ 2,172 2,172
Minimum pension liability
adjustment (Note 10)............ 570 570
Accumulated translation
adjustment...................... 9 9
---- ---- ------- --------- ------ -------- ---------
BALANCE, NOVEMBER 22, 1996.......... -- -- $ 49,649 $ (77,435) $ 1,916 $ (461) $(26,331)
==== ==== ======= ========= ====== ======== =========
</TABLE>
See notes to consolidated financial statements.
F-46
<PAGE> 114
POWDER METAL HOLDING, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1994 AND 1995 AND THE
PERIOD JANUARY 1, 1996 THROUGH NOVEMBER 22, 1996
(In Thousands)
<TABLE>
<CAPTION>
JANUARY 1,
1996
DECEMBER 31, THROUGH
----------------- NOVEMBER 22,
1994 1995 1996
------ ------ ------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income............................................... $5,394 $9,568 $2,172
Adjustments to reconcile net income to cash provided by
operating activities:
Depreciation and amortization......................... 5,622 5,622 5,812
Amortization of debt and accrued interest forgiven
(Note 2)............................................ (2,568) (2,568) (2,354)
Loss provision credit on restructuring (Note 8)....... (3,307) (5,260)
Loss (gain) on disposal of property, plant and
equipment........................................... (32) (169) (80)
Exchange (gain) loss on foreign currency transactions
(Note 2)............................................ 522 (107) (66)
Pension expense, net of cash contributions (Note
10)................................................. (298) (435) 268
Provision for postretirement benefits other than
pensions (Note 11).................................. 495 440 824
Cumulative effect of accounting change (Note 2)....... (770)
Changes in assets and liabilities that provided (used)
cash:
Receivables......................................... (1,625) (752) (2,093)
Inventories (Notes 2 and 3)......................... (2,431) (166) 1,232
Prepaid and other (Note 2).......................... (26) (99) (1,000)
Accounts payable.................................... 2,676 (2,264) 1,632
Accrued and other liabilities -- net................ 2,221 (224) (156)
Accrual for disposition of foreign operation (Note
8)............................................... (3,753) (1,133)
Other assets........................................ (468) 23 611
------- ------- -------
Net cash provided by operating activities........ 2,422 1,706 6,802
------- ------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property, plant and equipment................ (5,158) (3,195) (7,050)
Proceeds from disposal of property, plant and
equipment............................................. 92 528 80
------- ------- -------
Net cash used in investing activities............ (5,066) (2,667) (6,970)
------- ------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds (repayments) under line of credit (Note
6).................................................... 2,170 2,646 (1,721)
Proceeds from issuance of notes payable to related
party................................................. 2,000
Principal payments:
Long-term debt........................................ (1,000)
Capital lease obligations (Note 7).................... (71) (41) (40)
------- ------- -------
Net cash provided by financing activities........ 2,099 1,605 239
------- ------- -------
EFFECT OF CHANGE IN FOREIGN CURRENCY EXCHANGE RATES ON
CASH..................................................... (94) (83) (84)
------- ------- -------
NET INCREASE (DECREASE) IN CASH............................ (639) 561 (13)
CASH, BEGINNING OF PERIOD.................................. 996 357 918
------- ------- -------
CASH, END OF PERIOD........................................ $ 357 $ 918 $ 905
======= ======= =======
</TABLE>
See notes to consolidated financial statements.
F-47
<PAGE> 115
POWDER METAL HOLDING, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1994 AND 1995 AND THE
PERIOD JANUARY 1, 1996 THROUGH NOVEMBER 22, 1996
1. BASIS OF PRESENTATION
Powder Metal Holding, Inc. ("PMH"), a Delaware corporation, was formed in
1989 as a wholly-owned subsidiary of MAAG Holding AG ("MAAG") based in Zurich,
Switzerland. In November 1993 the role of PMH within MAAG's North American
operations was modified and limited to that of a holding company whose sole
business purpose became the 100% ownership of the shares of ICM/Krebsoge, Inc.,
a Delaware corporation, and its 100% owned Canadian subsidiary, ICM/Krebsoge
Canada, Ltd. PMH conducts no other business and has no other assets than the
shares of ICM/Krebsoge. PMH and ICM/Krebsoge, Inc. collectively (the "Company")
maintain operating facilities in the U.S. and Canada for the manufacture of
metal parts for the automotive industry using powder metal technology.
In November, 1993 Sinter Metals, Inc. ("SMI") acquired a 30% equity
interest in PMH.
On October 7, 1996 MAAG and SMI entered into a Powder Metal Stock Purchase
Agreement (the "Agreement") whereby SMI would purchase in December 1996 all of
MAAG's shares in PMH and substantially all of the shares in MAAG's German powder
metal parts manufacturing subsidiary, Krebsoge Sinterholding GmbH. The purchase
price for MAAG's shares in PMH was set at $65 million, less all indebtedness and
subject to certain further limited adjustments upon closing (Note 14.).
2. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation -- The consolidated financial statements
include the accounts of PMH and its wholly owned entity, ICM/Krebsoge, Inc. All
material amounts and balances have been eliminated in consolidation.
Operations -- The Company manufactures metal parts, mainly for the
automotive industry, using powdered metal technology. The Company maintains U.S.
operating facilities in Ohio, Indiana, and corporate headquarters in Michigan.
The Company's Canadian subsidiary, ICM/Krebsoge Canada, Ltd., has operating
facilities in St. Thomas, Ontario. In 1993, a plan was adopted to dispose of
ICM/Krebsoge Canada, Ltd. However, in 1995, the Company's management reversed
their decision to dispose of ICM/Krebsoge Canada, Ltd. Refer to Note 8 regarding
these Canadian operations. At December 31, 1995 and November 22, 1996,
ICM/Krebsoge Canada, Ltd.'s assets were approximately $12.4 million and $11.3
million, respectively. Sales of ICM/Krebsoge Canada, Ltd. were approximately
$23.4 million, $19.4 million and $15.4 for the years ended December 31, 1994 and
1995, and the period January 1, 1996 through November 22, 1996, respectively.
The net loss of ICM/Krebsoge Canada, Ltd. was approximately $5.1 million, $1.5
million and $1.4 million for the years ended December 31, 1994 and 1995, and the
period January 1, 1996 through November 22, 1996.
F-48
<PAGE> 116
POWDER METAL HOLDING, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
YEARS ENDED DECEMBER 31, 1994 AND 1995 AND THE
PERIOD JANUARY 1, 1996 THROUGH NOVEMBER 22, 1996
Major Customers -- Sales to the Company's four major customers for the
years ended December 31, 1994 and 1995, and the period January 1, 1996 through
November 22, 1996, are as follows (in thousands):
<TABLE>
<CAPTION>
JANUARY 1,
1996
DECEMBER 31, THROUGH
--------------------- NOVEMBER 22,
1994 1995 1996
-------- -------- ------------
<S> <C> <C> <C>
Chrysler Corporation............................ $ 24,303 $ 20,349 $ 20,575
Ford Motor Company.............................. 54,305 53,635 52,192
New Venture Gear................................ 12,153 13,484 13,247
General Motors Corporation...................... 7,670 11,782 9,995
Others.......................................... 9,372 7,223 5,662
-------- -------- --------
Total................................. $107,803 $106,473 $101,671
======== ======== ========
</TABLE>
Supplemental Cash Flows Disclosures -- Cash paid during the years ended
December 31, 1994 and 1995, and the period January 1, 1996 through November 22,
1996 was $2.9 million, $4.1 million and $4.5 million, respectively, for interest
(net of $227,000, $110,000 and $342,000, capitalized during the years ended
December 31, 1994 and 1995, and the period January 1, 1996 through November 22,
1996, respectively).
Concentrations of Credit Risk -- Financial instruments which subject the
Company to concentrations of credit risk consist principally of trade
receivables. Automobile manufacturers comprise a significant portion of the
Company's business customer base. The Company's four major automotive customers
accounted for approximately 90% of trade receivables at December 31, 1995 and
November 22, 1996. Although the Company's exposure to credit risk associated
with nonpayment by automotive manufacturers is affected by conditions or
occurrences within the automotive industry, trade receivables from the
automotive manufacturers were current at November 22, 1996.
Revenue Recognition -- The Company generally recognizes sales when products
are shipped to customers. An allowance for sales returns is accrued based on
historical experience.
Financial Instruments included in the consolidated balance sheets are
recorded at cost and such amounts approximate fair value.
Other Receivables -- Included in other receivables at December 31, 1995 and
November 22, 1996 is approximately $163,000 and $138,000, respectively, relating
to billed customer tooling costs.
Related Party Receivable -- Included in related party receivables is
$444,000 related to a receivable from MAAG for expenditures related to the
transfer of interest.
Inventories are stated at the lower of cost (first-in, first-out method) or
market.
Accounting Changes -- Effective January 1, 1995, the Company changed its
method of recognizing actuarial gains and losses related to its U.S. union and
nonunion postretirement plans from the defer and amortize method prescribed in
Statement of Financial Accounting Standards (SFAS) No. 106, "Employers'
Accounting for Postretirement Benefits Other Than Pensions," to a method of
immediately recognizing the gains or losses at the measurement date if the
accumulated net gain or loss exceeds 10% of the greater of the accumulated
postretirement benefit obligation or the market-related value of plan assets.
The cumulative effect of this change as of January 1, 1995 was approximately
$1.2 million or approximately $.8 million after-
F-49
<PAGE> 117
POWDER METAL HOLDING, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
YEARS ENDED DECEMBER 31, 1994 AND 1995 AND THE
PERIOD JANUARY 1, 1996 THROUGH NOVEMBER 22, 1996
tax (Note 12). On a pro forma basis, the Company's reported net income for 1994
would have been $6.027 million, if this accounting method had been elected in
1993 when the Company adopted SFAS No. 106.
Prepaid and Other Assets -- Included in prepaid and other assets at
December 31, 1995 and November 22, 1996 are unbilled tooling costs of $776,000
and $930,000, respectively, associated with the development of tooling to be
used in the manufacturing of new products.
Property, Plant and Equipment are stated at cost or, in the case of assets
under capital leases (Note 7), at the present value of future lease payments.
Depreciation is computed using the straight-line method over the useful lives of
the related assets, which range from 5 to 40 years. Amortization of leasehold
improvements and capital lease equipment is computed using the straight-line
method over the shorter of the lease term or the useful lives of the related
assets. Depreciation and amortization expense for the years ended December 31,
1994 and 1995 and the period January 1, 1996 through November 22, 1996 was
approximately $5.6 million, $5.6 million and $5.8 million, respectively.
Other Assets -- Included in the other assets balance at December 31, 1995
is a deposit of approximately $384,000 towards the purchase of machinery and
equipment which was delivered in 1996.
Foreign Currency Translation -- The accounts of the Company's Canadian
subsidiary are translated into U.S. dollars in the accompanying consolidated
financial statements. Exchange transaction losses/(gains) included in
consolidated operating results for the years ended December 31, 1994 and 1995
and the period ended November 22, 1996 were approximately $.5 million, $(.1)
million and $.1 million, respectively.
Debt and Accrued Interest Forgiven by Lender -- In 1993, the Company
amended and restated a loan agreement (the "Loan and Security Agreement") with
Heller Financial Inc. ("Heller"). As a result of the restated agreement, Heller
forgave unpaid principal and accrued interest of $17.9 million and converted
additional debt into the new Term Loans A and B and a revolving loan facility.
No gain was recognized for the $17.9 million, which was forgiven, as the total
gross future cash flows from the new Term Loans A and B exceeded the carrying
amount of the old loans. Accordingly, the $17.9 million is being recognized over
the seven year term of the restructured debt as a reduction of future interest
expense. Amortization of debt and interest forgiven by the lender for the years
ended December 31, 1994 and 1995 and the period January 1, 1996 through November
22, 1996 was approximately $2.6 million each period (Note 6).
Reclassifications -- Certain reclassifications have been made to the 1994
and 1995 consolidated financial statements to conform to the 1996 presentations.
Use of Estimates in the Preparation of the Financial Statements -- The
preparation of financial statements in conformity with generally accepted
accounting principles requires 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 results could differ from those estimates.
F-50
<PAGE> 118
POWDER METAL HOLDING, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
YEARS ENDED DECEMBER 31, 1994 AND 1995 AND THE
PERIOD JANUARY 1, 1996 THROUGH NOVEMBER 22, 1996
3. INVENTORIES
Inventories consist of the following at December 31, 1995 and November 22,
1996 (in thousands):
<TABLE>
<CAPTION>
DECEMBER NOVEMBER
31, 22,
1995 1996
----------- -----------
<S> <C> <C>
Raw materials............................................. $ 1,450 $ 1,020
Work-in-process........................................... 5,958 5,231
Finished goods............................................ 1,706 1,679
------- -------
Total inventory................................. $ 9,114 $ 7,930
======= =======
</TABLE>
4. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consists of the following at December 31,
1995 and November 22, 1996 (in thousands):
<TABLE>
<CAPTION>
DECEMBER NOVEMBER
31, 22,
1995 1996
----------- -----------
<S> <C> <C>
Land and land improvements.................................. $ 992 $ 873
Buildings and leasehold improvements........................ 10,252 10,446
Machinery and equipment (including capital lease equipment
of $309 in 1995 and 1996)................................. 48,823 53,482
Furniture and fixtures...................................... 3,775 3,853
Office equipment............................................ 296 297
Company vehicles............................................ 159 162
Construction-in-progress.................................... 1,898 5,968
------- -------
Total............................................. 66,195 75,081
Less accumulated depreciation and amortization.............. 36,512 43,995
------- -------
Property and equipment -- net............................... $29,683 $31,086
======= =======
</TABLE>
5. ACCRUED LIABILITIES
Accrued liabilities consist of the following at December 31, 1995 and
November 22, 1996 (in thousands):
<TABLE>
<CAPTION>
DECEMBER NOVEMBER
31, 22,
1995 1996
----------- -----------
<S> <C> <C>
Salaries, wages, vacation, related benefits and taxes..... $ 2,269 $ 2,787
Other taxes, interest and bank charges.................... 997 1,011
Environmental............................................. 262 102
Bonuses (Note 9).......................................... 600 347
Other..................................................... 762 1,027
------- -------
Total accrued liabilities....................... $ 4,890 $ 5,274
======= =======
</TABLE>
F-51
<PAGE> 119
POWDER METAL HOLDING, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
YEARS ENDED DECEMBER 31, 1994 AND 1995 AND THE
PERIOD JANUARY 1, 1996 THROUGH NOVEMBER 22, 1996
6. LONG-TERM DEBT
As discussed in Note 2, the Company entered into the Loan and Security
Agreement, as amended, with Heller in 1989. On November 19, 1993, the Company
amended the Loan and Security Agreement with Heller. Borrowings under the Loan
and Security Agreement are collateralized by substantially all assets of the
Company.
The Agreement between MAAG and SMI (Note 1) describes that on the date of
the transfer of interest, all Heller loans will be repaid (Note 14).
Descriptions and outstanding balances of each loan at December 31, 1995 and
November 22, 1996 are as follows (in thousands):
<TABLE>
<CAPTION>
1995 1996
------- -------
<S> <C> <C>
HELLER
Term Loan A -- Payable in 21 quarterly installments, with final
payment due October 1, 2000. Interest is payable monthly at
prime, plus 1.5% per annum. The effective interest rates for
the year ended December 31, 1995 and the period January 1, 1996
through November 22, 1996 were approximately 1.0% (Note 2)..... $29,000 $26,875
Term Loan B -- Due October 1, 2000. Effective January 1, 1996,
interest is payable monthly at prime, plus 1.75% per annum. The
effective interest rates for the year ended December 31, 1995
and the period January 1, 1996 through November 22, 1996 were
approximately 1.0% (Note 2).................................... 12,177 12,286
Revolving Loan -- Heller may issue or guarantee letters of credit
or make advances to the Company up to approximately $17
million. Such outstanding letters of credit totaled
approximately $1.1 million at December 31, 1995 and November
22, 1996. Interest is equal to the base rate, as defined, plus
1.5% per annum. The effective interest rate for the year ended
December 31, 1995 and the period January 1, 1996 through
November 22, 1996 were approximately 8.4% and 9.1%,
respectively................................................... 10,027 10,431
OTHER NOTES PAYABLE
Industrial Revenue Bonds bearing interest at 6.72% per annum and
due in 2000, collateralized by a letter of credit drawn on
MAAG........................................................... 2,600 2,600
MAAG Subordinated Note with interest payable quarterly at prime,
plus 2% per annum; due on October 1, 2000. The effective rate
for the period January 1, 1996 through November 22, 1996 was
10%............................................................ 2,000
------- -------
Total.................................................. 53,804 54,192
Less current portion............................................. 51,204 51,592
------- -------
Long-term debt................................................... $ 2,600 $ 2,600
======= =======
</TABLE>
The Loan and Security Agreement requires the Company to maintain a minimum
earnings before interest debt amortization and taxes (EBIDAT, as defined) and a
minimum fixed charge coverage ratio as of various dates. The Loan and Security
Agreement restricts defined mergers and investments in any corporation, person
or entity, payments of dividends, transactions with affiliates, subordinated
indebtedness, additional liens on Company assets, the amount of capital
expenditures, aggregate restructuring charges and expenditures and
F-52
<PAGE> 120
POWDER METAL HOLDING, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
YEARS ENDED DECEMBER 31, 1994 AND 1995 AND THE
PERIOD JANUARY 1, 1996 THROUGH NOVEMBER 22, 1996
various other transactions. Noncompliance with such restrictions or requirements
allow Heller to demand immediate payment of the debt. As of November 22, 1996,
the Company was in violation of the Loan and Security Agreement covenants. As a
result of this, the debt obligations with Heller have been classified as current
liabilities.
In addition to the principal payments required above, the Company is
required to make additional principal payments to Heller from the sale proceeds
of any property or equity interest in the Company, and insurance proceeds from
property loss or damage.
The Company is also required to make additional principal payments based on
a percentage of excess cash flow, as defined in the Loan and Security Agreement.
In 1996, MAAG issued to PMH a subordinated note with a face value of $2
million. Interest expense related to this note was $115,000 for the period
January 1, 1996 to November 22, 1996. This note will also be repaid as a result
of the transfer of interest. Refer to Note 14.
The following summarizes the future annual maturities of the Company's debt
obligations at November 22, 1996 (in thousands):
<TABLE>
<S> <C>
1997....................... $51,592
2000....................... 2,600
-------
Total...................... $54,192
=======
</TABLE>
7. CAPITAL AND OPERATING LEASE OBLIGATIONS
Equipment under capital leases, which expire in 1999, had a net book value
of approximately $211,000 and $168,000 at December 31, 1995 and November 22,
1996, respectively. The amortization expense relating to such assets for the
years ended December 31, 1994 and 1995 and the period January 1, 1996 through
November 22, 1996 is approximately $32,000, $40,000 and $44,000, respectively.
The Company leases other equipment and office facilities under
noncancelable operating leases which are in effect through 2000. Rent expense
for the years ended December 31, 1994 and 1995 and the period January 1, 1996
through November 22, 1996 is approximately $501,000, $696,000 and $505,000,
respectively.
Future minimum lease payments as of November 22, 1996 under noncancelable
capital and operating leases are as follows (in thousands):
<TABLE>
<CAPTION>
CAPITAL OPERATING
LEASES LEASES
------- ---------
<S> <C> <C>
Year Ending December 31:
1997............................................................ $ 95 $ 1,147
1998............................................................ 68 927
1999............................................................ 35 851
2000............................................................ 814
---- ------
Total minimum lease payments............................ 198 3,739
Less amount representing interest............................... (43)
---- ------
Present value of minimum lease payments........................... $ 155 $ 3,739
==== ======
</TABLE>
During 1995, the Company entered into an agreement for the sale and
leaseback of machinery and equipment. Under this agreement, the Company sold
machinery and equipment with a net book value of
F-53
<PAGE> 121
POWDER METAL HOLDING, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
YEARS ENDED DECEMBER 31, 1994 AND 1995 AND THE
PERIOD JANUARY 1, 1996 THROUGH NOVEMBER 22, 1996
approximately $314,000 and leased the same machinery and equipment back, after
rebuild, under an operating lease. The historical cost and the accumulated
depreciation of the machinery and equipment of approximately $534,000 and
$220,000, respectively, have been removed from the appropriate balance sheet
accounts. Simultaneously, the Company entered into a lease agreement for new
machinery and equipment. The lease has also been classified as an operating
lease in accordance with SFAS No. 13, "Accounting for Leases." Payments under
the five-year lease agreements are approximately $1.5 million for the first year
and $.8 million annually thereafter, which commenced in October 1996.
8. DISPOSITION OF FOREIGN OPERATION
In 1993, the Company's management announced a decision to dispose of
ICM/Krebsoge Canada, Ltd. operations in order to curtail the large operating
losses stemming from that facility. Management's plan called for production of
certain products to be relocated to the Company's U.S. operating facilities.
A provision for plant disposal costs totaling approximately $20.1 million
was recorded in the consolidated statement of income for the year ended December
31, 1993. The provision included noncash and cash charges as follows (in
millions):
<TABLE>
<S> <C>
Noncash charges:
Estimated losses from the disposal of part of a line of business.......... $ 1.5
Writedown of property, plant and equipment to net realizable value........ 4.7
Inventory writedown....................................................... 0.3
Recognized foreign currency translation credit adjustment................. (1.9)
-----
Total noncash charges....................................................... $ 4.6
=====
Cash charges:
Equipment relocation...................................................... $ 2.9
Employee separation....................................................... 2.7
Estimated losses from disposal of a part of a line of business............ 2.4
Transition team........................................................... 2.0
Pension funding obligation................................................ 1.4
Other..................................................................... 4.1
-----
Total cash charges.......................................................... $15.5
=====
</TABLE>
In 1993, cash restructuring expenditures of approximately $3.4 million were
charged against the accrual for disposition of foreign operation leaving a
remaining accrual balance at December 31, 1993 of approximately $13.6 million.
In 1994, cash restructuring expenditures of approximately $6.0 million and
noncash restructuring costs of approximately $1.7 million were charged against
the accrual for disposition of foreign operation leaving a remaining accrual
balance at December 31, 1994 of approximately $5.9 million. In addition, the
Company recognized an additional noncash restructuring charge in 1994 of
approximately $.5 million related to the writedown of machinery and equipment to
its net realizable value. In 1995, cash restructuring expenditures of
approximately $1.1 million and noncash restructuring costs of approximately $.8
million were charged against the accrual for disposition of foreign operation
leaving a remaining balance of $4.0 million at December 31, 1995.
On December 31, 1995, the Company's management reversed their decision to
dispose of ICM/Krebsoge Canada, Ltd. due to unforeseen additional costs,
difficulties related to equipment logistics, a high risk of a supply
interruption to significant customers and capacity constraints that would result
from transferring several
F-54
<PAGE> 122
POWDER METAL HOLDING, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
YEARS ENDED DECEMBER 31, 1994 AND 1995 AND THE
PERIOD JANUARY 1, 1996 THROUGH NOVEMBER 22, 1996
of the remaining product lines at St. Thomas to the Company's U.S. facilities as
originally planned. As a result of this decision, the Company has reversed the
remaining accrual of $4.0 million for the disposition of foreign operation with
a corresponding credit to restructuring provision as follows (in millions):
<TABLE>
<S> <C>
Equipment relocation................................................... $(1.0)
Employee separation.................................................... (1.1)
Pension funding obligation............................................. (1.0)
Other.................................................................. (0.9)
-----
Total.................................................................. $(4.0)
=====
</TABLE>
At December 31, 1995, the Company also reversed $3.2 million of the $4.7
million noncash charge included in 1993 restructuring provision for the
writedown of property, plant and equipment to net realizable value and the $1.9
million noncash credit included in the 1993 restructuring provision related to
the unrecognized foreign currency accumulated translation adjustment. As a
result of these reversals, property, plant and equipment -- net, and the
accumulated translation adjustment component of shareholders' equity have
increased approximately $3.2 million and $1.9 million, respectively. The noncash
charge and noncash credit previously recorded in 1993 were reversed as the
Company now intends to retain these assets and is not substantially liquidating
or disposing of its investment in ICM/Krebsoge Canada, Ltd. Management believes
the carrying value of these assets is recoverable from their use in the
Company's operations.
As a result of the reversals described in the two preceding paragraphs, the
Company recorded a net credit to the restructuring provision of approximately
$5.3 million for the year ended December 31, 1995.
Further, certain amounts in the Company's December 31, 1994 consolidated
statement of income have been reclassified to reflect management's decision to
retain ICM/Krebsoge Canada, Ltd., as follows -- $4.4 million of the $4.6 million
previously classified as assets held for disposition at December 31, 1994 has
been reclassified to property, plant and equipment -- net. The Company still
plans to dispose of the remaining balance of assets held for disposition.
9. RELATED PARTY TRANSACTIONS
PMH had recorded a bonus accrual of $600,000 as of December 31, 1995,
payable to International Consulting Management, Ltd., a corporation owned in
part by a director of the Company (Notes 5 and 13). PMH has a $444,000
receivable from MAAG at November 22, 1996 for expenditures incurred by PMH
related to the transfer of interest for which MAAG has agreed to reimburse PMH
(Note 2).
PMH has a note payable to MAAG of $2 million at November 22, 1996 (Note 6).
10. PENSIONS
The Company has four defined benefit pension plans covering substantially
all of its employees in the U.S. and Canada. The benefits are based on years of
service and the highest consecutive five-year average earnings prior to
retirement. The Company's policy is to fund the pension costs in accordance with
applicable regulatory guidelines.
The projected unit credit method is used to determine the funding
requirements of the plans. The tables below reconcile the funded status of the
Company's U.S. and Canadian defined benefit pension plans for
F-55
<PAGE> 123
POWDER METAL HOLDING, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
YEARS ENDED DECEMBER 31, 1994 AND 1995 AND THE
PERIOD JANUARY 1, 1996 THROUGH NOVEMBER 22, 1996
which SFAS No. 87, "Employers' Accounting for Pensions," has been adopted with
amounts recognized in the consolidated balance sheets at December 31, 1995 and
November 22, 1996 (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31, 1995
-----------------------------------------------------------
CANADIAN PLANS U.S. PLANS
------------------------- ---------------------------
ASSETS ACCUMULATED ASSETS ACCUMULATED
EXCEED BENEFITS EXCEED BENEFITS
ACCUMULATED EXCEED ACCUMULATED EXCEED
BENEFITS ASSETS BENEFITS ASSETS
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Actuarial present value of benefit
obligations:
Vested benefits......................... $ 748 $ 2,346 $ 3,729 $ 1,929
Nonvested benefits...................... 2 207 96
----------- ----------- ----------- -----------
Accumulated benefit obligations........... $ 748 $ 2,348 $ 3,936 $ 2,025
========= ========= ========= =========
Projected benefit obligations for services
provided to date........................ $ 840 $ 2,348 $ 5,639 $ 2,025
Plan assets at fair value................. 688 1,546 3,995 1,815
----------- ----------- ----------- -----------
Excess of projected benefit obligations
over plan assets........................ 152 802 1,644 210
Unrecognized prior service cost........... (190)
Unrecognized net loss..................... (169) (522) (1,375) (340)
Adjustment for unfunded pension
liability............................... 169 712 340
----------- ----------- ----------- -----------
Accrued pension cost recognized in
consolidated balance sheet.............. $ 152 $ 802 $ 269 $ 210
========= ========= ========= =========
</TABLE>
<TABLE>
<CAPTION>
NOVEMBER 22, 1996
------------------------------
CANADIAN PLANS U.S. PLANS
-------------- -----------
ACCUMULATED ACCUMULATED
BENEFITS BENEFITS
EXCEED EXCEED
ASSETS ASSETS
-------------- -----------
<S> <C> <C>
Actuarial present value of benefit obligations:
Vested benefits......................................... $2,881 $ 5,971
Nonvested benefits...................................... 2 376
------ ------
Accumulated benefit obligations........................... $2,883 $ 6,347
====== ======
Projected benefit obligations for services provided to
date.................................................... $2,971 $ 7,858
Plan assets at fair value................................. 2,042 7,655
------ ------
Excess of projected benefit obligations over plan
assets.................................................. 929 203
Unrecognized prior service cost........................... (177)
Unrecognized net loss..................................... (462) (4)
Adjustment for unfunded pension liability................. 639
------ ------
Accrued pension cost recognized in consolidated balance
sheet................................................... $ 929 $ 199
====== ======
</TABLE>
The discount rate used in determining the actuarial present value of the
projected benefit obligations for the U.S. plans was 6.8% and 7.5% at December
31, 1995 and November 22, 1996, respectively. The discount rate used in
determining the actuarial present value of the projected benefit obligations for
the Canadian plans
F-56
<PAGE> 124
POWDER METAL HOLDING, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
YEARS ENDED DECEMBER 31, 1994 AND 1995 AND THE
PERIOD JANUARY 1, 1996 THROUGH NOVEMBER 22, 1996
was 7.5% and 6.8% at December 31, 1995 and November 22, 1996. The rate of
increase in future compensation levels for applicable U.S. and Canadian
employees was 4% at December 31, 1995 and November 22, 1996. The expected
long-term rate of return on plan assets used in determining pension expense for
the U.S. and Canadian plans was 7.5% and 8.25% in 1995 and the period January 1,
1996 through November 22, 1996, respectively. The assumptions for the Canadian
plans were developed on a basis consistent with that for U.S. plans adjusted to
reflect prevailing economic conditions and interest rate environments.
The net periodic pension cost and total pension expense for the years ended
December 31, 1994 and 1995 and for the period January 1, 1996 through November
22, 1996 of U.S. plans and Canadian plans include the following components (in
thousands):
<TABLE>
<CAPTION>
DECEMBER 31, 1994 DECEMBER 31, 1995 NOVEMBER 22, 1996
------------------ -------------------- -------------------
CANADIAN U.S. CANADIAN U.S. CANADIAN U.S.
PLANS PLANS PLANS PLANS PLANS PLANS
-------- ----- -------- ------- -------- ------
<S> <C> <C> <C> <C> <C> <C>
Service cost......................... $223 $ 838 $ 169 $ 868 $ 174 $1,074
Interest cost on projected benefit
obligation......................... 203 298 232 387 200 466
Return on assets -- actual........... (68) 45 (122) (1,006) (201) (488)
Net amortization and deferral........ 36 (256) 40 667 323 82
---- ----- ----- ------- ---- ------
Net periodic pension cost............ $394 $ 925 $ 319 $ 916 $ 496 $1,134
==== ===== ===== ======= ==== ======
</TABLE>
Plan assets consist principally of investments in bonds and debentures,
common stocks and cash. The Company also has a defined contribution 401(k) plan,
covering substantially all of its U.S. employees. No Company contributions were
made to the 401(k) plan in 1994, 1995 and the period January 1, 1996 through
November 22, 1996.
11. OTHER POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
The Company maintains union and non-union benefit plans that provide
postretirement medical and life insurance to U.S. retirees and eligible
dependents. These benefits are funded as incurred from the general assets of the
Company. SFAS No. 106, "Employers' Accounting for Postretirement Benefits Other
Than Pensions," requires that the cost of such benefits be recognized in the
financial statements during the period employees provide service to the Company.
The medical and life insurance costs for active employees during active service
are not covered by SFAS No. 106 and are charged directly to expense on a
pay-as-you-go basis. The Company's Canadian subsidiary also maintains a
postretirement plan, however, the postretirement cost of the Canadian plan is
not significant to the Company.
The components of non-pension postretirement benefit cost of the Company
for 1994, 1995 and the period January 1, 1996 through November 22, 1996 are set
forth below (in thousands):
<TABLE>
<CAPTION>
1994 1995 1996
---- ---- ----
<S> <C> <C> <C>
Benefits earned during the year/period........................ $384 $303 $377
Interest accrued on benefits attributed to prior year......... 137 137 170
Net amortization of actuarial (gain)/loss..................... (26) 277
---- ---- ----
Total non-pension postretirement benefit cost................. $495 $440 $824
==== ==== ====
</TABLE>
F-57
<PAGE> 125
POWDER METAL HOLDING, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
YEARS ENDED DECEMBER 31, 1994 AND 1995 AND THE
PERIOD JANUARY 1, 1996 THROUGH NOVEMBER 22, 1996
As of January 1, 1995, the Company changed its method of recognizing
actuarial gains or losses from the defer and amortize method described in SFAS
No. 106 to the immediate recognition of such gains or losses, if the accumulated
net gain or loss exceeds 10% of the greater of the accumulated benefit
obligation or market-related value of plan assets (Note 2).
No retiree benefit payments were made during the years ended December 31,
1994 and 1995 and the period January 1, 1996 through November 22, 1996.
The table below displays the components of the Company's U.S.
postretirement benefit obligation as recognized in the consolidated balance
sheets at December 31, 1995 and November 22, 1996 (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31, NOVEMBER 22,
1995 1996
------------ ------------
<S> <C> <C>
Accumulated postretirement benefit obligation (APBO):
Current retirees......................................... $ 201 $ 288
Fully eligible active plan participants.................. 170 156
Other active plan participants........................... 2,357 2,472
------ ------
APBO....................................................... 2,728 2,916
Unrecognized net gain...................................... (9)
------ ------
U.S. obligation recognized in consolidated balance
sheets................................................... $2,728 $2,925
====== ======
</TABLE>
The following table summarizes the principal assumptions used in
determining the actuarial value of the APBO:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------
1995 1996
---- ----
<S> <C> <C>
Weighted average discount rate........................................ 6.8 7.8%
Weighted average health care trend rate............................... 6.0 * 5.0
Ultimate sustained weighted average health care cost trend rate in
1997................................................................ 5.0 5.0
</TABLE>
- ---------------
* Rate decreases on a linear basis through 1997, to the ultimate weighted
average trend rate of 5.0%.
The following increase would result from a one percentage point increase in
the weighted average health care trend rates:
<TABLE>
<CAPTION>
1995 1996
-------- --------
<S> <C> <C>
APBO......................................................... $288,945 $453,438
Service and interest costs of postretirement expense......... 90,703 134,786
</TABLE>
12. UNITED STATES, FOREIGN AND OTHER INCOME TAXES -- DEFERRED AND PAYABLE
Deferred income tax assets and liabilities reflect the impact of "temporary
differences" between amounts of assets and liabilities for financial reporting
purposes and the bases of such assets and liabilities as measured by tax laws
and rates applicable to periods in which differences are expected to affect
taxable income. Valuation allowances are established when necessary to reduce
deferred tax assets to the amount expected to
F-58
<PAGE> 126
POWDER METAL HOLDING, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
YEARS ENDED DECEMBER 31, 1994 AND 1995 AND THE
PERIOD JANUARY 1, 1996 THROUGH NOVEMBER 22, 1996
be realized. Temporary differences and carryforwards which give rise to the
deferred tax asset at December 31, 1995 and November 22, 1996 are as follows (in
thousands):
<TABLE>
<CAPTION>
1995 1996
-------- --------
<S> <C> <C>
Current deferred tax assets:
Pension and other employee benefits........................ $ 711 $ 602
Postretirement benefits other than pensions................ 752 1,036
Special provision for plant closing and other
restructuring........................................... 304
Other non-deductible reserves.............................. 523 580
-------- --------
Total current deferred tax asset................... 2,290 2,218
Noncurrent deferred tax assets (liabilities):
Net operating loss carryforwards........................... 15,206 16,847
Capital lease obligations.................................. (92) (94)
Depreciation............................................... (3,747) (2,811)
Minimum pension liability.................................. 361 164
Accumulated translation adjustment......................... (648) (654)
Alternative minimum tax credit carryforward................ 139 178
Other...................................................... 69
-------- --------
Total net noncurrent deferred tax asset............ 11,219 13,699
-------- --------
Total net deferred tax asset................................. 13,509 15,917
Less valuation allowance..................................... (13,509) (15,917)
-------- --------
Net deferred tax asset....................................... None None
======== ========
</TABLE>
The Company had U.S. federal net operating loss carryforwards for tax
purposes of approximately $31.8 million and $30.9 million at December 31, 1995
and November 22, 1996, respectively. These net operating loss carryforwards
expire on various dates between the years 2004 and 2007. The Company also had
approximately $12.3 million and $17.9 million of loss carryforwards for tax
purposes for ICM/Krebsoge Canada, Ltd. at December 31, 1995 and November 22,
1996, respectively. These loss carryforwards expire on various dates between the
years 2000 and 2001.
For the year ended December 31, 1995 and the period January 1, 1996 through
November 22, 1996, the Company paid income taxes of $220,750 and $38,000,
respectively. No income taxes were paid in 1994.
F-59
<PAGE> 127
POWDER METAL HOLDING, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
YEARS ENDED DECEMBER 31, 1994 AND 1995 AND THE
PERIOD JANUARY 1, 1996 THROUGH NOVEMBER 22, 1996
The components of income tax expense are as follows:
<TABLE>
<CAPTION>
1994 1995 1996
------- ------- -------
<S> <C> <C> <C>
Domestic:
Current..................................................... $ 1,308 $ (253) $ 518
Deferred.................................................... 1,615 991 247
Benefit of operating loss carryforwards..................... (1,308) (480)
Adjustment in valuation allowance........................... (1,615) (991) (247)
------- ------- -------
Total domestic...................................... None (253) 38
Foreign:
Current..................................................... 1,483
Deferred.................................................... (1,959) 3,024 (2,858)
Benefit of operating loss carryforwards..................... (1,483)
Adjustment in valuation allowance........................... 1,959 (3,024) 2,858
------- ------- -------
Total foreign....................................... None None None
------- ------- -------
Income tax (credit)........................................... None $ (253) $ 38
------- ------- -------
</TABLE>
The domestic and foreign components of income (loss) before income tax
expense are as follows (in thousands):
<TABLE>
<CAPTION>
1994 1995 1996
------- ------- -------
<S> <C> <C> <C>
U.S........................................................... $ 6,724 $ 4,081 $ 3,619
Foreign....................................................... (1,330) 5,487 (1,409)
------- ------- -------
Income before income taxes.................................... $ 5,394 $ 9,568 $ 2,210
======= ======= =======
</TABLE>
The consolidated income tax benefit (exclusive of the tax effect related to
the cumulative effect of accounting changes) was different than the amount
computed using the U.S. statutory income tax rate for the reasons set forth in
the following table (in thousands):
<TABLE>
<CAPTION>
1994 1995 1996
------- ------- -------
<S> <C> <C> <C>
Expected tax at U.S. statutory income tax rate................ $ 1,834 $ 3,253 $ 751
Net effect of Canadian losses at rates other than 34%......... (20) 82 (21)
Amortization of debt and accrued interest forgiven by
lender...................................................... (873) (873) (800)
Alternative minimum tax....................................... 143 38
Nondeductible restructuring credit............................ 3,216
Change in valuation allowance................................. 344 (4,015) 2,611
Change in valuation allowance for tax effected components of
shareholders' deficit....................................... (287) (203)
Benefits of net operating loss carryforwards.................. (1,308) (1,483) (480)
Other items................................................... 23 (289) (1,858)
------- ------- -------
Income tax (credit)........................................... None $ (253) $ 38
======= ======= =======
</TABLE>
F-60
<PAGE> 128
POWDER METAL HOLDING, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
YEARS ENDED DECEMBER 31, 1994 AND 1995 AND THE
PERIOD JANUARY 1, 1996 THROUGH NOVEMBER 22, 1996
13. COMMITMENTS AND CONTINGENCIES
Self-Insurance Program -- The Company is self-insured for health care
claims for active employees. The Company maintains excess insurance coverage for
claims exceeding $150,000 per individual. The Company accrues for incurred but
not reported claims based on the history of such claims. The Company paid claims
of $1.9 million, $2.6 million and $2.7 million for the years ended December 31,
1994 and 1995 and the period January 1, 1996 through November 22, 1996,
respectively.
Employment Agreements -- On October 1, 1996 ICM/Krebsoge, Inc. entered into
a Supplemental Executive Retirement Program ("SERP") and a two year
Non-Disclosure, Non-Solicitation Non-Competition and Severance Agreement (the
"Employment Agreements") with seven key employees. The Employment Agreements
provide that in the event of termination of employment within the contract term
for reasons other than cause or disability, then the salary and benefits for the
remainder of the contract term shall be paid.
Consulting Agreement -- On January 1, 1994, ICM/Krebsoge, Inc. entered into
a consulting agreement with International Consulting Management, Ltd., a
Delaware corporation. International Consulting Management, Ltd. is owned in part
by a director of the Company. The consulting agreement retained the services of
the director to act as President of ICM/Krebsoge, Inc. through December 31,
1996. In consideration of such services, ICM/Krebsoge, Inc. paid International
Consulting Management, Ltd. a monthly consulting fee of $30,000, plus expenses.
At December 31, 1995, the Company had recorded an accrued liability of
$600,000, related to an anticipated bonus (Notes 5 and 9). During 1996, it was
agreed among the involved parties that such bonus would not be paid and the
liability was reversed.
Claims, Legal Actions and Environmental Matters -- The Company is subject
to potential liability under various claims and legal actions which are pending
or may be asserted against them. Groundwater and soil contamination has been
identified at the St. Thomas, Ontario facility, although there have been no
environmental asserted claims against the Company. The sources of contamination
have not been positively identified and may be related to either past facility
operations or off-site origins. The ultimate liability of the Company under
these claim actions was not determinable at November 22, 1996.
14. SUBSEQUENT EVENT
On December 19, 1996, SMI acquired 70% of the shares of PMH for $65 million
less the principal amount of the indebtedness of PMH plus all accrued but unpaid
interest. As a result of the transaction, PMH became a wholly-owned entity of
SMI.
All obligations to Heller were repaid in connection with this transfer of
interest. This included Term Loan A, $26.9 million; Term Loan B, $12.3 million;
and the Revolving Loan, $10.0 million. In addition, the MAAG subordinated note
including principal and interest of $2.1 million was repaid.
F-61
<PAGE> 129
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following is a list of the estimated expenses to be incurred by the
Company in connection with the issuance and distribution of the Class A Common
Stock being registered hereby, other than underwriting discounts and
commissions.
<TABLE>
<S> <C>
Securities and Exchange Commission registration fee.......... $20,652.08
National Association of Securities Dealers, Inc. filing
fee........................................................ 7,331.00
Transfer Agent and Registrar's fees.......................... *
NYSE Supplemental listing application fee.................... *
Accounting fees and expenses................................. *
Printing costs............................................... *
Legal fees and expenses (not including Blue Sky)............. *
Blue Sky fees and expenses................................... *
Miscellaneous expenses....................................... *
----------
Total $ *
==========
</TABLE>
- ---------------
* To be disclosed by Amendment
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Company's Restated Certificate of Incorporation (Exhibit 3.1 to the
Registration Statement) provides for the indemnification of the Company's
Directors and officers against certain liabilities. Section 145 of the Delaware
General Corporation Law (Exhibit 99.1 to this Registration Statement) also
provides for indemnification of directors and officers of Delaware corporations
against certain liabilities. Reference is made to the Underwriting Agreement
(Exhibit 1.1 to this Registration Statement) which provides for indemnification
of the Company's Directors and officers by the Underwriters against certain
civil liabilities, including liabilities under the Securities Act of 1933 (the
"Securities Act").
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
No securities of the Company that were not registered under the Securities
Act have been issued or sold by the Company within the past three years, except
as follows:
On January 28, 1994 and October 26, 1994, the Company issued an aggregate
of 60,805 shares and 303,750 shares, respectively, of Class B Common Stock to
the members of the Company's senior management under the Company's Management
Incentive Stock Plan.
On June 26, 1995, the Company issued an aggregate of 100,000 shares of
Class A Common Stock to the previous owners of Sinterteknik as part of the
purchase price for such company. On July 18, 1996, the Company issued an
aggregate of 5,000 shares of Class A Common Stock to the previous owners of
SinterForm as part of the purchase price for such company.
All such transactions were effected in reliance on the exemption from
registration provided by Section 4(2) of the Securities Act.
II-1
<PAGE> 130
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(A) EXHIBITS.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- ----------- ------------------------------------------------------------------------------
<C> <S>
* 1.1 Form of Underwriting Agreement.
2.1 Powder Metal Holding Stock Purchase Agreement, dated as of October 7, 1996, by
and between MAAG Holding AG and Sinter Metals, Inc.
2.2 Krebsoge Stock Purchase Agreement, dated as of October 11, 1996, by and
between MAAG Holding AG and Sinter Metals, Inc.
3.1 Restated Certificate of Incorporation of the Company.
3.2 Restated By-Laws of the Company.
4.1 Specimen certificate for the Class A Common Stock, $.001 par value, of the
Company.
* 4.2 Form of certificate for the Class B Common Stock, $.001 par value, of the
Company.
4.3 Stockholders' Agreement, dated as of October 18, 1994, by and among the
Company, Citicorp Venture Capital, Ltd. and certain other stockholders of the
Company.
* 5.1 Opinion of Jones, Day, Reavis & Pogue as to the validity of the securities
being offered.
10.1 1994 Key Employee Stock Option Plan.
10.2 Employment Agreement, dated as of January 1, 1992, by and between Pennsylvania
Pressed Metals, Inc. and Donald L. LeVault, as amended.
* 10.3 Form of Nonqualified Stock Option Agreement (with an attached schedule
identifying the Named Executive Officers of the Company that have entered into
option agreements with the Company).
* +10.4 Purchase Agreement, dated as of September 30, 1996, by and between the Company
and Hoeganaes Corporation.
* +10.5 Purchase Agreement by and between the Company and Hoganas AB.
* +10.6 Purchase Agreement by and between the Company and Mannesman AG.
* +10.7 Purchase Agreement by and between the Company and Quebec Metal Powder.
10.8 Credit Agreement, dated as of December 19, 1996, by and between the Company,
Sinter Metals GmbH, the Lenders party thereto, NBD Bank, as Administrative
Agent and Collateral Agent, and Salomon Brothers Inc, as Syndication Agent.
10.9 Deferred Compensation Plan for Nonemployee Directors.
10.10 Deferred Compensation Plan.
21.1 Subsidiaries of the Company.
* 23.1 Consent of Jones, Day, Reavis & Pogue (included in Exhibit 5.1).
23.2 Consent of Arthur Andersen LLP.
23.3 Consent of Deloitte & Touche LLP.
23.4 Consent of Price Waterhouse GmbH.
23.5 Consent of BDO Seidman GmbH.
24.1 Powers of Attorney.
99.1 Section 145 of the General Corporation Law of Delaware.
</TABLE>
- ---------------
* To be filed by Amendment.
+ At such time as the Registrant files this Exhibit with the Commission, the
Registrant intends to request confidential treatment with respect to certain
portions of this Exhibit.
II-2
<PAGE> 131
All other schedules have been omitted because they are not applicable, not
required or not material or the required information is included in the
financial statements and notes thereto.
ITEM 17. UNDERTAKINGS
The undersigned registrant hereby undertakes to provide to the underwriters
at the closing specified in the underwriting agreements, certificates in such
denominations and registered in such names as required by the underwriters to
permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 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 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.
The undersigned registrant hereby undertakes that:
(1) For the purpose of determining any liability under the Securities
Act of 1933, 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 Securities Act shall be deemed to be
part of this registration statement as of the time it was declared
effective.
(2) For purposes of determining any liability under the Securities Act
of 1933, 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-3
<PAGE> 132
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE COMPANY HAS
DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF CLEVELAND, STATE OF OHIO,
ON DECEMBER , 1996.
SINTER METALS, INC.
By: /s/ JOSEPH W. CARRERAS
------------------------
Joseph W. Carreras
Chairman of the Board and
Chief Executive Officer
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES INDICATED ON DECEMBER , 1996.
<TABLE>
<CAPTION>
SIGNATURE TITLE
- ---------------------------------------- -----------------------------------
<S> <C>
Chairman of the Board and
* Chief Executive Officer
Joseph W. Carreras (Principal Executive Officer)
Vice President, Chief Financial
* Officer and Secretary
Michael T. Kestner (Principal Financial Officer)
Controller
* (Principal Accounting Officer)
Ian B. Hessel
President and Director
*
Donald L. LeVault
Director
*
E. Joseph Hochreiter
Director
*
Mary Lynn Putney
William H. Roj
Director
*
Charles E. Volpe
David Y. Howe
</TABLE>
- ---------------
* The undersigned by signing his name hereto, does sign and execute this
Registration Statement pursuant to the Powers of Attorney executed by the
above-named officers and directors of the Company and filed with the
Securities and Exchange Commission on behalf of such officers and Directors.
/s/ JOSEPH W. CARRERAS
- -------------------------------------
Joseph W. Carreras, Attorney-in-Fact
II-4
<PAGE> 1
EXECUTION COPY
EXHIBIT 2.1
-----------
POWDER METAL STOCK PURCHASE AGREEMENT
by and between
MAAG HOLDING AG
as Seller
and
SINTER METALS, INC.
as Buyer
<PAGE> 2
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Page
----
<S> <C>
ARTICLE I DEFINITIONS ....................................................... -1-
ARTICLE II PURCHASE AND SALE OF SHARES ...................................... -7-
2.1 Purchase and Sale ........................................... -7-
2.2 Consideration ............................................... -7-
2.3 Final Statement of Working Capital; Purchase
Price Adjustment ........................................... -8-
2.4 Indemnity Escrow Account .................................... -9-
ARTICLE III REPRESENTATIONS AND WARRANTIES
CONCERNING SELLER ...................................................-10-
3.1 Organization and Good Standing ..............................-10-
3.2 Authority of Seller .........................................-10-
3.3 No Conflict or Breach .......................................-11-
3.4 Consents and Approvals ......................................-11-
3.5 Share Ownership .............................................-11-
3.6 Financial Advisors ..........................................-12-
ARTICLE IV REPRESENTATIONS AND WARRANTIES CONCERNING
THE COMPANY AND SUBSIDIARIES ........................................-12-
4.1 Organization and Good Standing ..............................-12-
4.2 Capitalization ..............................................-12-
4.3 Subsidiaries ................................................-13-
4.4 No Conflict or Breach .......................................-13-
4.5 Consents and Approvals ......................................-14-
4.6 Financial Statements ........................................-14-
4.7 Title to Assets .............................................-14-
4.8 Real Property ...............................................-15-
4.9 Contracts ...................................................-16-
4.10 Intellectual Property .......................................-16-
4.11 Litigation ..................................................-17-
4.12 Taxes .......................................................-17-
4.13 Environmental Protection ....................................-17-
4.14 Labor and Employment Matters ................................-18-
4.15 Employee Benefit Plans ......................................-19-
4.16 Absence of Certain Changes ..................................-20-
4.17 Insurance ...................................................-21-
4.18 Capital Projects ............................................-21-
4.19 Condition of Properties and Equipment .......................-21-
4.20 No Undisclosed Liabilities ..................................-21-
4.21 Entirety of Business ........................................-22-
4.22 Compliance with Laws ........................................-22-
4.23 Completeness of Warranties ..................................-22-
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
<S> <C>
4.24 Inventory ...................................................-22-
4.25 Receivables .................................................-22-
4.26 Customers and Suppliers .....................................-23-
4.27 Indebtedness ................................................-23-
ARTICLE V REPRESENTATIONS AND WARRANTIES OF BUYER ...........................-23-
5.1 Organization and Good Standing ..............................-23-
5.2 Authority ...................................................-23-
5.3 No Conflict or Breach .......................................-24-
5.4 Consents and Approvals ......................................-24-
5.5 Share Ownership .............................................-24-
5.6 Financial Advisors ..........................................-24-
5.7 Financing ...................................................-25-
5.8 Investment ..................................................-25-
ARTICLE VI COVENANTS OF SELLER ..............................................-25-
6.1 Conduct of Business .........................................-25-
6.2 Access and Information ......................................-27-
6.3 No Solicitation .............................................-28-
6.4 Confidentiality .............................................-28-
6.5 Repayment of Indebtedness ...................................-28-
6.6 Other Actions ...............................................-29-
6.7 Working Capital .............................................-29-
6.8 Director Resignations .......................................-29-
6.9 Intellectual Property .......................................-29-
6.10 Other Assistance ............................................-29-
6.11 Consents ....................................................-29-
6.12 Employment Claims ...........................................-29-
ARTICLE VII COVENANTS OF BUYER ..............................................-29-
7.1 Confidentiality .............................................-29-
7.2 Disclosure to Seller ........................................-30-
ARTICLE VIII MUTUAL COVENANTS ...............................................-30-
8.1 HSR Filings .................................................-30-
8.2 Casualty or Loss ............................................-30-
8.3 Further Actions .............................................-31-
ARTICLE IX CONDITIONS PRECEDENT TO BUYER'S OBLIGATIONS ......................-31-
9.1 Representations and Warranties ..............................-32-
9.2 Compliance with Covenants ...................................-32-
9.3 Absence of Litigation .......................................-32-
9.4 HSR Act .....................................................-32-
9.5 Required Consents ...........................................-32-
9.6 No Injunction, etc ..........................................-32-
9.7 Legal Opinion ...............................................-32-
</TABLE>
-ii-
<PAGE> 4
<TABLE>
<S> <C>
9.8 Financing ...................................................-32-
9.9 Krebsoge Transactions .......................................-32-
9.10 Indemnity Escrow Agreement ..................................-33-
9.11 Release or Termination of Liens .............................-33-
9.12 Payment of Indebtedness .....................................-33-
9.13 U.S. Real Property Holding Company ..........................-33-
9.14 Contingent Payment Agreement ................................-33-
ARTICLE X CONDITIONS PRECEDENT TO SELLER'S OBLIGATIONS ......................-33-
10.1 Representations and Warranties ..............................-34-
10.2 Compliance with Covenants ...................................-34-
10.3 Absence of Litigation .......................................-34-
10.4 HSR Act .....................................................-34-
10.5 No Injunction, etc ..........................................-34-
10.6 Legal Opinion ...............................................-34-
10.7 Irrevocable Letter of Credit Replacement ....................-34-
ARTICLE XI CLOSING ..........................................................-34-
11.1 Closing .....................................................-34-
11.2 Deliveries by Seller ........................................-35-
11.3 Deliveries by Buyer .........................................-35-
ARTICLE XII INDEMNIFICATION .................................................-36-
12.1 Indemnification by Seller ...................................-36-
12.2 Indemnification by Buyer ....................................-37-
12.3 Notice of Claim .............................................-37-
12.4 Defense .....................................................-37-
12.5 Time for Claims .............................................-38-
12.6 Limitation ..................................................-38-
12.7 Characterization ............................................-39-
12.8 Indemnity Amounts ...........................................-39-
ARTICLE XIII TAX MATTERS ....................................................-39-
13.1 Straddle Periods ............................................-39-
13.2 Carrybacks ..................................................-40-
ARTICLE XIV TERMINATION .....................................................-40-
14.1 Termination .................................................-40-
14.2 Effect on Obligations .......................................-41-
ARTICLE XV EMPLOYEES ........................................................-41-
ARTICLE XVI MISCELLANEOUS ...................................................-41-
16.1 Access After the Closing Date ...............................-41-
16.2 Payment of Expenses .........................................-42-
16.3 Publicity ...................................................-42-
</TABLE>
-iii-
<PAGE> 5
<TABLE>
<S> <C>
16.4 Commercially Reasonable Efforts .............................-42-
16.5 Notices .....................................................-42-
16.6 Governing Law ...............................................-43-
16.7 Counterparts ................................................-44-
16.8 Assignment ..................................................-44-
16.9 Third Party Beneficiaries ...................................-44-
16.10 Headings; References ........................................-44-
16.11 Amendments; Waiver ..........................................-44-
16.12 Knowledge ...................................................-44-
16.13 Severability ................................................-45-
16.14 Entire Agreement ............................................-45-
16.15 Arbitration; Submission to Jurisdiction .....................-45-
16.16 Overall Adjustment/Indemnification Limitation ...............-46-
</TABLE>
-iv-
<PAGE> 6
POWDER METAL AGREEMENT
SCHEDULES AND EXHIBITS
Schedule 2.3 - Methodology and Principles; Minimum Working Capital Amount
Schedule 3.4 - Consent and Approvals of Seller
Schedule 3.5 - Share Ownership of Seller
Schedule 4.5 - Required Consents
Schedule 4.7 - Tangible Personal Property
Schedule 4.8(a) - Owned Real Property
Schedule 4.8(b) - Leased Real Property
Schedule 4.9 - Material Contracts
Schedule 4.10 - Intellectual Property
Schedule 4.11 - Litigation
Schedule 4.12 - Taxes
Schedule 4.13 - Environmental Protection
Schedule 4.14 - Labor and Employment Matters
Schedule 4.15 - Employee Benefit Plans
Schedule 4.16 - Changes in Operations
Schedule 4.18 - Capital Projects
Schedule 4.19 - Properties and Equipment
Schedule 4.20 - Undisclosed Liabilities
Schedule 4.22 - Compliance with Laws
Schedule 4.23 - Materials Provided to the Buyer
Schedule 4.26 - Customers & Suppliers
Schedule 4.27 - Indebtedness
Schedule 5.3 - Conflicts and Breaches
Schedule 5.4 - Consents and Approvals of Buyer
Schedule 5.5 - Share Ownership of Buyer
Schedule 5.7 - Financing
Schedule 6.1 - Conduct of Buyer
Schedule 6.9 - Use of Intellectual Property
Schedule 6.12 - Employment Claims
Schedule 9.11 - Release or Termination of Liens
-v-
<PAGE> 7
POWDER METAL STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (together with all Schedules and Exhibits
hereto, this "Agreement"), dated as of October 7, 1996, is entered into by and
between MAAG HOLDING AG, a Swiss corporation (which, together with its
successors and assigns, is herein referred to as the "Seller"), and SINTER
METALS, INC., a Delaware corporation (which, together with its successors and
assigns, is herein referred to as the "Buyer").
RECITALS:
WHEREAS, the Seller is the owner, beneficially and of record, of 5,100
shares of the Class A common stock, par value $.01 per share (the "Seller's
Class A Common Stock"), and 6,434 shares of the Class B common stock, par value
$.01 per share (the "Seller's Class B Common Stock") of Powder Metal Holding,
Inc., a Delaware corporation (the "Company"), which is the parent corporation of
ICM/Krebsoge, Inc., a Delaware corporation ("ICM/K"), which is in turn the
parent corporation of ICM/Krebsoge Canada, Ltd., an Ontario corporation ("ICM/K
Canada");
WHEREAS, the Seller desires to sell, and the Buyer desires to buy, all of
the shares of the Seller's Class A Common Stock and the Seller's Class B Common
Stock (collectively, the "Shares") on the terms and conditions set forth in this
Agreement;
WHEREAS, simultaneously with the purchase of the Shares hereunder, the
Buyer shall purchase shares in Krebsoge Sinterholding GMBH, a German limited
liability company ("Krebsoge"), pursuant to the Krebsoge Agreement (as defined
herein), which shall be executed and which shall close simultaneously with this
Agreement; and
WHEREAS, in connection with or relative to this Agreement, the Seller and
the Buyer have executed, delivered and performed certain Seller Ancillary
Documents and Buyer Ancillary Documents including, without limitation, the Side
Agreement, dated as of September 26,1996.
NOW, THEREFORE, the parties agree as follows:
ARTICLE I DEFINITIONS
As used in this Agreement, the following terms shall have the following
meanings:
"AFFILIATE" - Has the meaning ascribed to such term in Rule 12b-2
promulgated under the Exchange Act by the SEC, as in effect on the date hereof.
"ANNUALIZED EBITDA" - (x) the quotient of (i) Net Income, PLUS (ii) all
amounts deducted in calculating Net Income in respect of (a) income and
franchise taxes,
<PAGE> 8
(b) depreciation and amortization, (c) interest on Indebtedness (including
payments in the nature of interest on capitalized obligations and interest
income as a consequence of the forgiveness of indebtedness by Heller Financial,
Inc. in 1993), (d) any expenses in determining Net Income for such period in
respect of post-retirement benefits in accordance with FASB 106 and in respect
of any foreign currency translation adjustments in accordance with FASB 52, and
(e) miscellaneous expenses which shall not exceed $100,000 in the aggregate,
EXCLUDING, HOWEVER, any non-recurring income or charges of whatever nature, all
non-recurring expenses or reductions in reserves, for the period beginning on
January 1, 1996 and ending on the last day of the month immediately preceding
the month in which the Closing occurs divided by the number of months in such
period multiplied by (y) 12.
"BALANCE SHEET DATE" - July 31,1996.
"BUSINESS DAY" - Any day other than a Saturday, Sunday or a day on which
banks in New York City are authorized or obligated by law or executive order to
close.
"BUYER ANCILLARY DOCUMENT" - Each other document or agreement executed or
to be executed by the Buyer in connection with or relating to this Agreement.
"BUYER'S COUNSEL" - Jones, Day, Reavis & Pogue or such other counsel as is
designated by the Buyer.
"CERCLA" - The Comprehensive Environmental Response, Compensation and
Liability Act, as amended.
"CLOSING" - Defined in Section 11.1.
"CLOSING DATE" - Defined in Section 11.1.
"CLOSING WORKING CAPITAL AMOUNT" - (i) the total Current Assets less (ii)
the total Current Liabilities, each as reflected on the Closing Working Capital
Statement.
"CLOSING WORKING CAPITAL STATEMENT" - The statement of net working capital
of the Company and the Subsidiaries as of the day immediately preceding the
Closing Date.
"CODE" - The Internal Revenue Code of 1986, as amended.
"COMPANY" - Powder Metal Holding, Inc., a Delaware corporation, together
with its successors and assigns.
"CURRENT ASSETS" - The sum of cash, inventory, accounts receivable and
prepaid expenses of the Company and the Subsidiaries.
"CURRENT LIABILITIES" - The sum of accounts payable and accrued liabilities
of the Company and the Subsidiaries, EXCLUDING, HOWEVER, any principal,
interest, fees, penalties
-2-
<PAGE> 9
or other costs associated with any Indebtedness (other than capital lease
obligations) and the current portion of capital lease obligations.
"DOLLAR" OR "$" - U.S. dollars.
"EBITDA SHORTFALL AMOUNT" - (x) the amount, if any, by which Annualized
EBITDA is less than $12 million, multiplied by (y) 5.0.
"EFFECTIVE TIME" - Defined in Section 11.1.
"ENVIRONMENTAL LAWS" - Any and all federal, state, provincial, local or
municipal laws, rules, orders, regulations, statutes, ordinances, codes,
decrees, requirements of any Governmental Authority or Requirements of Law
(including common law) regulating, relating to or imposing liability or
standards of conduct concerning protection of the environment, as now or may at
any time hereafter be in effect.
"ESCROW AGENT" - Defined in Section 2.4.
"EXCHANGE ACT"- The Securities Exchange Act of 1934, as amended from time
to time, and the rules and regulations of the SEC promulgated from time to time
thereunder.
"ERISA" - The Employee Retirement Income Security Act of 1974, as amended.
"FINAL STATEMENT OF WORKING CAPITAL" - The statement of net working capital
of the Company and the Subsidiaries as of the close of business on the day
immediately prior to the Closing Date to be delivered pursuant to Section 2.3.
"FINAL WORKING CAPITAL AMOUNT" - (i) the total Current Assets set forth on
the Closing Statement of Working Capital, less (ii) the total Current
Liabilities set forth on the Closing Statement of Working Capital, determined in
accordance with the methodology and accounting principles set forth on Schedule
2.3.
"FINANCIAL STATEMENTS" - Defined in Section 4.6.
"FINANCING" - Defined in Section 5.7.
"GAAP" - Generally accepted accounting principles as in effect in the
United States from time to time.
"GOVERNMENTAL AUTHORITY" - Any nation or government, any state, province or
other political subdivision thereof, and any entity or person exercising
executive, legislative, judicial, regulatory or administrative functions of or
pertaining to government.
-3-
<PAGE> 10
"HAZARDOUS MATERIALS" - Any hazardous or toxic substances, materials,
pollutants or wastes, defined or regulated as such in or under any Environmental
Law or that could reasonably result in liability under any Environmental Law,
including crude oil petroleum and any fraction thereof.
"HSR ACT" - The Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended, and the rules and regulations thereunder.
"INDEBTEDNESS" - As to any Person, at any time, (a) all indebtedness of
such Person for borrowed money or for the deferred purchase price of property or
services (whether from public or private sources) (other than current trade
liabilities incurred in the ordinary course of business and payable in
accordance with customary practices), (b) any other indebtedness of such Person
which is evidenced by a note, bond, debenture or similar instrument, (c) all
obligations of such Person under capitalized leases, (d) all obligations of such
Person in respect of acceptances issued or created for the account of such
Person, (e) all liabilities secured by any lien or other encumbrance of any kind
(other than any lien or other encumbrance of any kind in respect of operating
leases) on any property owned by such Person even though such Person has not
assumed or otherwise become liable for the payment thereof and (f) all
guarantees of any Indebtedness or obligations referred to in clauses (a) through
(e) above.
"INDEMNIFIED PARTY" - Defined in Section 12.3.
"INDEMNITY AMOUNTS" - Defined in Section 2.4.
"INDEMNITY ESCROW ACCOUNT" - Defined in Section 2.4.
"INDEMNITY ESCROW AGREEMENT" - Defined in Section 2.4.
"INDEMNITY FUND" - Defined in Section 2.4.
"INDEMNITY FUND DATE" - Defined in Section 2.4.
"INDEMNITY LETTER OF CREDIT" - Defined in Section 2.4.
"INDEMNITY OBLIGOR" - Defined in Section 12.3.
"INTELLECTUAL PROPERTY" - All of the following which is owned by, issued to
or licensed to either the Company or any Subsidiary which is used by them, and
all rights associated therewith (including, without limitation, royalties and
the right to sue for infringements): inventions (whether or not patentable and
whether or not reduced to practice), trade names and corporate names together
with all goodwill associated therewith, and all translations, adaptations,
derivations and combinations of the foregoing; copyrights and copyrightable
works; trade secrets and confidential information (including, without
limitation, formulae, know-how, manufacturing and production processes and
techniques, research and development information, drawings, specifications,
designs, plans, proposals,
-4-
<PAGE> 11
technical data, and customer and supplier lists and related information);
computer software (including, without limitation, data and related
documentation); other proprietary rights; and all copies and tangible
embodiments of the foregoing (in whatever form or medium), in each case
including the items claimed by employees of the Company or the Subsidiaries.
"KREBSOGE AGREEMENT" - Defined in Section 9.9.
"LEASED REAL PROPERTY" - The land, buildings and structures leased by the
Company or any Subsidiary, as lessee, and listed in Schedule 4.8(b), including
any additions thereto or substitutions therefor.
"LOAN AGREEMENTS" - Defined in Section 9.12.
"LOSS" - Defined in Section 12.1.
"MATERIAL ADVERSE EFFECT" - A material adverse effect on or material
adverse change in the business, operations, property, results of operations or
financial condition of the Seller or the Company and the Subsidiaries, taken as
a whole, or the Buyer, as the case may be, or on the ability of the Seller, the
Company and the Subsidiaries or the Buyer, as the case may be, to consummate the
transactions contemplated hereby.
"MATERIAL CONTRACTS" - All contracts, commitments, agreements (including
agreements for the borrowing of money or the extension of credit), leases,
licenses, guarantees, understandings and obligations, whether written or oral,
to which the Company or any Subsidiary are party or by which any of them are
bound except for (a) contracts with automotive manufacturers which may be
canceled by the Company or any Subsidiary without penalty on not more than sixty
days' notice, copies of which have been provided to the Buyer; (b) employment
contracts and miscellaneous service contracts terminable on not more than sixty
days' notice without penalty, copies of which have been provided to the Buyer;
(c) purchase orders with suppliers involving payment by the Company or the
Subsidiaries of amounts less than $50,000 in the aggregate; (d) equipment
maintenance agreements involving payment by the Subsidiaries of amounts less
than $50,000 per year in the aggregate; and (e) other contracts not involving
other aggregate liabilities under all such contracts exceeding $50,000 in any
twelve month period.
"MINIMUM WORKING CAPITAL AMOUNT"- $9,215,000, as determined on Schedule
2.3.
"NET INCOME" - The net income (or loss) of the Company and the Subsidiaries
determined in accordance with GAAP, excluding any income (or loss) arising from
extraordinary items, as defined by GAAP.
"OFFICER'S CERTIFICATE" - Defined in Section 12.8.
"OWNED REAL PROPERTY" - The land, building and structures owned by the
Company or any Subsidiary, including any additions thereto or substitutions
therefor.
-5-
<PAGE> 12
"PERSON" - An individual, partnership, corporation, business trust, joint
stock company, limited liability company, trust, unincorporated association,
joint venture, Governmental Authority or other entity of whatever nature.
"PLANS" - (a) Employee benefit plans as defined in Section 3(3) of ERISA,
whether or not funded and whether or not terminated; (b) employment agreements;
and (c) personnel policies or fringe benefit plans, policies, programs and
arrangements, whether or not subject to ERISA, whether or not funded, and
whether or not terminated, including, without limitation, stock bonus, deferred
compensation, pension, severance, bonus, vacation, travel, incentive and health,
disability and welfare, in each case of or relating to the Company or any
Subsidiary.
"PURCHASE PRICE" - Defined in Section 2.2.
"REAL PROPERTY LEASES" - Defined in subsection 4.8(b).
"REPRESENTATIVES" - Defined in Section 7.1.
"REQUIRED CONSENTS" - Defined in Section 4.5.
"REQUIREMENTS OF LAW" - As to any Person, the Certificate of Incorporation
and By-laws or other organizational or governing documents of such Person, and
any federal, state, local, municipal, foreign, international, multinational or
other administrative order, constitution, law (statutory or otherwise), treaty,
rule, regulation, ordinance or determination of any arbitrator or court or other
Governmental Authority, in each case applicable to or binding upon such Person
or any of its property or to which such Person or any of its property is
subject.
"SEC" - The Securities and Exchange Commission.
"SELLER" - MAAG Holding AG, a Swiss corporation, together with its
successors and assigns.
"SELLER ANCILLARY DOCUMENT" - Each other document or agreement executed or
to be executed by the Seller, the Company or the Subsidiaries, as the case may
be, in connection with or relating to this Agreement.
"SELLER'S COUNSEL" - Cadwalader, Wickersham & Taft, or such other counsel
as is designated by Seller.
"SHARES" - Seller's Class A Common Stock and Seller's Class B Common Stock,
which constitute all of the issued and outstanding shares of Class A Common
Stock and Class B Common Stock of the Company other than the Buyer's Class A
Common Stock.
"SUBORDINATED NOTE" - Defined in Section 9.12.
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"SUBSIDIARIES" - Defined in Section 4.1.
"SUBSIDIARY SHARES" - Defined in Section 4.3.
"SURVIVAL DATE" - Defined in Section 12.5.
"TAX OR TAXES" - Any and all taxes, fees, levies, duties, tariffs, imposts,
and other charges of any kind (together with any and all interest, penalties,
additions to tax and additional amounts imposed with respect thereto) imposed by
any government or taxing authority, including, without limitation: taxes or
other charges on or with respect to income, franchises, windfall or other
profits, gross receipts, property, sales, use, capital stock, payroll,
employment, social security, workers' compensation, unemployment compensation,
or net worth; taxes or other charges in the nature of excise, withholding, ad
valorem, stamp, transfer, value added, or gains taxes; license, registration and
documentation fees; and customs duties, tariffs, and similar charges.
"TAX RETURN OR TAX RETURNS" - Any report, return declaration or other
information, or any amendment thereof, required to be filed or supplied in
connection with any Tax.
"THIRD PARTY CLAIM" - Defined in Section 12.3.
"WARN" - Defined in Section 4.14(e).
"WORKING CAPITAL ADJUSTMENT AMOUNT" - The amount, if any, by which the
Minimum Working Capital Amount exceeds the Closing Working Capital Amount.
ARTICLE II PURCHASE AND SALE OF SHARES
2.1 PURCHASE AND SALE. The Seller hereby agrees to sell to the Buyer, and
the Buyer hereby agrees to buy from the Seller, at the Closing, all, and not
less than all, of the Shares, free and clear of all claims, liens, security
interests, charges, community property interests, equitable interests, options,
pledges, rights of first refusal or restrictions or encumbrances of any kind,
including any restrictions on use, transfer, voting, receipt of income or other
attribute of ownership, other than those created by the Buyer.
2.2 CONSIDERATION. The purchase price (the "Purchase Price") to be paid for
the Shares shall be (a) $65,000,000 (the "Aggregate Consideration"), minus (i)
the sum of (x) the principal amount of all Indebtedness of the Company and the
Subsidiaries (whether assumed by Buyer or paid by or on behalf of Seller), (y)
subject to Section 16.16, the EBITDA Shortfall Amount, if any, and (z) subject
to Section 16.16, the Working Capital Adjustment Amount, if any, multiplied by
(b) a fraction, the numerator of which shall be equal to the aggregate number of
Shares sold to the Buyer on the Closing Date and the denominator of which shall
be the aggregate number of all shares of Class A Common Stock and Class B Common
Stock on a fully-diluted basis. The Purchase Price shall be paid to Seller by
wire transfer of immediately available funds at the Closing. The Purchase Price
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shall be subject to adjustment after the Closing as set forth in Section 2.3
subject to Section 16.16.
2.3 FINAL STATEMENT OF WORKING CAPITAL; PURCHASE PRICE ADJUSTMENT. (a)
Within ninety days after the Closing Date, the Buyer shall deliver to the Seller
the Final Statement of Working Capital, prepared as described herein, and
reviewed by Arthur Andersen & Co. The Final Statement of Working Capital shall,
except as otherwise specifically provided in Schedule 2.3, be prepared in
conformity with the accounting principles utilized in determining the Minimum
Working Capital Amount and the Closing Working Capital Amount. The Seller and
its designated independent accounting firm, Deloitte & Touche, shall have the
right to be present to observe the taking of any physical inventory in
conjunction with the preparation of the Final Statement of Working Capital and
may review and examine the procedures, books, records and work papers used in
the preparation of the Final Statement of Working Capital.
(b) Unless the Seller, within sixty days after receipt of the Final
Statement of Working Capital, notifies the Buyer that it objects to the
computation of the Final Working Capital Amount specifying the basis for such
objection and its alternative computation of the Final Working Capital Amount,
the Final Working Capital Amount shall be binding upon the parties. The
computation of the Final Working Capital Amount shall not be disputed as to
accounting principles so long as the principles and procedures used to compute
Final Working Capital Amount are consistent with those described in Schedule
2.3. If the Buyer and the Seller are unable to agree upon the Final Working
Capital Amount within thirty days after any such notification has been given by
the Seller or within a mutually agreed to extended time period, the controversy
shall be referred to Ernst & Young for a final determination thereof which shall
make such determination based on the presentations of the Buyer and the Seller
and only with respect to the differences so submitted. Such determination shall
be binding upon the parties, absent manifest error, but shall not be for an
amount which is outside of the range of the Buyer's and Seller's disagreement.
The parties shall share equally the fees and expenses of Ernst & Young.
(c) (i) If the Closing Working Capital Amount and the Final Working Capital
Amount each exceed $9,215,000, then no adjustment shall be made to the Purchase
Price pursuant to this Section 2.3(c); (ii) if the Closing Working Capital
Amount and the Final Working Capital Amount are each less than $9,215,000, then
(x) if the Closing Working Capital Amount exceeds the Final Working Capital
Amount, then the Seller shall pay to the Buyer an amount equal to such excess,
or (y) if the Final Working Capital Amount exceeds the Closing Working Capital
Amount, then the Buyer shall pay to the Seller an amount equal to such excess;
(iii) if the Closing Working Capital Amount exceeds $9,215,000 and the Final
Working Capital Amount is less than $9,215,000, then the Seller shall pay to the
Buyer the amount by which $9,215,000 exceeds the Final Working Capital Amount;
and (iv) if $9,215,000 exceeds the Closing Working Capital Amount and the Final
Working Capital Amount exceeds $9,215,000, then the Buyer shall pay to the
Seller the amount by which $9,215,000 exceeds the Closing Working Capital
Amount. The Seller's obligation to pay to the Buyer any amounts pursuant to this
Section 2.3(c) shall not be
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subject to the limitations provided in Section 12.6 but shall be subject to the
limitation provided in Section 16.16.
(d) Any Purchase Price adjustment required under Section 2.3(c) shall be
delivered in accordance with the instructions of the appropriate recipient,
together with interest thereon for each day from and including the Closing Date
to, but excluding, the date of payment, at a rate per annum equal to the prime
rate of interest of Citibank, N.A. in effect on the Closing Date calculated over
a 365-day year, (i) within sixty-five (65) days after delivery of the Final
Statement of Working Capital; or (ii) if the Seller shall have objected to the
Final Statement of Working Capital, within five Business Days following final
determination of the disputed items pursuant to Section 2.3(b).
2.4 INDEMNITY ESCROW ACCOUNT. (a) At the Closing, the Buyer shall deposit
$2,000,000 (which may be in the form of an irrevocable, direct pay letter of
credit or similar bank guarantee (the "Indemnity Letter of Credit"), in either
case in form reasonably acceptable to the Buyer from a financial institution
reasonably acceptable to the Buyer issued to the Escrow Agent on behalf of the
Seller) into an escrow account with an escrow agent mutually acceptable to the
Buyer and the Seller (the "Indemnity Escrow Account"). Such amount or instrument
shall be held in and paid out of the Indemnity Escrow Account in accordance with
the terms hereof and the terms of an Indemnity Escrow Agreement to be entered
into among the Buyer, the Seller and the escrow agent (the "Escrow Agent"), in
form and substance mutually agreeable among such parties (the "Indemnity Escrow
Agreement").
(b) Pursuant to the terms hereof and of the Indemnity Escrow Agreement,
funds held in the Indemnity Escrow Account or drawn under the Indemnity Letter
of Credit shall be applied by the Escrow Agent to make cash payments to the
Buyer equal to the Indemnity Amounts. The "Indemnity Amounts" shall be those
amounts deemed to be due to the Buyer as indemnification pursuant to the
provisions of Section 12.1 hereof and, at the option of the Buyer, amounts in
respect of Employment Claims pursuant to Section 6.12. The Escrow Agent shall
promptly pay the Indemnity Amounts out of the Indemnity Escrow Account to the
Buyer in accordance with Section 12.1 hereof and the Indemnity Escrow Agreement.
The aggregate Indemnity Amounts payable pursuant to Section 12.1 hereof may
exceed the amount of cash deposited by the Buyer on behalf of the Seller in the
Indemnity Escrow Account or the face amount of the Indemnity Letter of Credit
deposited therein, as the case may be.
(c) If the Seller deposited cash in the Indemnity Escrow Account at the
Closing, the Escrow Agent shall pay promptly to the Seller in immediately
available funds (i) on the sixth-month anniversary of the Closing Date, one-half
of the aggregate amount remaining in the Indemnity Escrow Account on such date
and not subject to any claim for Indemnity Amounts, and (ii) on the Survival
Date, the aggregate amount remaining in the Indemnity Escrow Account on such
date and not subject to any claim for Indemnity Amounts. If the Seller deposited
the Indemnity Letter of Credit in the Indemnity Escrow Account at the Closing,
the face amount of the Indemnity Letter of Credit shall be reduced in a
corresponding manner pursuant to the terms of the Indemnity Escrow Agreement.
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(d) In the event claims to Indemnity Amounts shall have been made on or
prior to the Survival Date pursuant to Section 12.1, and such claims shall not
be resolved or paid as of such date, an amount (the "Indemnity Fund") equal to
such unresolved or unpaid claims (or an Indemnity Letter of Credit with a face
value equal to such amount) shall be held by the Escrow Agent in escrow, and
funds therefrom not distributed, until following the date of resolution or
payment to the Buyer of such claims, together with interest thereon (the
"Indemnity Fund Date"). Promptly after the Indemnity Fund Date, the Escrow Agent
shall pay promptly to the Seller in immediately available funds the aggregate
amount remaining in the Indemnity Fund or return the Indemnity Letter of Credit.
(e) The Escrow Agent shall retain in the Indemnity Escrow Account all
income earned, if any, by the Indemnity Escrow Account pursuant to the Indemnity
Escrow Agreement.
(f) The Escrow Agent shall pay out of the Indemnity Escrow Account all fees
and expenses associated with the Indemnity Escrow Account, as provided in the
Indemnity Escrow Agreement, including, without limitation, its own reasonable
fees and expenses.
ARTICLE III REPRESENTATIONS AND WARRANTIES
CONCERNING SELLER
The Seller represents and warrants to the Buyer as follows:
3.1 ORGANIZATION AND GOOD STANDING. The Seller is a stock corporation duly
organized, validly existing and in good standing under the laws of its
jurisdiction of organization, and has all requisite power and authority to own,
operate and lease its properties and assets and to conduct its business as
presently conducted. The Seller is duly licensed or qualified as a foreign
corporation for the transaction of business and is in good standing under the
laws of each other jurisdiction in which it owns or leases properties, or
conducts any business, so as to require such qualification, or is subject to no
Material Adverse Effect by reason of the failure to be so licensed or qualified
in any such jurisdiction. True, complete and correct copies of the Seller's
constituent documents, as amended to date, have been furnished to the Buyer. No
bankruptcy or conciliation proceedings have been initiated in respect to the
Seller.
3.2 AUTHORITY OF SELLER. The Seller has all requisite power and authority
to execute and deliver this Agreement and any Seller Ancillary Document, and to
perform the transactions contemplated hereby and thereby. The execution,
delivery and performance of this Agreement and any Seller Ancillary Document
have been duly and validly authorized by all necessary corporate and shareholder
action on the part of the Seller and no further such action is required on the
part of the Seller or its shareholders. This Agreement has been, and each of the
Seller Ancillary Documents will be, on or prior to the Closing Date, duly
executed and delivered by the Seller and each constitutes or will constitute a
valid and binding obligation of the Seller, enforceable in accordance with its
respective terms, except
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that enforceability hereof or thereof may be limited by bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium or other similar laws
affecting creditors' rights generally, general equitable principles (whether
considered in a proceeding in equity or at law) and an implied covenant of good
faith and fair dealing.
3.3 NO CONFLICT OR BREACH. The execution, delivery and performance of
this Agreement and each of the Seller Ancillary Documents do not and will not:
(a) conflict with or constitute a violation of the Articles of
Association of the Seller;
(b) assuming compliance with the requirements of the HSR Act, conflict
with or constitute a violation of any law, statute, judgment, order, decree
or regulation of any legislative body, court, administrative agency,
Governmental Authority or arbitrator applicable to or relating to the
Seller or its properties or assets; or
(c) conflict with, violate or result in a breach of, or constitute a
default (or an event which, with notice or lapse of time or both would
constitute a default) under, or result in the termination of or accelerate
the performance required by, or result in a right of termination or
acceleration under, any mortgage, note, indenture, deed of trust, lease,
loan agreement or other agreement or instrument applicable to the Seller or
its properties or assets, except for conflicts, violations, breaches or
defaults which, individually or in the aggregate, could not reasonably be
expected to have a Material Adverse Effect.
3.4 CONSENTS AND APPROVALS. Except as set forth on Schedule 3.4, no
(a) consent, approval, authorization, registration or filing with any federal,
state or local judicial or Governmental Authority or administrative agency,
other than as required under the HSR Act or (b) consent, approval, authorization
of or notice to any other third party, is required in connection with the valid
execution, delivery and performance by the Seller of this Agreement or any of
the Seller Ancillary Documents or the consummation by the Seller of the
transactions contemplated herein or therein.
3.5 SHARE OWNERSHIP. The Seller is the owner, beneficially and of
record, of the Shares. At the Closing, the Seller will deliver or cause to be
delivered to the Buyer full right, title and interest in and to the Shares, free
and clear of all claims, liens, security interests, charges, community property
interests, equitable interests, options, pledges, rights of first refusal or
encumbrances of any kind, including any restrictions on use, transfer, voting,
receipt of income or other attribute of ownership. Except as set forth on
Schedule 3.5, the Seller is not a party to any option, warrant, right, contract,
call, put, right to subscribe, conversion right or other agreement, commitment
or right of any kind providing for the issuance, disposition, acquisition or
voting of any of the capital stock of the Company, including the Shares (other
than as set forth in this Agreement) or gives rise to any right in connection
with the issuance, disposition, acquisition or voting of any of the Shares or
other equity or similar interest in the Company.
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3.6 FINANCIAL ADVISORS. Except for Europeans Investors Corporate
Finance, Inc. and Botts & Company Limited, for whose fees the Seller shall be
solely responsible, the Seller has not retained any finder, broker, agent or
other intermediary to act for it or on its behalf in connection with the
negotiation or consummation of this Agreement, and no party has made any claim
for any brokerage commission, finder's fee or similar payment due from the
Seller. None of the Company or any Subsidiary nor any of their respective
officers, directors, employees or agents has employed any broker, finder or
investment banker or incurred any liability for any brokerage fees, commissions,
finders' fees or investment banking fees in connection with the transactions
contemplated hereby.
ARTICLE IV REPRESENTATIONS AND WARRANTIES
CONCERNING THE COMPANY AND SUBSIDIARIES
The Seller represents and warrants to the Buyer as follows:
4.1 ORGANIZATION AND GOOD STANDING. The Company and ICM/Krebsoge are
each corporations duly organized, validly existing and in good standing under
the laws of the State of Delaware and ICM/K Canada is a corporation duly
organized, validly existing and in good standing under the laws of the province
of Ontario. ICM/Krebsoge and ICM/K Canada are sometimes referred to herein
collectively as "Subsidiaries" and individually as a "Subsidiary." The Company
and each Subsidiary is duly qualified to do business as a foreign corporation
and is in good standing in respect of each jurisdiction where the failure to do
so would have a Material Adverse Effect. The Company and each Subsidiary have
all requisite corporate power and authority and governmental authorizations to
own, operate and lease its properties and assets and to carry on its respective
business as presently conducted. The Company and each Subsidiary have all
corporate power and authority to consummate the transactions contemplated by
this Agreement and any Seller Ancillary Document. Complete and correct copies of
the Company and each of the Subsidiaries' constituent documents and governing
instruments, each as amended to date, have been furnished to the Buyer.
4.2 CAPITALIZATION. The authorized capital stock of the Company
consists of: (i) 200,000 shares of Class A Common Stock, par value $.01 per
share, (ii) 100,000 shares of Class B Common Stock, par value $.01 per share,
and (iii) 50,000 shares of 8% Cumulative Preferred Stock, par value $.01 per
share. There are 10,000 shares of Class A Common Stock and 6,434 shares of Class
B Common Stock currently issued and outstanding and all of such shares have been
validly issued and are fully paid and nonassessable. Except as set forth on
Schedule 3.5, there are no outstanding or authorized options, warrants, rights,
contracts, calls, puts, rights to subscribe, conversion rights or other
agreements, commitments or rights of any kind to which the Company or the Seller
is a party or which are binding upon the Company providing for the issuance,
disposition, acquisition or voting of any of its stated capital or other equity
or similar interest of the Company (other than this Agreement), or giving rise
to any rights in connection with the issuance, disposition, acquisition or
voting of any of the Shares. Except as set forth on Schedule 3.5, there are no
voting trusts, proxies or any other agreements or understandings with respect to
the
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voting of any capital stock of the Company or any Subsidiary. Except as set
forth on Schedule 3.5, neither the Company nor any subsidiary is subject to any
obligation (contingent or otherwise) to repurchase or otherwise acquire or
retire any of its stated capital.
4.3 SUBSIDIARIES. (a) The Subsidiaries are the only entities in which
the Company owns, directly or indirectly, any capital stock or other equity
interest. The authorized capital stock of ICM/K consists of 2,000 shares of
common stock, par value $1.00 per share, and all 2,000 of such shares are issued
and outstanding. The authorized capital stock of ICM/K Canada consists of an
unlimited number of common shares without par value and 100 of such shares are
issued and outstanding. (The issued and outstanding shares of ICM/K and ICM/K
Canada are referred to herein, collectively, as the "Subsidiary Shares").
(b) The Company is the owner, beneficially and of record, of all of
the Subsidiary Shares, free and clear of all liens, security interests, charges,
community property interests, equitable interests, options, pledges, rights of
first refusal or restrictions or encumbrances of any kind, including any
restrictions on use, transfer, voting, receipt of income or other attribute of
ownership (other than liens that will be released at Closing and liens related
to Indebtedness assumed by the Buyer). All of the Subsidiary Shares have been
validly issued and are fully paid and nonassessable. There are no outstanding or
authorized options, warrants, rights, contracts, calls, puts, rights to
subscribe, conversion rights or other agreements, commitments or rights of any
kind to which any Subsidiary, the Seller or the Company is a party or which are
binding upon any Subsidiary providing for the issuance, disposition or
acquisition or voting of any of its capital stock, or giving rise to any right
in connection with the issuance, disposition, acquisition or voting of any of
the Subsidiary Shares. There are no voting trusts, proxies or any other
agreements or understandings with respect to the voting of the capital stock of
any Subsidiary. No Subsidiary is subject to any obligation (contingent or
otherwise) to repurchase or otherwise acquire or retire any of its capital
stock.
4.4 NO CONFLICT OR BREACH. Except as set forth on Schedule 4.4, the
execution, delivery and performance of this Agreement or the Seller Ancillary
Documents by the Seller or the performance of this Agreement or any Seller
Ancillary Document by the Company or any Subsidiary does not and will not:
(a) conflict with or constitute a violation of the Certificate of
Incorporation or By-laws or other constituent document or governing
instrument of the Company or any Subsidiary;
(b) assuming compliance with the requirements of the HSR Act, conflict
with or constitute a violation of any Requirement of Law applicable to or
relating to the Company or any Subsidiary in any manner that would have a
Material Adverse Effect; or
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(c) conflict with, constitute a default under, result in a breach or
acceleration of or, give to others any interest or rights under or require
notice to or the consent of any third party under any contract, agreement,
commitment, mortgage, note, license or other instrument or obligation
applicable to the Company or any Subsidiary or their respective properties
or assets, or any subsidy or incentive provided to the Company or any
Subsidiary by any federal, state, provincial or local judicial or
Governmental Authority or administrative agency.
4.5 CONSENTS AND APPROVALS. Schedule 4.5 describes each of the
following which is required on the part of the Company or the Subsidiaries in
connection with the execution and delivery by the Seller of this Agreement or
any Seller Ancillary Document or the consummation by it or the Company or any
Subsidiary of the transactions contemplated herein or therein: (a) each consent,
approval, authorization, registration, permit, notice or filing with any
federal, state or local judicial or Governmental Authority or administrative
agency, other than as required under the HSR Act and (b) each consent,
approval, authorization of or notice to any other third party, except with
respect to clause (a) or (b) above, such consents, approvals, authorizations and
notices the failure of which to obtain or give would not have a Material Adverse
Effect. The consents described on Schedule 4.5 together with the consents
described on Schedule 3.4 shall be referred to herein, collectively, as the
"Required Consents."
4.6 FINANCIAL STATEMENTS. The Buyer has received copies of (a) the
audited consolidated financial statements of the Company and its Subsidiaries
for the fiscal years ended December 31, 1994 and December 31,1995 and (b)
unaudited interim consolidated financial statements of the Company and its
Subsidiaries for the period ended on the Balance Sheet Date. The financial
statements referred to in the previous sentence are sometimes referred to as the
"Financial Statements." The Financial Statements have been prepared in
accordance with GAAP consistently applied, from books and records which are
maintained in accordance with the controls and procedures of the Company and its
Subsidiaries with the exceptions that such interim statements do not contain the
disclosures required by GAAP in notes accompanying financial statements, and are
subject to normal year-end adjustments (the effect of which will not
individually or in the aggregate, be materially adverse). Except as noted
therein, the Financial Statements fairly present the financial condition and
results of operation of the Company and its Subsidiaries, taken as a whole, as
of the dates and for the periods indicated.
4.7 TITLE TO ASSETS. The Company and each Subsidiary has good and
marketable title to all of its Owned Real Property. Set forth on Schedule 4.8(a)
is a list of all Owned Real Property having a value in excess of $50,000. The
Company has good title to all tangible personal property owned by the Company
and each Subsidiary and used in or necessary to the operation of the business of
the Company and each Subsidiary (collectively, the "Tangible Personal
Property"). Set forth on Schedule 4.7 is a list of all Tangible Personal
Property owned by the Company or a Subsidiary having a value in excess of
$50,000. All such Owned Real Property and Tangible Personal Property are owned
by the Company free and clear of any liens, charges, equitable interests,
options, rights of first
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refusal, encumbrances, claims, security interests, mortgages or pledges of any
nature, other than:
(a) liens arising as a consequence of any Indebtedness which liens are
identified on Schedule 4.7;
(b) easements that could not be reasonably expected to materially
adversely affect the full use and enjoyment of the Owned Real Property or
the purposes for which it is currently used and/or materially detract from
its value;
(c) imperfections of title and encumbrances, if any, which, in the
aggregate, are not material to the Company or any Subsidiary, do not
materially detract from the marketability or value of the properties
subject thereto, and could not be reasonably expected to materially impair
the operations of the owner thereof; and
(d) liens for taxes not yet due and payable.
4.8 REAL PROPERTY.
(a) OWNED. Schedule 4.8(a) contains a description of all Owned Real
Property having a value in excess of $50,000. True, correct and complete
copies of (i) deeds, insurance policies and surveys related to the Owned
Real Property and (ii) all documents evidencing any liens, charges,
equitable interests, options, rights of first refusal, encumbrances,
claims, security interests, mortgages or pledges of any nature upon the
Owned Real Property shall have been delivered to the Buyer prior to the
Closing. None of the liens, charges, equitable interests, options, rights
of first refusal, encumbrances, claims, security interests, mortgages or
pledges of any nature upon the Owned Real Property secure obligations other
than those of the Company or a Subsidiary. There are no liens, charges,
equitable interests, options, rights of first refusal, encumbrances,
claims, security interests, mortgages or pledges of any nature upon the
Owned Real Property which are not registered in the applicable land
register. None of the Seller or the Company or any Subsidiary has received
any notice of any appropriation, condemnation or like proceeding, or of any
violation of any applicable zoning law, regulation or other law, order,
regulation or requirement relating to or affecting any Owned Real Property.
To the best knowledge of the Seller, there are no material physical,
structural or mechanical defects in any improvements on any of the Owned
Real Property.
(b) LEASED. Schedule 4.8(b) contains a description of all Real
Property Leases to which the Company or any Subsidiary is a party (the
"Real Property Leases"). Each of the Real Property Leases is valid, binding
and enforceable in accordance with its terms (except that enforceability
thereof may be limited by bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium or other similar laws affecting creditors'
rights generally, general equitable principles (whether considered in a
proceeding in equity or at law) and an implied covenant of good faith and
fair dealing) and is in full force and effect and there have been no
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breaches or defaults thereunder. None of the Seller or the Company or any
Subsidiary have received any notice of any appropriation, condemnation or
like proceeding, or of any violation of any applicable zoning law,
regulation or other law, order, regulation or requirement relating to or
affecting any Leased Real Property. To the best knowledge of the Seller,
there are no material physical, structural or mechanical defects in any
material improvements on any of Leased Real Property. Except as disclosed
on Schedule 4.8(b), none of the sale of the Shares the execution, delivery
or performance of this Agreement or any Seller Ancillary Document or the
consummation of the transactions contemplated herein or therein will, with
respect to any such Real Property Lease, (i) permit the landlord to
accelerate the rent or cause any material lease terms to be renegotiated,
(ii) constitute a material default thereunder, or (iii) require notice on
the consent of the landlord or any third party, except for the Required
Consents.
4.9 CONTRACTS. Schedule 4.9 lists all Material Contracts. Each of the
Material Contracts is valid, binding and enforceable against the Company or the
Subsidiary party thereto in accordance with its terms (except that
enforceability thereof may be limited by bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium or other similar laws affecting
creditors' rights generally, general equitable principles (whether considered in
a proceeding in equity or at law) and an implied covenant of good faith and fair
dealing) and is in full force and effect and there have been no breaches or
defaults thereunder. Except as disclosed on Schedule 4.9, none of the sale of
the Shares, the execution, delivery or performance of this Agreement or any
Seller Ancillary Document or the consummation of the transactions contemplated
herein or therein will, with respect to any Material Contract, (i) constitute a
default thereunder, (ii) require notice to or the consent of any person or
party, except for the Required Consents, or (iii) affect the continuation,
validity and effectiveness thereof or the terms thereof, except for such
defaults, consents and effects as do not and will not in the aggregate have a
Material Adverse Effect.
4.10 INTELLECTUAL PROPERTY. The Intellectual Property comprises all of
the intellectual property rights necessary for the operation of the business of
the Company and each Subsidiary as currently conducted or as currently proposed
to be conducted. Schedule 4.10 sets forth a complete and correct list of all:
(i) patented or registered Intellectual Property or for which applications or
other applications for such registrations are pending; and (ii) all licenses or
similar agreements or arrangements for the Intellectual Property to which the
Company or any Subsidiary is a party, either as licensee or licensor (including
any intracompany licensing arrangements). Except as set forth in Schedule 4.10:
(i) either the Company or a Subsidiary owns and possesses all right, title and
interest in and to, or has a valid and enforceable license to use, the
Intellectual Property necessary for the operation of its business as currently
conducted or as currently proposed to be conducted free and clear of all liens,
licenses, security interests, encumbrances and other restrictions; (ii) no claim
by any third party contesting the validity, enforceability, use or ownership of
any of the Intellectual Property has been made, is currently outstanding or to
the best knowledge of Seller, is threatened; (iii) neither the Company nor any
Subsidiary has received any notices of any infringement or misappropriation by,
or conflict with, any third party with respect to the Intellectual Property
(including, without limitation, any demand or request
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that the Company or any Subsidiary license any rights from a third party); and
(iv) to the best knowledge of the Seller, neither the Company nor any Subsidiary
has infringed, misappropriated or otherwise conflicted with any intellectual
property rights or other rights of any third parties.
4.11 LITIGATION. Except as set forth in Schedule 4.11, there are no
claims, actions, suits, inquiries, hearings or investigations pending or, to the
best knowledge of Seller, threatened or contemplated against the Company or any
Subsidiary, or which seek to restrain or enjoin the consummation of the
transactions contemplated by this Agreement or any of the Seller Ancillary
Documents.
4.12 TAXES.
(a) The Company and each Subsidiary has paid and discharged, or has
reserved on the Financial Statements or its books and records, all Taxes
required to be paid and currently due as of the Closing Date in respect of
the business and operations of the Company and the Subsidiaries, and the
Company and each Subsidiary has filed all Tax Returns required in
connection therewith to be filed. Neither the Company nor any Subsidiary
has executed or filed with the Internal Revenue Service or any other taxing
authority, domestic or foreign, any extension or agreement extending the
period for the assessment or collection of any Taxes, except for permitted
statutory extensions. Neither the Company nor any Subsidiary is a party to
any pending action or proceeding and neither the Company nor any Subsidiary
has received written notice of any audit or review of any Tax Return or
report of the Company or any Subsidiary which would result in the
imposition of any Tax upon the Company or any Subsidiary. No election under
Section 341(f) of the Code is in effect with respect to any of the assets
of the Company or any Subsidiary. The Seller is a "foreign person" within
the meaning of Section 1445 of the Code.
(b) Schedule 4.12 sets forth the taxable years of Company and each
Subsidiary as to which the respective statutes of limitations with respect
to Taxes have not expired.
4.13 ENVIRONMENTAL PROTECTION.
(a) Except as set forth on Schedule 4.13, neither of the Company nor
any Subsidiary has received any notice of violation, alleged violation,
noncompliance, liability or potential liability regarding environmental
matters or compliance with Environmental Laws. To the Seller's knowledge,
neither the Company nor any Subsidiary is subject to any ongoing
investigation relating to or arising out of any environmental matter.
(b) Except as set forth on Schedule 4.13, to the knowledge of the
Seller, neither the Company nor any Subsidiary has transported or arranged
for the transport of any Hazardous Materials (i) to any site or location
listed or proposed to be listed on the National Priorities List as of
September 1, 1996 or any other
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similar state list; or (ii) to a location which could reasonably be
expected to give rise to liability under Environmental Laws.
(c) Except as set forth on Schedule 4.13, there is no condition
relative to the Company or any Subsidiary or their respective operations or
owned or used properties, including, but not limited to, any contractual
relationships, that could reasonably be expected to result in any material
violation of, or liability under, applicable Environmental Laws or
Environmental Permits (as defined below) or, to the knowledge of the
Seller, could interfere with continued material compliance with applicable
Environmental Laws in the future.
(d) Each of the Company and the Subsidiaries has obtained, or has
filed, all required applications for, all permits, licenses, registrations,
consents and other authorizations required under any Environmental Law
through the date hereof with respect to the operation of the Company and
the Subsidiaries ("Environmental Permits"), except where the failure to
have such permits or to file such applications does not have a Material
Adverse Effect, and all such Environmental Permits are, and have
continuously been, in full force and effect.
(e) Except as set forth on Schedule 4.13, to the knowledge of the
Seller, no above or below ground storage tanks have ever been used for the
storage of Hazardous Materials on or at (i) the Owned Real Property; (ii)
the Leased Real Property; or (iii) any previously owned or leased real
property of the Company or any Subsidiary or former Subsidiary.
(f) Except as set forth on Schedule 4.13, to the knowledge of the
Seller, there has never been a release (as defined in CERCLA) of Hazardous
Materials at, on, under, or from any of the Owned Real Property or Leased
Real Property, or any previously owned or leased real property of the
Company or any Subsidiary.
4.14 LABOR AND EMPLOYMENT MATTERS. With respect to employment matters:
(a) After the execution of this Agreement, the amendment or
termination by the Company or any Subsidiary of any existing employment
agreement with any of their respective officers, directors or employees
will require the express written approval of the Buyer except in the
ordinary course of business consistent with past practice.
(b) Except as disclosed on Schedule 4.14, no employees of the Company
or any Subsidiary are currently represented by a union or other labor
organization or covered by any collective bargaining agreement.
(c) There is no labor strike, dispute, slowdown, stoppage or similar
labor difficulty pending or, to the best of the Seller's knowledge,
threatened against or affecting the Company or any Subsidiary.
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(d) There is no unfair labor practice charge or other complaint
pending or, to the best knowledge of the Seller, threatened against or
otherwise affecting the Company or any Subsidiary.
(e) The Company and Subsidiaries are in compliance with their
obligations pursuant to Worker Adjustment and Retraining Notification Act
of 1988, as amended ("WARN") and all other notification and bargaining
obligations arising under any collective bargaining agreement, statute or
otherwise, respecting their employees.
4.15 EMPLOYEE BENEFIT PLANS. Schedule 4.15 contains a description of
all Plans contributed to, maintained or sponsored by the Company or any
Subsidiary to which any of them are obligated to contribute, or with respect to
which any of them has any liability or potential liability.
(a) Except as disclosed in Schedule 4.15, neither the Company nor any
Subsidiaries contributes to, has any obligation to contribute to or
otherwise has any liability or potential liability with respect to (i) any
Multiemployer Plan (as such term is defined in Section 3(37) of ERISA),
(ii) any Plan of the type described in Sections 4063 and 4064 of ERISA or
in Section 413(c) of the Code, or (and regulations promulgated thereunder),
(iii) any plan which provides health, life insurance, accident or other
"welfare-type" benefits to current or future retirees or current or former
employees, their spouses or dependents, other than in accordance with
Section 4980B of the Code or applicable state continuation coverage law. No
"accumulated funding deficiency" (as such term is used in Section 412 or
4971 of the Code) has occurred with respect to any Plan. No termination has
occurred that remains unsatisfied with respect to any Plan which is not a
Multiemployer Plan but is subject to Title IV of ERISA. With respect to any
Multiemployer Plan to which the Company or any Subsidiary contributes or is
obligated to contribute, neither the Company nor any Subsidiary has had a
complete or partial withdrawal from any such Multiemployer Plan, and
neither the Company nor any Subsidiary would become subject to any
liability under ERISA which would have a Material Adverse Effect if the
Company or any Subsidiary were to withdraw completely from all
Multiemployer Plans as of the valuation date most closely preceding the
date hereof.
(b) Each Plan has been maintained, operated, and administered in
compliance with its terms and any related documents or agreements and in
compliance with all applicable laws, including the Code and ERISA. Each
Plan intended to qualify under Section 401(a) of the Code is so qualified
and each trust maintained in connection with each such plan is tax exempt
under Section 501(a) of the Code, and the Internal Revenue Service has
issued favorable determination letters with respect to each such Plan and
related trust and has not taken any action to revoke such letter.
(c) The Seller has previously delivered to the Buyer true, complete
and correct copies of each of the Plans, including all amendments thereto,
and any other
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documents, forms or other instruments relating thereto reasonably requested
by Buyer's counsel.
(d) Except for routine claims for benefits, there is no pending or
threatened assessment, complaint, proceeding, audit or investigation of any
kind in any court or government agency with respect to any Plan, nor is
there any basis for one.
(e) With respect to any insurance policy providing funding for
benefits under any Plan, (i) there is no liability of the Company or any
Subsidiary in the nature of a retroactive or retrospective rate adjustment,
loss sharing arrangement, or other actual or contingent liability, nor
would there be any such liability if such insurance policy were terminated
on the date hereof, and (ii) no insurance company issuing such policy is in
receivership, conservatorship, liquidation, or similar proceeding and, to
the best of the Seller's knowledge, no such proceedings with respect to any
insurer are imminent.
(f) The Company and the Subsidiaries have reserved all rights
necessary to amend or terminate each of the Plans without the consent of
any other Person, except (i) to the extent such rights are limited by any
applicable collective bargaining agreement or law, and (ii) with respect to
claims under any such Plan that are accrued but unpaid as of the date of
such amendment or termination. Neither the Company nor any Subsidiary has
agreed or committed to make any amendments to any of the Plans.
(g) Except as disclosed in Schedule 4.15, neither the Company nor any
Subsidiary maintains any plans or programs or is a party to any agreement
that could result in the payment of severance pay or similar compensation
prior to the Closing, at the time of the Closing or during the one-year
period commencing on the Closing Date. Except as contemplated by Section
6.12, aggregate payments under any such plan, program, or arrangement
during the one-year period commencing on the Closing Date shall not exceed
$100,000 in the aggregate.
4.16 ABSENCE OF CERTAIN CHANGES. Except as described in Schedule 4.16,
since the Balance Sheet Date, the operations of the Company and the Subsidiaries
have been conducted only in the ordinary course and in a manner consistent with
past practice, and the Company and the Subsidiaries have not:
(a) suffered any uninsured damage, destruction, theft or loss to any
asset of the Company or any Subsidiary of a value in excess of $50,000 in
the aggregate;
(b) sold, transferred, distributed or otherwise disposed of any assets
used in the operation of business of the Company or any Subsidiary, or
returned to any customers or otherwise disposed of, any tooling owned by
such customer and in the possession of the Company or any Subsidiary,
except for (i) assets consumed or disposed of in the ordinary course of
business; (ii) assets disposed of in connection
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with the acquisition of replacement property of equivalent kind and value;
or (iii) assets that were returned in the ordinary course of business or
that are no longer used or useful in the business or operations of the
Company or the Subsidiaries;
(c) made, authorized, entered into, or permitted to go into effect any
general wage or salary increase for its employees, other than in the
ordinary course of business consistent with past practice;
(d) amended or terminated, or authorized the amendment or termination
of, any Material Contract or Real Property Lease, other than in the
ordinary course of business consistent with past practice;
(e) incurred any material obligation or liability except normal trade
or business obligations incurred in the ordinary course of business
consistent with past practice and except for expenses relating to
transactions contemplated hereby not to exceed $200,000;
(f) experienced or learned of any change or event which could
reasonably be expected to have a Material Adverse Effect; or
(g) agreed or committed, whether in writing or otherwise, to take any
described in this Section.
4.17 INSURANCE. The insurable properties owned or leased by the
Company or any Subsidiary are, and until the Closing Date will be, adequately
insured by financially sound and reputable insurers at levels of coverage
reasonable and customary in the powder metal industry. All such policies are in
full force and effect and will continue to be in full force and effect upon the
consummation of the transactions contemplated herein and by the Seller Ancillary
Documents. Buyer has been provided with true, correct and complete copies of all
insurance policies relating to or affecting the Owned Real Property, Real
Property Leases or any Material Contract.
4.18 CAPITAL PROJECTS. Schedule 4.18 sets forth each unfinished
capital project with a total cost in excess of $50,000 relating to the business
of each of the Company and the Subsidiaries, the Company's reasonable estimate
of the capital expenditures that will be required subsequent to the Closing Date
to complete such projects and the expected date of completion of such projects.
4.19 CONDITION OF PROPERTIES AND EQUIPMENT. Except for equipment not
currently used in the operation of the business of the Company or Subsidiaries
and except for equipment set forth in Schedule 4.19, the assets and equipment of
each of the Company and the Subsidiaries required for the normal operation of
their respective businesses are in good condition, normal wear and tear
excepted.
4.20 NO UNDISCLOSED LIABILITIES. Each of the Company and the
Subsidiaries has no liabilities or obligations of any nature (absolute, accrued,
contingent or otherwise)
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that are not fully reflected or reserved against in the Financial Statements,
except for liabilities that may have arisen in the ordinary and usual course of
business and consistent with past practice or which are disclosed on Schedule
4.20.
4.21 ENTIRETY OF BUSINESS. The Company and Subsidiaries and the Owned
Real Property, Tangible Personal Property, Leased Real Property and Intellectual
Property constitute all of the companies, businesses, rights, assets and
arrangements necessary to conduct the business of each of the Company and
Subsidiaries as presently conducted, and there are no other companies,
businesses, assets, rights or arrangements necessary to conduct the business of
the Company and the Subsidiaries as presently conducted.
4.22 COMPLIANCE WITH LAWS. Except as set forth in Schedule 4.22, each
of the Company and the Subsidiaries (a) is in material compliance with all laws,
regulations, reporting and licensing requirements and orders applicable to its
business or employees conducting its business, the breach or violation of which
could reasonably be expected to have a Material Adverse Effect; and (b) has
received no notification or communication from any Governmental Authority (i)
asserting that the Company or any Subsidiary is not in compliance with any of
the statutes, treaties, regulations or ordinances that such Governmental
Authority enforces, which noncompliance could reasonably be expected to have a
Material Adverse Effect or (ii) threatening to revoke any license, franchise,
permit or authorization of any Governmental Authority which would have a
Material Adverse Effect.
4.23 COMPLETENESS OF WARRANTIES. To the Seller's best knowledge, the
representations made by the Seller on behalf of itself or the Company or the
Subsidiaries in this Agreement (including the Schedules and Exhibits hereto) and
other materials provided to the Buyer by the Seller or the Company as set forth
on Schedule 4.23 do not contain any untrue statement of a material fact or omit
any material fact necessary to make the statements herein or therein, in light
of the circumstances under which they were made, not misleading.
4.24 INVENTORY. All of the finished goods inventory of the Company and
the Subsidiaries will at the Closing consist of goods useable or saleable in the
ordinary course of the business of the Company and the Subsidiaries except for
such amount of inventory that can be reasonably expected to be written off in
the ordinary course of their business determined by reference to past practice.
The Company and the Subsidiaries currently have and on the Closing Date will
have, inventory and work-in-progress in an amount which is not in excess of the
amount that can reasonably be expected to be sold in the ordinary course of
their business determined by reference to past practice except for such amount
of inventory that can be reasonably expected to be written off in the ordinary
course of their business determined by reference to past practice.
4.25 RECEIVABLES. All receivables of the Company and the Subsidiaries
which are reflected on the balance sheet of the Company on July 31, 1996 and
which are reflected on the books of the Company and the Subsidiaries as of the
Closing Date represent actual, bona fide obligations owing to the Company or the
Subsidiaries in the
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ordinary course of business and are carried at their net realizable value. At
the Closing, such receivables will be free and clear of any liens, charges,
equitable interests, options, rights of first refusal, encumbrances, claims,
security interests, mortgages or pledges of any nature. No reserve allowance in
excess of the recorded reserve is required to be established in accordance with
GAAP with respect to such receivables which are reflected on the balance sheet
of the Company on July 31, 1996 and as of the Closing Date, and no allowance
will be required to be established in accordance with GAAP with respect to such
receivables which will be reflected on the books of the Company and the
Subsidiaries as of the Closing Date. None of such receivables are, or on the
Closing Date will be, past due for a period of more than 90 days.
4.26 CUSTOMERS AND SUPPLIERS. Schedule 4.26 contains a complete and
correct list of (a) the 10 largest customers of and the 10 largest suppliers to
the Company and the Subsidiaries in the aggregate, and any sole-source suppliers
of significant goods or services to the Company and the Subsidiaries with
respect to which alternative sources of supply are not readily available on
comparable terms and conditions, in each case, during the 8-month period ended
August 31, 1996, setting forth the sales by or to the Company and the
Subsidiaries for each such customer or supplier during such period. The Company
has not received written or oral notice that any such customer or supplier will
or may substantially reduce the extent of such relationship, at any time prior
to or after the Closing Date. Neither the Seller nor the Company or any
Subsidiary has received written or oral notice of (a) any other existing or
contemplated material modification or change in the business relationship of the
Company and the Subsidiaries with such customers or suppliers, or (b) any
existing condition or state of facts or circumstances, in either case which has
materially adversely affected, or will materially adversely affect, any such
business relationship with any such customer or supplier.
4.27 INDEBTEDNESS. Schedule 4.27 contains a complete and correct
description of all Indebtedness, including name of creditor, amount outstanding
on the Balance Sheet Date and amortization and repayment schedule.
ARTICLE V REPRESENTATIONS AND WARRANTIES OF BUYER
The Buyer represents and warrants to the Seller as follows:
5.1 ORGANIZATION AND GOOD STANDING. The Buyer is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware.
5.2 AUTHORITY. The Buyer has all requisite power and authority to
execute and deliver this Agreement and to perform the transactions contemplated
hereby. The execution, delivery and performance of this Agreement have been duly
and validly authorized by all necessary corporate and shareholder action on the
part of the Buyer. This Agreement has been duly executed and delivered by the
Buyer and constitutes a valid and binding obligation of the Buyer, enforceable
against the Buyer in accordance with its terms, except that enforceability
thereof may be limited by bankruptcy, insolvency, fraudulent
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conveyance, reorganization, moratorium or other similar laws affecting
creditors' rights generally, general equitable principles (whether considered in
a proceeding in equity or at law) and an implied covenant of good faith and fair
dealing or other applicable law or other similar laws affecting creditors'
rights generally and by principles of equity regarding the availability of
remedies.
5.3 NO CONFLICT OR BREACH. Except as provided on Schedule 5.3, the
execution, delivery and performance of this Agreement does not and will not:
(a) conflict with or constitute a violation of the Certificate of
Incorporation or Bylaws or other governing instrument of the Buyer;
(b) assuming compliance with the requirements of the HSR Act, conflict
with or constitute a violation of any Requirement of Law applicable to or
relating to Buyer in any manner that would have a Material Adverse Effect;
or
(c) conflict with, constitute a default under, result in a breach or
acceleration of or require notice to or the consent of any third party
under any contract, agreement, commitment, mortgage, note, license or other
instrument or obligation to which Buyer is party or by which it is bound,
in any manner that would have a Material Adverse Effect.
5.4 CONSENTS AND APPROVALS. Except as set forth on Schedule 5.4, no
(a) consent, approval, authorization, permit, notice, registration or filing
with any federal, state or local judicial or Governmental Authority or
administrative agency, other than as required under the HSR Act, or (b) each
consent, approval, authorization of or notice to any other third party, is
required in connection with the valid execution and delivery by Buyer of this
Agreement or any Buyer Ancillary Document or the consummation by Buyer of the
transactions contemplated herein or therein except, in either case, such
consents, approvals, authorizations and notices as the failure to obtain or give
would not have a Material Adverse Effect.
5.5 SHARE OWNERSHIP. The Buyer will have at the Closing good title to
all of the Buyer's Class A Common Stock, free and clear of all liens, security
interests, charges, community property interests, equitable interests, options,
pledges, rights of first refusal or restrictions or encumbrances of any kind,
including any restrictions on use, transfer, voting, receipt of income or other
attribute of ownership. Except as set forth on Schedule 5.5, the Buyer is not a
party to any option, warrant, right, contract, call, put or other agreement or
commitment providing for the disposition or acquisition of any of the capital
stock of the Company, including the Buyer's Class A Common Stock (other than as
set forth in this Agreement).
5.6 FINANCIAL ADVISORS. Except for Salomon Brothers Inc, for whose
fees the Buyer shall be solely responsible, the Buyer has not retained any
finder, broker, agent or other intermediary to act for it or on its behalf, has
acted for or on behalf of Buyer in
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connection with the negotiation or consummation of this Agreement, and no party
has made any claim for any brokerage commission, finder's fee or similar
payment due from Buyer.
5.7 FINANCING. Buyer has secured binding commitments for all financing
(the "Financing") that will be required for it to consummate the purchase of the
Shares, which are set forth on Schedule 5.7 hereto.
5.8 INVESTMENT. Buyer is purchasing the Shares for investment and is
not acquiring the Shares with a view to or for sale in connection with any
distribution thereof within the meaning of the Securities Act of 1933, as
amended.
ARTICLE VI COVENANTS OF SELLER
Seller covenants and agrees with Buyer as follows:
6.1 CONDUCT OF BUSINESS. From the date hereof to the Closing Date,
except as provided by this Agreement or as Buyer shall otherwise consent in
writing, Seller shall cause the Company and each Subsidiary to:
(a) continue to carry on its business, maintain its facilities and
equipment, maintain its supply of programming, advertising and technical
materials and supplies and keep its books of account, records and files in
substantially the same manner as heretofore carried on and maintained;
(b) maintain in full force and effect through the Closing Date
property damage, liability and other insurance with respect to the assets
of the Company or the Subsidiaries at levels of coverage reasonable and
customary and consistent with past practice.
(c) refrain from selling or otherwise transferring or disposing of
assets having an aggregate value in excess of $50,000, except for (i)
assets consumed or disposed of in the ordinary course of business, (ii)
assets which are no longer used or, in Seller's reasonable judgment, useful
in the business or operations of the Company or the Subsidiaries or (iii)
in connection with the acquisition of replacement property of equivalent
kind or value;
(d) not make any distribution of assets of the Company or any
Subsidiary or declare, pay or set aside for payment any dividend (of any
kind or nature) or distribution with respect to the Shares, except for
allocations or payment of corporate expense and interest expense consistent
with past practice and the Company's obligations to its lenders;
(e) not alter the terms of any existing Material Contract except where
such alteration would not have a Material Adverse Effect, nor enter into
any new
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<PAGE> 32
agreement which, if entered into, would be a Material Contract except for
those set forth on Schedule 6.1(e) and those which will have been provided
to Buyer for its comments at least 5 business days prior to their
execution;
(f) refrain from issuing, selling, delivering, or agreeing to issue,
sell or deliver, any capital stock, warrants, options or similar rights or
other corporate securities of the Company or any Subsidiary and granting or
issuing, or agreeing to grant or issue, any options, warrants, incentive
awards or similar rights calling for the issuance of such securities or
entering into any registration rights agreements;
(g) refrain from repurchasing, redeeming and making a distribution
with respect to, any shares of capital stock of the Company or any
Subsidiary, except as otherwise provided in this Agreement;
(h) refrain from effecting any recapitalization of capital stock of
the Company or any Subsidiary and making any amendment, whether by merger,
consolidation or otherwise, to the Certificate of Incorporation, By-laws or
other governing instrument of the Company or any Subsidiary;
(i) refrain from (i) merging or consolidating with or into any other
corporation or entity, (ii) conveying, selling, leasing or otherwise
disposing of in any transaction or related series of transactions all or
substantially all of the property, business or assets of the Company and
the Subsidiaries (including, without limitation, the capital stock or
assets of the Company and the Subsidiaries), and (iii) acquiring by
purchase the business, assets or stock of any business;
(j) use reasonable efforts to preserve intact the business
organization of the Company and each Subsidiary and to keep available the
services of their present officers and key employees, and use reasonable
efforts to preserve the goodwill of those having business relationships
with the Company and each Subsidiary;
(k) refrain from (i) granting any increase in the compensation of
officers or employees currently receiving total compensation in excess of
$35,000, (including any such increase pursuant to any bonus, pension,
profit-sharing or other plan or commitment), except as set forth on
Schedule 6.1(k) and except for reasonable increases in the ordinary course
of business and consistent with past practice, not to exceed, individually
or in the aggregate, 5% of the current base compensation level, (ii) except
with respect to the endorsement of negotiable instruments in the ordinary
course of its business and intercompany debt that is canceled in accordance
with Section 6.5, incurring, assuming or guaranteeing any Indebtedness for
borrowed money or revising or amending the terms of any existing
Indebtedness for borrowed money other than money borrowed under the
Company's revolving credit facility with Heller Financial, Inc.; (iii)
assuming or incurring any lien charges, equitable interests, mortgages or
pledges of any nature in respect to the property of the Company or any
Subsidiary, other than those made in the ordinary course of business; (iv)
factoring, selling, transferring or otherwise disposing of any account
receivable other than
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factors, sales, transfers or dispositions of account receivables in the
ordinary course of business; or (v) entering into any agreement that is
material to the Company and its Subsidiaries taken as a whole, except in
the ordinary course of business;
(l) refrain from taking any action that would have the effect of
deferring any Tax liability of the Company or any Subsidiary from any
taxable period ending at or before the Closing Date in a manner that is
inconsistent with past practice;
(m) refrain from reviewing, extending or otherwise amending any of the
agreements listed on Schedule 4.15 except as required by law;
(n) refrain from making any capital expenditure other than regularly
scheduled payments made pursuant to those capital projects set forth on
Schedule 4.19; and
(o) refrain from agreeing, whether in writing or otherwise, to do any
of the foregoing;
in each case, except where failure to do any of the foregoing would not have a
Material Adverse Effect and PROVIDED that nothing contained in this Section
shall require Seller, the Company or any Subsidiary to incur any extraordinary
cost or make any extraordinary payment.
6.2 ACCESS AND INFORMATION.
(a) During the period commencing on the date hereof and ending on the
Closing Date, Seller shall permit Buyer and its counsel, accountants,
advisors, providers of financing, and other representatives reasonable
access during normal business hours to all the properties, assets,
employees, books, records, agreements and other documents of the Company
and the Subsidiaries; PROVIDED that, Buyer will obtain the approval of Hans
Peter Wursch or any representative of Botts & Co. or European Investors
Corporate Finance, Inc. prior to each visit to any Company or Subsidiary
premises, whose approval shall not be withheld. Seller shall furnish to
Buyer and its representatives all information concerning the Company and
the Subsidiaries as Buyer may reasonably request; PROVIDED that such
information is prepared by the management of the Company or Subsidiaries,
as the case may be, in the ordinary course of business. Any investigation
by Buyer pursuant to this Section shall be conducted in such manner as not
to interfere unreasonably with the normal operation of the Subsidiaries.
Buyer and its representatives shall be accompanied on any visits to the
premises of the Subsidiaries by representatives of Seller.
(b) The Seller shall, within 15 Business Days after the execution of
this Agreement, provide to Buyer a list of all contracts, commitments,
agreements (including agreements for the borrowing of money or the
extension of credit), leases, licenses, guarantees, understandings and
obligations, whether written or oral, to
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which the Company or either of the Subsidiaries are party and which involve
a payment by or to the Company or a Subsidiary exceeding $50,000 in any
twelve-month period.
6.3 NO SOLICITATION. Neither Seller, the Company, the Subsidiaries nor
any representatives (including, without limitation, attorneys, investment
bankers and accountants) of Seller, the Company or the Subsidiaries will
directly or indirectly, through any partner, officer, director, agent or
otherwise (a) solicit, initiate or encourage the submission of inquiries,
proposals or offers from any Person relating to any acquisition or purchase of
assets or capital stock of the Company or any Subsidiary or any other
transaction that would result in the transfer of control of the Company or any
Subsidiary or an investment by any Person in the Company or any Subsidiary
(each, an "Acquisition Proposal") or (b) participate in any discussions or
negotiations regarding an Acquisition Proposal or any of the foregoing or
furnish to any Person any information concerning the Company or any Subsidiary
or any of the foregoing, except to the extent required by law, or (c) otherwise
cooperate in any way with, or assist or participate in, facilitate or encourage,
any effort or attempt by any other Person to do or seek any of the foregoing.
6.4 CONFIDENTIALITY. Following the Closing, Seller agrees to retain in
confidence, and to require its directors, officers, employees, consultants,
professional representatives and agents (collectively, "Seller Representatives")
to retain in confidence all information concerning the Company and the
Subsidiaries and further agrees that, following the Closing, it will not use for
its own benefit and will not use or disclose to any third party, or permit the
use or disclosure to any third party of, any such information, except that
Seller may disclose the information to those of the Seller Representatives who
need the information for the proper performance of their assigned duties with
respect to the consummation of the transactions contemplated hereby and the
preparation of appropriate Tax Returns. In making such information available to
its Representatives, Seller shall take any and all precautions necessary to
ensure that the Seller Representatives use the information only as permitted
hereby. Notwithstanding the foregoing, such information may be disclosed (a) if
it is required by court order or decree or applicable law or in connection with
the preparation of Tax Returns, (b) if it is ascertainable or obtained from
public or published information, or (c) if it is received from a third party not
known to the recipient to be under an obligation to keep such information
confidential. If Seller shall be required to make disclosure of any such
information by operation of law (other than in connection with the preparation
of Tax Returns), Seller shall give Buyer prior notice of the making of such
disclosure and shall use all reasonable efforts to afford Buyer an opportunity
to contest the making of such disclosure.
6.5 REPAYMENT OF INDEBTEDNESS. At the Closing, the Buyer shall
determine which Indebtedness of the Company and the Subsidiaries shall be paid
at the Closing (which Indebtedness shall include the Indebtedness referred to in
the first sentence of Section 9.12 and the Company's Indebtedness to Heller
Financial, Inc.) and the Buyer shall, as directed by and on behalf of the
Seller, cause such Indebtedness (including all accrued but unpaid interest
thereon) to be paid out of the Aggregate Consideration at the Closing.
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6.6 OTHER ACTIONS. The Seller shall not, and shall not permit the
Company or any of its Subsidiaries to, take any action that would, or that could
reasonably be expected to, result in (i) any of the representations and
warranties of the Seller or the Company and the Subsidiaries set forth in this
Agreement that are qualified as to materiality becoming untrue, (ii) any of such
representations and warranties that are not so qualified becoming untrue in any
material respect, or (iii) any of the conditions set forth in Section 9.1 not
being satisfied.
6.7 WORKING CAPITAL. The Company and each of its Subsidiaries will not
(i) delay payment of any accounts payable beyond normal and customary terms,
(ii) fail to maintain adequate inventory or replenish inventory consistent with
past practice, or (iii) accelerate payment of any accounts receivable other than
in the ordinary course.
6.8 DIRECTOR RESIGNATIONS. The Seller shall, after consultation with
the Buyer and with its express approval, cause all members of the Company's or
any Subsidiary's Board of Directors, or any other governing body, if any, to
resign effective as of the Closing.
6.9 INTELLECTUAL PROPERTY. Except for the licenses set forth in
Schedule 6.9, after the Closing the Seller shall refrain from using, and shall
ensure that its Affiliates will not use, directly or indirectly, any
Intellectual Property.
6.10 OTHER ASSISTANCE. To the extent requested by Buyer, Seller shall
reasonably cooperate with and assist Buyer in the preparation of a registration
statement or similar offering document relating to a proposed issuance of
securities of the Buyer. In connection therewith, Seller shall make available to
Buyer and its representatives and agents the officers and employees of the
Company and the Subsidiaries at reasonable times and locations. All reasonable
out-of-pocket expenses incurred by Seller, the Company or the Subsidiaries in
connection with such cooperation and assistance shall be promptly paid by Buyer.
6.11 CONSENTS. Prior to the Closing Date, the Seller shall use its
best efforts to obtain or cause to be obtained all Required Consents, including,
without limitation, paying reasonable consideration necessary to obtain such
consent.
6.12 EMPLOYMENT CLAIMS. Subject to Section 16.16, the Seller shall be
responsible for the first $475,000 to be paid in respect of amounts owed upon
termination, if any, arising under the employment agreements listed on Schedule
6.12 ("Employment Claims"). The Buyer shall be responsible for any amounts in
excess thereof.
ARTICLE VII COVENANTS OF BUYER
Buyer covenants and agree with Seller as follows:
7.1 CONFIDENTIALITY. In consideration of the confidential nature of
certain of the information which will be provided to Buyer by Seller, the
Company and the Subsidiaries prior to the Closing, Buyer agrees to retain in
confidence, prior to the Closing,
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and to require its directors, officers, employees, consultants, professional
representatives and agents (collectively, its "Representatives") to retain in
confidence all information transmitted or disclosed to it by Seller, the Company
and the Subsidiaries, and further agrees that, prior to the Closing, it will not
use for its own benefit and will not use or disclose to any third party, or
permit the use or disclosure to any third party of, any information so obtained
or revealed, except that Buyer may disclose the information (i) to those of its
Representatives who need the information for the proper performance of their
assigned duties with respect to the consummation of the transactions
contemplated hereby, (ii) to the parties from which Buyer seeks financing and
their representatives, and (iii) in a registration statement or similar offering
document relating to the proposed issuance of securities by the Buyer. In making
such information available to its Representatives, Buyer shall take any and all
precautions necessary to ensure that its Representatives use the information
only as permitted hereby. Notwithstanding anything to the contrary in the
foregoing provisions, such information may be disclosed (a) where it is
necessary to any regulatory authorities or governmental agencies, (b) if it is
required by court order or decree or applicable law, (c) if it is ascertainable
or obtained from public or published information, or (d) if it is received from
a third party not known to the recipient to be under an obligation to keep such
information confidential. If Buyer shall be required to make disclosure of any
such information by operation of law, Buyer shall give Seller prior notice of
the making of such disclosure and shall use all reasonable efforts to afford
Seller an opportunity to contest the making of such disclosure. In the event
that the Closing shall not occur, Buyer shall immediately deliver, or cause to
be delivered, to Seller (without retaining any copies thereof) any and all
documents, statements or other written information obtained from Seller, the
Company or any Subsidiary that contain confidential information of Seller.
7.2 DISCLOSURE TO SELLER. The Buyer will notify the Seller if the
Buyer knows or learns of the existence of any facts which cause any of the
representations and warranties contained in Articles III or IV to be or become
untrue, PROVIDED, HOWEVER, that such disclosure shall not affect any of the
Buyer's rights or remedies pursuant to this Agreement.
ARTICLE VIII MUTUAL COVENANTS
8.1 HSR FILINGS. Buyer and Seller shall, as promptly as practicable
following the execution of this Agreement, and in cooperation with each other,
file with the Department of Justice and the Federal Trade Commission the
premerger notification forms and any other documents required under the HSR Act,
and each shall use its reasonable efforts to obtain earliest termination of all
waiting periods under the HSR Act. Buyer shall be responsible for and shall pay
all fees assessed in connection with the filing of such forms and documents.
8.2 CASUALTY OR LOSS. The risk of any loss, damage or impairment,
confiscation or condemnation of any of the assets of the Subsidiaries from any
cause whatsoever shall be borne by Seller at all times prior to the completion
of the Closing. In the event of any loss, damage or impairment, confiscation or
condemnation of any such
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assets prior to the completion of the Closing, Seller shall have the option, but
shall not be required, to expend such funds and take such other actions as are
necessary to repair, replace or restore such assets to their prior condition. If
Seller has commenced but not completed the restoration or replacement of such
assets before the Closing Date, the Closing Date shall be postponed during such
period not to extend beyond the date specified in subsection 14.1(f) to permit
completion of the repair or replacement of the damage or loss. If such assets
have not been restored or replaced by such date, Buyer may then take the action
specified in subsection 14.1(c). Alternatively, Buyer may, at its option,
proceed to Closing as of such date and complete the restoration and replacement
of such damaged assets after the Closing Date, in which event Seller shall
assign to Buyer the right to receive all insurance proceeds payable in
connection with such damage to or destruction of the assets.
8.3 FURTHER ACTIONS.
(a) Seller and Buyer will notify each other immediately of any
litigation, arbitration or administrative proceeding pending or to
its/their knowledge, threatened against either of them, the Company or any
Subsidiary which challenges the transactions contemplated in this
Agreement.
(b) Subject to the terms and conditions of this Agreement, Seller and
Buyer each agree to use commercially reasonable efforts to take, or cause
to be taken, all action and to do, or cause to be done, all things
necessary, proper or advisable to consummate and make effective the
transactions contemplated in this Agreement and to satisfy the conditions
hereto.
(c) The Seller and the Buyer agree (i) to furnish upon request to each
other such further information, (ii) to execute and deliver to each other
such other documents, and (iii) to do such other acts and things, all as
the other party may reasonably request for the purpose of carrying out the
intent of this Agreement, the Seller Ancillary Documents, the Buyer
Ancillary Documents and the documents referred to herein and therein.
(d) Prior to the Closing or prior to the termination of this Agreement
pursuant to Section 14(e), the Seller and Buyer will notify each other
immediately orally and in writing if the satisfaction of any condition to
the Closing is or becomes impossible.
ARTICLE IX CONDITIONS PRECEDENT TO BUYER'S OBLIGATIONS
The obligation of the Buyer to consummate the transactions
contemplated by this Agreement is subject to the satisfaction of the following
conditions on or before the Closing Date, unless specifically waived in writing
by the Buyer on or prior to the Closing Date (such waiver shall not constitute a
waiver of Buyer's rights pursuant to Section 12.1 hereof):
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9.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties
of Seller contained in this Agreement (other than in Section 4.19) (i) shall
have been true and correct in all respects on the date of this Agreement and
(ii) shall be true and correct in all material respects (except that those
representations which expressly contain a materiality qualifier shall each be
true and correct in all respects, giving effect to such qualifier) on the
Closing Date as though made on and as of the Closing Date. Buyer shall have
received a certificate executed by an officer Seller dated as of the Closing
Date, certifying the satisfaction of the conditions in this Section 9.1.
9.2 COMPLIANCE WITH COVENANTS. Seller shall have duly performed and
complied in all material respects with all covenants, agreements and obligations
required by this Agreement to be performed or complied with by it on or prior to
the Closing. Buyer shall have received a certificate executed by an officer of
Seller dated as of the Closing Date, certifying the satisfaction of the
conditions in this Section 9.2.
9.3 ABSENCE OF LITIGATION. No action or proceeding shall be pending by
or before any court or other Governmental Authority of competent jurisdiction
seeking to (a) restrain, prohibit or invalidate the transactions contemplated by
this Agreement in whole or material part or that may have the effect of
preventing, delaying, making illegal, or otherwise interfering with any of the
transactions contemplated by this Agreement or the Seller Ancillary Documents or
the Buyer Ancillary Documents, or (b) impose material limitations on the Buyer's
freedom of action with respect to the Company and its Subsidiaries or any
material portion thereof or all or a material portion of the assets or
businesses of the Buyer.
9.4 HSR ACT. All applicable waiting periods under the HSR Act shall
have expired or been terminated.
9.5 REQUIRED CONSENTS. All Required Consents shall have been obtained
by Seller, the Company or the Subsidiaries, as the case may be, except where
failure to have such consent would not have a Material Adverse Effect.
9.6 NO INJUNCTION. etc. No preliminary or permanent injunction or
other order, decision or decree issued by any court or Governmental Authority of
competent jurisdiction nor any Requirement of Law which restrains, enjoins or
otherwise prohibits the transactions contemplated hereby shall be in effect.
9.7 LEGAL OPINION. Buyer shall have received from Seller's Counsel an
opinion, dated the Closing Date, in form and substance reasonably satisfactory
to Buyer and Buyer's Counsel.
9.8 FINANCING. The Buyer shall have received proceeds of the
Financing.
9.9 KREBSOGE TRANSACTIONS. The transactions contemplated by the
Krebsoge Stock Purchase Agreement, dated the date hereof, between the Buyer and
the Seller relating
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to the sale of Krebsoge and its subsidiaries (the "Krebsoge Agreement") shall
have occurred simultaneously with the Closing.
9.10 INDEMNITY ESCROW AGREEMENT. The Indemnity Escrow Agreement shall
have been executed by the parties and the amounts required thereunder shall have
been funded or instruments deposited as provided in Section 2.4.
9.11 RELEASE OR TERMINATION OF LIENS. Other than any liens created by
the Buyer or liens relating to Indebtedness which the Buyer has agreed to
assume, all liens, security interests, charges, community property interests,
equitable interests, options, pledges, rights of first refusal or restriction or
encumbrance of any kind, including any restrictions on use, transfer, voting,
receipt of income or other attribute of ownership, on any of (i) the Shares, or
(ii) except as set forth on Schedule 9.11, the assets or properties of the
Seller, the Company or the Subsidiaries shall have been terminated, and the
Buyer shall have received written evidence of such releases.
9.12 PAYMENT OF INDEBTEDNESS. The Seller shall pay in full (or shall
direct the Buyer to pay in full on behalf of the Seller from the Aggregate
Consideration) the unpaid principal amount owing by ICM/K to MAAG America
Holding Inc. under the Subordinated Note dated April 30,1996, issued by ICM/K in
the original principal amount of $2,000,000 together with any and all accrued
but unpaid interest thereon computed through the day preceding the Closing Date.
To the extent Buyer has not agreed to assume, the Seller shall pay in full (or
shall direct the Buyer to pay in full on behalf of the Seller from the Aggregate
Consideration) (i) the unpaid principal amount owing to the Company's lenders,
together with any and all accrued but unpaid interest thereon computed through
the day preceding the Closing Date (such loan agreements, the "Loan Agreements")
and (ii) all other Indebtedness of the Company and the Subsidiaries outstanding
as of the Closing Date, together with any accrued but unpaid interest thereon
through the Closing Date.
9.13 U.S. REAL PROPERTY HOLDING COMPANY. The Seller shall certify to
Buyer that neither the Company nor any of the Subsidiaries is a United States
Real Property Holding Company as such term is defined under the Code.
9.14 CONTINGENT PAYMENT AGREEMENT. The Contingent Payment Agreement
dated November 19, 1993 between the Company and Heller Financial, Inc. shall
have been terminated and neither the Company nor any Subsidiary shall have any
liability arising under or with respect to such agreement.
ARTICLE X CONDITIONS PRECEDENT TO SELLER'S OBLIGATIONS
The obligation of Seller to consummate the transactions contemplated
by this Agreement is subject to the satisfaction of each of the following
conditions on or before the Closing Date, unless specifically waived in writing
by Seller prior to the Closing (such waiver shall not constitute a waiver of
Seller's rights pursuant to Section 12.2 hereof):
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10.1 REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Buyer contained in this Agreement (i) shall have been true and
correct on the date of this Agreement and (ii) shall be true and correct in all
material respects (except that those representations which expressly contain a
materially qualifier shall each be true and correct in all respects, giving
effect to such qualifier) on the Closing Date as though made on and as of the
Closing Date. Seller shall have received a certificate executed by an officer of
Buyer dated as of the Closing Date, certifying the satisfaction of the
conditions in this Section 10.1.
10.2 COMPLIANCE WITH COVENANTS. Buyer shall have duly performed and
complied with in all material respects all covenants, agreements and obligations
required by this Agreement to be performed or complied with by it on or before
the Closing Date. Seller shall have received a certificate executed by an
officer of Buyer dated as of the Closing Date, certifying the satisfaction of
the conditions in this Section 10.2.
10.3 ABSENCE OF LITIGATION. No action or proceeding against Buyer
shall be pending by or before any court or other Governmental Authority of
competent jurisdiction seeking to restrain, prohibit or invalidate the
transactions contemplated by this Agreement.
10.4 HSR ACT. All applicable waiting periods under the HSR Act shall
have expired or been terminated.
10.5 NO INJUNCTION, etc. No preliminary or permanent injunction or
other order, decision or decree issued by any court or Governmental Authority of
competent jurisdiction or any Requirement of Law which restrains, enjoins or
otherwise prohibits the transactions contemplated hereby shall be in effect.
10.6 LEGAL OPINION. Seller shall have received from Buyer's Counsel an
opinion, dated the Closing Date, in form and substance reasonably satisfactory
to Seller and Seller's Counsel.
10.7 IRREVOCABLE LETTER OF CREDIT REPLACEMENT. The Buyer shall replace
or cause to be replaced the Irrevocable Letter of Credit issued by Union Bank of
Switzerland in the amount of $2,712,191.77 as security for the Economic
Development Revenue Bonds Series 1985 issued by the City of Salem, Indiana as of
October 16, 1985, maturing October 1, 2000. The Buyer shall provide evidence of
such replacement of the Letter of Credit (the "Substitute Irrevocable Letter of
Credit") to the Seller.
ARTICLE XI CLOSING
11.1 CLOSING. The closing of the sale of the Shares (the "Closing")
shall take place at the offices of Cadwalader, Wickersham & Taft in New York,
New York or such other place as agreed to by Seller and Buyer at 6:00 a.m. local
time, on the later to occur of (i) December 10, 1996 or (ii) fifth business day
after the date on which the conditions contained in Sections 9.4 and 10.4 are
met; PROVIDED HOWEVER, as follows: (a) if
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one or more conditions to this Agreement is not satisfied by such date, the
party benefiting from such condition may elect, in its sole discretion, one or
more postponements of the Closing for the purpose of enabling such condition to
be satisfied; and (b) upon agreement of the parties hereto, the Closing may be
postponed to a future date, PROVIDED that, notwithstanding the provisions of the
preceding subparagraphs (a) and (b), in no event may the Closing be postponed
beyond January 31, 1997. The date of the Closing is referred to as the "Closing
Date." The Closing when completed shall be deemed to have occurred at 12:01
a.m., local time, on the Closing Date (the "Effective Time").
11.2 DELIVERIES BY SELLER. At the Closing, Seller shall deliver or
cause to be delivered to Buyer the following:
(a) A certificate of an officer of Seller confirming the satisfaction
of the conditions set forth in Sections 9.1 and 9.2.
(b) A copy of all corporate resolutions authorizing the execution,
delivery and performance of this Agreement and the Seller Ancillary
Documents, and the consummation of the transactions contemplated herein or
therein.
(c) The legal opinion referred to in Section 9.7, the Indemnity Escrow
Agreement and the lien releases and terminations referred to in Section
9.11.
(d) A certificate certifying as to the matters referred to in Section
9.13.
(e) Satisfactory evidence in Buyer's reasonable judgment, that all
Indebtedness (other than the principal amount of Indebtedness Buyer has
agreed to assume) has been repaid or discharged.
(f) Such other documents, certificates and information as Buyer may
reasonably request.
11.3 DELIVERIES BY BUYER. At the Closing, Buyer shall deliver or cause
to be delivered to Seller the following:
(a) A certificate of an officer of Buyer confirming the satisfaction
of the conditions set forth in Sections 10.1 and 10.2.
(b) A copy of all corporate resolutions authorizing the execution,
delivery and performance of this Agreement and the Buyer Ancillary
Documents, and the consummation of the transactions contemplated herein or
therein.
(c) The legal opinion referred to in Section 10.6 and the Indemnity
Agreement.
(d) The Purchase Price, paid by a wire transfer of immediately
available funds in accordance with Section 2.2.
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(e) Replace or cause to be replaced the Irrevocable Letter of Credit
referred to in Section 10.7 and provide evidence of the Substitute Letter
of Credit to the Seller, the original of which shall be delivered to INB
National Bank, as Trustee,
(f) Such other documents, certificates and information as Seller may
reasonably request.
ARTICLE XII INDEMNIFICATION
12.1 INDEMNIFICATION BY SELLER. Subject to the provisions of Sections
2.4, 12.5 and 12.6, the Seller shall indemnify, defend and hold harmless Buyer
and its officers, directors, employees, agents and Affiliates from, against and
with respect to any and all loss, damage, claim, obligation, liability, cost and
expense (including, without limitation, reasonable attorneys' fees and costs and
expenses incurred in investigating, preparing, defending against or prosecuting
any litigation, claim, proceeding or demand), of any kind or character (a
"Loss") arising out of or in connection with any of the following:
(a) any breach of any of the representations or warranties of Seller
contained in this Agreement (other than those contained in Sections 4.18
and 4.24 or the first three sentences of Section 4.25);
(b) any failure by Seller to perform or observe, or to have performed
or observed any covenant or agreement to be performed or observed by it
pursuant to this Agreement;
(c) any failure by Seller to comply with the continuation coverage
requirements applicable to group health plans pursuant to Sections 601 et
seq. of ERISA and Section 4980B of the Code;
(d) all liability for Taxes in excess of $10,000, or payable by or
with respect to, the Company and the Subsidiary for any period ending on or
before the end of the day on the Closing Date and that portion of a
Straddle Period up to and including the Closing Date ("Pre-Closing Tax
Period");
(e) any liability of the Company or Subsidiary for the unpaid Taxes of
any Person (other than such Company or Subsidiary) under Regulation Section
1.1502-6 (or any similar provision of state, local or foreign law) as a
transferee or successor, by contract, or otherwise;
(f) any debt or liability of any Company or Subsidiary to the extent
not disclosed on the balance sheet included in the Financial Statements, on
any Schedule hereto, or not otherwise expressly assumed by Buyer hereunder;
or
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(g) any matter set forth on Schedules 4.5, 4.10, 4.11, 4.13, 4.16(e),
4.20 and 4.22 to the extent Losses relating thereto exceed, in the
aggregate together with Losses arising in connection with any matter set
forth on Schedules 4.5, 4.10(b), 4.11, 4.13, 4.16(e), 4.20 and 4.22 of the
Krebsoege Agreement, $1,500,000.
12.2 INDEMNIFICATION BY BUYER. Buyer shall indemnify, defend and hold
harmless each of the Seller, the Company and the Subsidiaries and their
respective officers, directors, employees, agents and Affiliates from, against
and with respect to any Loss arising out of or in connection with any of the
following:
(a) any breach of any of the representations and warranties of Buyer
contained in this Agreement;
(b) any failure by Buyer to perform or observe, or to have performed
or observed any covenant or agreement to be performed or observed by it
pursuant to this Agreement;
(c) Buyer's operation of the Subsidiaries on and after the Effective
Time; or
(d) all liability for Taxes of any Company or Subsidiary for any
taxable period ending after the Closing Date (except to the extent such
taxable period is a Straddle Period in which case Buyer's indemnity will
cover only that portion of such Taxes that are not attributable to the
Pre-Closing Tax Period).
12.3 NOTICE OF CLAIM. If any third party shall notify any party (the
"Indemnified Party") with respect to any matter (a "Third Party Claim") which
may give rise to a claim for indemnification against the other party (the
"Indemnity Obligor") under this Article XII, then the Indemnified Party shall,
within 30 days following receipt of such Third Party Claim, promptly notify the
Indemnity Obligor in writing of any claim for recovery, specifying in reasonable
detail the nature of the Loss and the amount of the liability estimated to arise
therefrom. If the Indemnified Party does not so notify the Indemnity Obligor
within 30 days of its discovery of a claim for recovery, such claim shall be
barred only to the extent that the Indemnity Obligor is prejudiced by such
failure to notify. The Indemnified Party shall provide to the Indemnity Obligor
as promptly as practicable thereafter all information and documentation
reasonably requested by the Indemnity Obligor to verify the claim asserted.
12.4 DEFENSE. If the facts relating to a Loss arise out of the claim
of any third party, or if there is any claim against a third party available by
virtue of the circumstances of the Loss, the Indemnity Obligor may, by giving
written notice to the Indemnified Party within 15 days following its receipt of
the notice of such claim, elect to assume the defense or the prosecution
thereof, including the employment of counsel or accountants at its cost and
expense; PROVIDED, HOWEVER, that during the interim the Indemnified Party shall
use its commercially reasonable efforts to take all action (not including
settlement) reasonably necessary to protect against further damage or loss with
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respect to the Loss. The Indemnified Party shall have the right to employ
counsel separate from counsel employed by the Indemnity Obligor in any such
action and to participate therein, but the fees and expenses of such counsel
shall be at the Indemnified Party's own expense, unless (i) the employment
thereof has been specifically authorized by the Indemnity Obligor, (ii) such
Indemnified Party will have been advised by counsel reasonably satisfactory to
the Indemnity Obligor that there may be one or more legal defenses available to
it which are different from or additional to those available to the Indemnity
Obligor and in the reasonable judgment of such counsel it is advisable for such
Indemnified Party to employ separate counsel, or (iii) the Indemnity Obligor has
failed to assume the defense of such action and employ counsel reasonably
satisfactory to the Indemnified Party. Whether or not the Indemnity Obligor
chooses so to defend or prosecute such claim, all the parties hereto shall
cooperate in the defense or prosecution thereof and shall furnish such records,
information and testimony and shall attend such conferences, discovery
proceedings and trials as may be reasonably requested in connection therewith.
The Indemnity Obligor shall not be liable for any settlement of any such claim
effected without its prior written consent. In the event of payment by the
Indemnity Obligor to the Indemnified Party in connection with any Loss arising
out of a third party claim, the Indemnity Obligor shall be subrogated to and
shall stand in the place of the Indemnified Party as to any events or
circumstances in respect of which the Indemnified Party may have any right or
claim against such third party relating to such Indemnified Matter. The
Indemnified Party shall cooperate with the Indemnity Obligor in prosecuting any
subrogated claim. The Indemnity Obligor will take no action in connection with
any claim that would adversely affect the Indemnified Party without the consent
of the Indemnified Party.
12.5 TIME FOR CLAIMS. Any claim asserted with respect to Sections
12.1(a) or (b) (other than with respect of Section 6.4) or 12.2(a) or (b) (other
than with respect of Section 7.1) must be submitted to the Indemnity Obligor in
writing, or invoked in official proceedings, by April 15, 1998 (the "Survival
Date"), other than claims with respect to (i) Sections 4.12 and 4.15, which may
be submitted until sixty (60) days following the expiration of the longest
applicable statute of limitations, (ii) Section 4.13, which may be submitted
until the third anniversary of the Closing Date, and (iii) Sections 3.5 and 4.3
(solely with respect to the ownership of the Subsidiary Shares), which may be
submitted at any time without limitation.
12.6 LIMITATION. Notwithstanding the provisions of Section 12.1 but
subject to the limitation provided in Section 16.16, the Seller shall not have
any indemnification obligation under this Agreement
(a) in excess of $2,000,000 and unless and until the aggregate amount
of the Losses of the Indemnified Party exceeds $250,000 in the aggregate
whereupon such Indemnity Obligor shall be responsible for the aggregate
amount of Losses dollar for dollar from the first claim; or
(b) with respect to an indemnification obligation resulting from a
breach of the representation and warranty contained in the last sentence of
Section 4.25, in excess of the amount of such receivable giving rise to
such breach, net of any
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<PAGE> 45
recorded reserve set forth on the books of the Company and the Subsidiaries
at the time of the Closing with respect to such receivable. Buyer agrees to
assign to Seller any such receivable for which the Buyer has received an
indemnification payment pursuant to this Article XII.
12.7 CHARACTERIZATION. Any payments pursuant to this Article XII shall
be treated by the parties as adjustments to the Purchase Price for tax purposes,
unless otherwise required by law.
12.8 INDEMNITY AMOUNTS. If the Buyer shall incur any Losses (whether
pursuant to a Third Party Claim or otherwise) or determine that it is likely to
incur any Losses and shall consider that it is entitled to be indemnified
against such Losses, the Buyer shall deliver a certificate signed by an officer
thereof (an "Officer's Certificate"), to the Seller which Officer's Certificate
shall (i) state that the Buyer has incurred Losses, or anticipates that it will
incur Losses for which the Buyer is entitled to indemnification pursuant to
Section 12.1 and (ii) specify in reasonable detail each individual Loss included
in the amount so stated, the date such Loss was incurred, the basis for any
anticipated Loss and the nature of the misrepresentation or breach of warranty
or agreement to which each such Loss is related and the computation of the
amount to which the Buyer claims to be entitled hereunder. In the event that the
Seller shall object to the indemnification of the Buyer in respect of any Loss
specified in an Officer's Certificate, the Seller shall, within 30 days of
receiving such Officer's Certificate, deliver to the Buyer a written notice to
such effect and the Seller and the Buyer shall, within the 30-day period
beginning on the date of receipt by the Buyer of such written objection, attempt
in good faith to agree upon the rights of the respective parties with respect to
each of such claims to which the Seller shall have so objected. If the Buyer and
the Seller shall succeed in reaching agreement on their respective rights with
respect to any of such claims, the Buyer and the Seller shall promptly prepare
and sign a memorandum setting forth such agreement. If no agreement is reached,
the Buyer may commence a cause of action in any court having competent
jurisdiction with respect to the Indemnity Escrow Account. The amounts set forth
in (A) claims specified in any Officer's Certificate to which the Seller shall
not object in writing within 30 days after its receipt of such Officer's
Certificate, (B) claims covered by a memorandum of agreement of the nature
described in this Section 12.8 and (C) claims the validity and amount of which
shall have been determined by a final judgment are hereinafter referred to,
collectively, as the "Indemnity Amounts."
ARTICLE XIII TAX MATTERS
13.1 STRADDLE PERIODS. In the case of any taxable period that includes
(but does not end on) the Closing Date (a "Straddle Period"):
(a) real, personal and intangible property Taxes ("Property Taxes") of
the Company and the Subsidiaries for the Pre-Closing Tax period shall
include the amount of such property Taxes for the entire Straddle Period
multiplied by a fraction, the numerator of which is the number of days
during the Straddle Period
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<PAGE> 46
that are in the Pre-Closing Tax Period and the denominator of which is the
number of days in the Straddle Period; and
(b) the Taxes of the Company and the Subsidiaries (other than Property
Taxes) attributable to the Pre-Closing Tax Period shall be computed as if
such taxable period ended at the end of the day on the Closing Date and the
amount of Taxes attributable to such period shall be based upon a closing
of the books of the applicable Company and Subsidiary at the end of the day
on the Closing Date.
13.2 CARRYBACKS. Buyer shall not be entitled to carryback any losses,
credits or other Tax benefit items of the Company or the Subsidiaries that
arises in a taxable period (or portion thereof) ending after the Closing Date to
a Pre-Closing Tax Period of Company, Seller, the Company or the Subsidiaries.
ARTICLE XIV TERMINATION
14.1 TERMINATION. This Agreement may be terminated at any time prior
to the Closing:
(a) by the mutual written consent of Seller and Buyer;
(b) by Seller (if Seller is not then in breach of any term of this
Agreement), if Buyer shall (i) fail to perform in any material respect its
agreements continued contained herein to be performed on or prior to the
Closing Date, or (ii) materially breach any of its representations or
warranties contained herein, which failure or breach is not cured within
ten days after Seller has notified Buyer of its intent to terminate this
Agreement pursuant to this subparagraph;
(c) by Buyer (if Buyer is not then in breach of any term of this
Agreement), if Seller shall (i) fail to perform in any material respect its
agreements contained herein required to be performed on or prior to the
Closing Date, or (ii) materially breach any of its representations or
warranties contained herein, which failure or breach is not cured within
ten days after Buyer has notified Seller of its intent to terminate this
Agreement pursuant to this subparagraph;
(d) by either Seller or Buyer, if there shall be any nonappealable
final order, writ, injunction or decree of any court or governmental or
regulatory agency binding on Seller or Buyer which prohibits or restrains
Seller or Buyer from consummating the transactions contemplated hereby
(other than temporary injunctions);
(e) by Buyer, if any of the conditions in Article IX has not been
satisfied as of the Closing Date or if satisfaction of such a condition is
or becomes impossible (other than through the failure of Buyer to comply
with its obligations under this Agreement) and Buyer has not waived such
condition on or before the Closing Date;
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<PAGE> 47
or (ii) by Seller, if any of the conditions in Article X has not been
satisfied as of the Closing Date or if satisfaction of such a condition is
or becomes impossible (other than through the failure of Seller to comply
with its obligations under this Agreement) and Seller has not waived such
condition on or before the Closing Date; or
(f) by either the Seller or the Buyer, if the Closing has not occurred
by January 31, 1997, for any reason other than delay or nonperformance of
the party seeking such termination.
14.2 EFFECT ON OBLIGATIONS. Termination of this Agreement pursuant to
this Article shall terminate all obligations of the parties hereunder, except
for the obligations under Sections 16.3 (with respect to expenses), 16.4 (with
respect to publicity) and 7.1 (with respect to confidentiality); PROVIDED,
HOWEVER, that termination pursuant to subparagraphs (b) or (c) of Section 14.1
shall not relieve the defaulting or breaching party from any liability to the
other party hereto.
ARTICLE XV EMPLOYEES
It is the Buyer's present intention to cause the Company and the Subsidiaries to
continue to provide, immediately following the Closing, compensation levels and
employee benefit programs the same as or reasonably comparable to the
compensation levels and employee benefit programs provided by the Company and
the Subsidiaries prior to the Closing, and to continue to credit service under
the employee benefit programs of the Company and the Subsidiaries following the
Closing in a manner consistent with the manner in which service has been
credited under such programs prior to the closing. Notwithstanding the
foregoing, however, the parties recognize that the Company and the Subsidiaries
may, subject to the requirements of any applicable collective bargaining
agreement, change the compensation levels or benefit programs provided by the
Company and the Subsidiaries following the Closing in ways that either the
Company or any Subsidiary determines to be necessary or appropriate for the
operation of its business.
ARTICLE XVI MISCELLANEOUS
16.1 ACCESS AFTER THE CLOSING DATE. After the Closing Date, the Buyer
shall provide the Seller with reasonable access during normal business hours to
copies of all of the books and records of the Company and the Subsidiaries
whenever requested by the Seller, and the Buyer shall retain such books and
records for the later of the end of the normal document retention period of the
Buyer; PROVIDED that the Buyer shall retain all required Tax books and records
until 60 days following the expiration of the applicable statute of limitations.
At the request and expense of the Seller, the Buyer shall deliver copies of any
such books and records to the Seller. At the Seller's out of pocket expense, the
Buyer shall use reasonable efforts to cause any of the employees of the Company
or any Subsidiary or the Buyer who were previously employed by the Company or
any Subsidiary to meet with the Seller and its representatives and agents
(including counsel and
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<PAGE> 48
accountants) at such times and places as the Seller may reasonably request in
order to provide the Seller with information concerning the operation of the
Company and the Subsidiaries and the conduct of their business by the Company or
such Subsidiary prior to the Closing Date.
16.2 PAYMENT OF EXPENSES.
(a) Except as provided in Sections 8.1 and 8.2, all costs of
transferring the Shares to Buyer in accordance with this Agreement,
including recordation, notarial, registration, stamp, transfer and
documentary taxes and fees, and any federal, state or local excise, sales
or use taxes, and any filings or grant fees imposed by any governmental
authority, shall be paid one-half by Seller and one-half by Buyer.
(b) All costs, including recordation, notarial, registration, stamp,
transfer and documentary taxes and fees, and any federal, state or local
excise, sales or use taxes, and any filings or grant fees imposed by any
governmental authority caused by, or arising from, any liquidation, merger,
sale or transfer by or of the Company or any Subsidiary or assets of the
Company or any Subsidiary which occurs after the Closing shall be paid by
Buyer.
(c) Except as otherwise expressly provided in this Agreement, each of
the parties shall bear its own expenses, including the fees of any
attorneys and accountants engaged by such party, in connection with this
Agreement, the Seller Ancillary Documents and the Buyer Ancillary Documents
and the consummation of the transactions contemplated herein or therein.
16.3 PUBLICITY. Seller and Buyer agree that they will not make any
press releases or other announcements prior to the Closing with respect to the
transactions contemplated hereby, except as required by applicable law, without
the prior approval of all other parties. The Seller acknowledges that the Buyer
is required to make certain public disclosures and filings pursuant to the
Exchange Act with respect to the transactions contemplated hereby.
16.4 COMMERCIALLY REASONABLE EFFORTS. Each party hereto agrees to use
commercially reasonable efforts to effect the Closing set forth in this
Agreement and otherwise to consummate the transactions contemplated by this
Agreement. Specifically, but without limiting the generality of the foregoing,
each of Buyer and Seller shall use commercially reasonable efforts to make or
obtain all consents, approvals, authorizations, registrations and filings with
all federal, state, provincial or local judicial or governmental authorities or
administrative agencies as are required in connection with the consummation of
the transactions contemplated by this Agreement.
16.5 NOTICES. All notices, demands and other communications made
hereunder shall be in writing and shall be given either by personal delivery, by
nationally recognized overnight courier (with charges prepaid) or by telecopy
(with telephone confirmation), and shall be deemed to have been given or made
when personally delivered,
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<PAGE> 49
the day following the date deposited with such overnight courier service or when
transmitted to telecopy machine and confirmed by telephone, addressed to the
respective parties at the following addresses (or such other address for a party
as shall be specified by like notice):
If to Seller:
Maag Holding AG
Hardstrasse 219
Zurich, Switzerland CH-8023
Attn: Samuel Gartmann
Telephone: 011-41-1-278-7215
Telecopy: 011-41-1-271-9204
With a copy (which shall not constitute notice) to:
Cadwalader, Wickersham & Taft
100 Maiden Lane
New York, NY 10038
Attn: Jonathan M. Wainwright, Esq.
Telephone: (212) 504-6122
Telecopy: (212) 504-6666
If to Buyer:
Sinter Metals, Inc.
Terminal Tower, Suite 3200
50 Public Square
Cleveland, Ohio 44113
Attn: Joseph W. Carreras
Telephone: (216) 771-6700
Telecopy: (216) 344-7631
With a copy (which shall not constitute notice) to:
Jones, Day, Reavis & Pogue
North Point
901 Lakeside Avenue
Cleveland, OH 44114
Attn: Christopher M. Kelly, Esq.
Telephone: (216) 586-3939
Telecopy: (216) 579-0212
16.6 GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the laws of the State of New York, without regard to conflict
of laws principles.
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16.7 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
16.8 ASSIGNMENT. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and permitted
assigns. Neither this Agreement nor any of the rights, interest or obligations
hereunder shall be assigned by either of the parties hereto without the prior
written consent of the other party hereto, and any purported assignment without
such consent shall be void; PROVIDED HOWEVER that (a) the Buyer may, without the
consent of the Seller, (i) grant a security interest in its rights under this
Agreement to a lender as security for Buyer's obligations to such lender and
(ii) assign its rights hereunder to one or more wholly-owned subsidiaries of the
Buyer, but no such grant of security interest or assignment shall release the
Buyer from its obligations hereunder, and (b) the Seller may, without the
consent of the Buyer, assign its rights hereunder to one or more wholly-owned
subsidiaries of the Seller, but no such assignment shall release the Seller from
its obligations hereunder, including, without limitation, its obligations under
Section 12.1, for which it shall be jointly and severally liable with any such
assignee.
16.9 THIRD PARTY BENEFICIARIES. None of the provisions of this
Agreement or any document contemplated hereby is intended to grant any right or
benefit to any person or entity which is not a party to this Agreement.
16.10 HEADINGS; REFERENCES. The article and section headings contained
in this Agreement are solely for the purpose of reference, are not part of this
Agreement and shall not in any way affect the meaning or interpretation of this
Agreement. When a reference is made in this Agreement to a clause, Section,
Subsection or Article, such reference shall be to such clause, Section,
Subsection or Article of this Agreement unless otherwise indicated.
16.11 AMENDMENTS; WAIVER. Any waiver, amendment, modification or
supplement of or to any term or condition of this Agreement shall be effective
only if in writing and signed by both parties hereto, and the parties hereto
waive the right to amend the provisions of this Section orally. No waiver by any
party of any of the provisions hereof shall be effective unless explicitly set
forth in writing and executed by the party so waiving. The waiver by any party
hereto of a breach of any provision of this Agreement shall not operate or be
construed as a waiver of any other or subsequent breach. No failure on the part
of either party hereto to exercise, and no delay in exercising, any right
hereunder shall operate as a waiver thereof. The remedies herein are cumulative
and not exclusive of any remedies provided by law.
16.12 KNOWLEDGE. Whenever used herein with respect to the Seller, the
Company and its Subsidiaries, the term "knowledge" or "best knowledge" shall
mean the actual knowledge of Jack D. Rutherford, Arthur Canfield, Bill Brown,
Thomas Pietrocini, Michael Huber and Steven Ferree. Notwithstanding any notice
provided pursuant to Section 7.2, the Seller acknowledges and agrees that the
Buyer's right to rely on the representations
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<PAGE> 51
and warranties of the Seller with respect to itself and the Company and its
Subsidiaries shall not be affected in any way by any investigation conducted by
the Buyer.
16.13 SEVERABILITY. In the event that any provision in this Agreement
shall be determined to be invalid, illegal or unenforceable in any respect, the
remaining provisions of this Agreement shall not be in any way impaired, and the
illegal, invalid or unenforceable provision shall be fully severed from this
Agreement and there shall be automatically added in lieu thereof a provision as
similar in terms and intent to such severed provision as may be legal, valid and
enforceable.
16.14 ENTIRE AGREEMENT. This Agreement and the Schedules and Exhibits
hereto constitute the entire contract between the parties hereto pertaining to
the subject matter hereof, and supersede all prior agreements and understandings
between the parties with respect to such subject matter (except with respect to
that certain Confidentiality Agreement by and between Buyer and Seller which
shall not be superseded hereby in the event of a termination of this Agreement
for any reason before Closing).
16.15 ARBITRATION; SUBMISSION TO JURISDICTION.
(a) Any dispute relating to this Agreement or the Seller Ancillary
Documents or the Buyer Ancillary Documents or the performance by the
parties of their respective obligations hereunder, which is not resolved
after the parties' attempt at amicable negotiations, shall be finally
settled by arbitration. If such a dispute arises, either party may initiate
arbitration proceedings by filing a demand for arbitration with the other
party and the New York, New York office of the American Arbitration
Association (the "AAA"). In making the selection of the arbitrators, each
party will select one arbitrator and the two arbitrators selected will
mutually agree upon the third arbitrator in accordance with the Commercial
Rules of Arbitration of the AAA. If the two selected arbitrators are unable
to agree on the third arbitrator, then the third arbitrator will be
selected in accordance with the Commercial Rules of Arbitration of the AAA.
All arbitration proceedings shall be conducted in accordance with the
Commercial Rules of Arbitration of the AAA before three arbitrators
selected in accordance with the Commercial Rules of Arbitration of the AAA.
All arbitration proceedings shall be held in New York, New York. The
arbitrator's award resulting from such arbitration may be confirmed and
entered as a final judgment in any court of competent jurisdiction and
enforced accordingly.
(b) The enforcement of any arbitration award or any legal action or
proceeding relating in any way to any other matter concerning any
arbitration proceeding pursuant to Section 16.15(a) above may be brought
and enforced in the federal courts of the United States for the Southern
District of New York, and (i) the Seller accepts for itself, the Company
and the Subsidiaries and in respect of its property, and (ii) the Buyer
accepts for itself and in respect of its property, each generally,
irrevocably and unconditionally, the jurisdiction of each such court in
respect of any such action or proceeding; PROVIDED THAT if for whatever
reason the federal courts of the United States for the Southern District of
New York will not
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<PAGE> 52
or cannot hear such action or proceeding, it may be brought and enforced in
the courts of the State of New York in The City of New York, Borough of
Manhattan. The Seller and the Buyer each agree that a judgment, after
exhaustion of all available appeals, in any such action or proceeding shall
be conclusive and binding upon, and may be enforced in any other
jurisdiction, by a suit upon such judgment, a certified copy of which shall
be conclusive evidence of the judgment. The Seller and the Buyer each
irrevocably designate, appoint and empower CT Corporation System, with
offices at 1633 Broadway, New York, New York 10019, as its designee,
appointee and agent to receive service of any and all legal process,
summons, notices and documents which may be served in any such action or
proceeding and agree that the failure of any such agent to give any advice
of service of process to it shall not impair or affect the validity of such
service or of any such judgment based thereon. If for any reason such
designee, appointee and agent shall cease to be available to act as such,
the Seller and the Buyer each agree to designate a new designee, appointee
and agent in New York City on the terms and for the purposes of this
provision reasonably satisfactory to the other party. The Seller and the
Buyer each further irrevocably consent to the service of process out of any
of the aforementioned courts in any such action or proceeding by the
mailing of copies thereof by registered or certified mail, postage prepaid,
to such party, at its address set forth in Section 16.5, such service to
become effective 30 days after such mailing. Nothing herein shall affect
the right of the Seller or the Buyer to serve process in any other manner
permitted by law or to commence legal proceedings or otherwise proceed
against the Seller or the Buyer in any other jurisdiction.
(c) The Seller and the Buyer each hereby irrevocably waive any
objection which it may now or hereafter have to the laying of venue of any
of the aforesaid actions or proceedings arising out of or in connection the
enforcement of any arbitrator's award or any other matter relating to any
arbitration proceeding pursuant to Section 16.15(a) above brought in the
courts referred to in clause (b) above, and hereby further irrevocably
waive and agree not to plead or claim in any such court that any such
action or proceeding brought in any such court has been brought in an
inconvenient or improper forum.
16.16 OVERALL ADJUSTMENT/INDEMNIFICATION LIMITATION. Notwithstanding
anything in this Agreement to the contrary, in no event shall the aggregate sum
of (i) the EBITDA Shortfall Amount, if any, (ii) the Working Capital Adjustment
Amount, if any, plus or minus the amount of any change thereto pursuant to
Section 2.3(c), (iii) any Employment Claim(s) actually paid by Seller, if any,
and (iv) any Losses actually paid by Seller to Buyer pursuant to Section 12.1,
if any, exceed $3,700,000.
[Remainder of page left blank intentionally]
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<PAGE> 53
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be signed by its duly authorized officer as of the date first above
written.
MAAG HOLDING AG
By:
----------------------------------
Name:
Title:
SINTER METALS, INC.
By:
----------------------------------
Name:
Title:
<PAGE> 1
EXHIBIT 2.2
-----------
KREBSOGE STOCK PURCHASE AGREEMENT
by and between
MAAG HOLDING AG
as Seller
and
SINTER METALS, INC.
as Buyer
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I DEFINITIONS............................................................. -1-
ARTICLE II PURCHASE AND SALE OF SHARES AND OTHER SHARES............................ -7-
2.1 Sale, Purchase, Transfer, Assignment and
Acceptance (schuldrechtliches und dingliches
Rechtsgeschaft)................................................................ -7-
2.2 Profits........................................................................ -7-
2.3 Consideration.................................................................. -7-
2.4 Indemnity Escrow Account....................................................... -7-
ARTICLE III REPRESENTATIONS AND WARRANTIES
CONCERNING SELLER....................................................... -9-
3.1 Organization and Good Standing................................................. -9-
3.2 Authority of Seller............................................................ -9-
3.3 No Conflict or Breach.......................................................... -9-
3.4 Consents and Approvals......................................................... -10-
3.5 Share Ownership................................................................ -10-
3.6 Financial Advisors............................................................. -11-
ARTICLE IV REPRESENTATIONS AND WARRANTIES CONCERNING THE
COMPANY AND SUBSIDIARIES................................................ -11-
4.1 Organization and Good Standing................................................. -11-
4.2 Capitalization................................................................. -11-
4.3 Subsidiaries................................................................... -12-
4.4 No Conflict or Breach.......................................................... -13-
4.5 Consents and Approvals......................................................... -14-
4.6 Financial Statements........................................................... -14-
4.7 Title to Assets................................................................ -15-
4.8 Real Property.................................................................. -15-
4.9 Contracts...................................................................... -16-
4.10 Intellectual Property.......................................................... -17-
4.11 Litigation..................................................................... -18-
4.12 Taxes.......................................................................... -18-
4.13 Environmental Protection....................................................... -18-
4.14 Labor and Employment Matters................................................... -19-
4.15 Employee Benefit Plans......................................................... -20-
4.16 Absence of Certain Changes..................................................... -21-
4.17 Insurance...................................................................... -22-
4.18 Capital Projects............................................................... -22-
4.19 Condition of Properties and Equipment.......................................... -23-
4.20 No Undisclosed Liabilities..................................................... -23-
4.21 Entirety of Business........................................................... -23-
4.22 Compliance with Laws........................................................... -23-
4.23 Completeness of Warranties..................................................... -23-
4.24 Inventory...................................................................... -23-
4.25 Receivables.................................................................... -24-
4.26 Customers and Suppliers........................................................ -24-
4.27 Indebtedness................................................................... -24-
</TABLE>
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<PAGE> 3
<TABLE>
<CAPTION>
<S> <C>
ARTICLE V REPRESENTATIONS AND WARRANTIES OF BUYER............................................. -25-
5.1 Organization and Good Standing............................................................. -25-
5.2 Authority.................................................................................. -25-
5.3 No Conflict or Breach...................................................................... -25-
5.4 Consents and Approvals..................................................................... -25-
5.5 [Intentionally Left Blank.................................................................. -26-
5.6 Financial Advisors......................................................................... -26-
5.7 Financing.................................................................................. -26-
ARTICLE VI COVENANTS OF SELLER................................................................. -26-
6.1 Conduct of Business........................................................................ -26-
6.2 Access and Information..................................................................... -28-
6.3 No Solicitation............................................................................ -29-
6.4 Confidentiality............................................................................ -29-
6.5 Repayment of Indebtedness.................................................................. -29-
6.6 Intentionally Left Blank................................................................... -30-
6.7 Other Actions.............................................................................. -30-
6.8 Intentionally Left Blank................................................................... -30-
6.9 Working Capital............................................................................ -30-
6.10 Director Resignations...................................................................... -30-
6.11 Intellectual Property...................................................................... -30-
6.12 Other Assistance........................................................................... -30-
6.13 Consents................................................................................... -31-
ARTICLE VII COVENANTS OF BUYER.................................................................. -31-
7.1 Confidentiality............................................................................ -31-
7.2 Disclosure to Seller....................................................................... -31-
7.3 Management Notification.................................................................... -32-
ARTICLE VIII MUTUAL COVENANTS.................................................................... -32-
8.1 GWB Filings................................................................................ -32-
8.2 Casualty or Loss........................................................................... -32-
8.3 Further Actions............................................................................ -32-
ARTICLE IX CONDITIONS PRECEDENT TO BUYER'S OBLIGATIONS......................................... -33-
9.1 Representations and Warranties............................................................. -33-
9.2 Compliance with Covenants.................................................................. -33-
9.3 Absence of Litigation...................................................................... -34-
9.4 Antitrust Filings.......................................................................... -34-
9.5 Required Consents.......................................................................... -34-
9.6 No Injunction, etc......................................................................... -34-
9.7 Acquisition of Other Shares................................................................ -35-
9.8 Legal Opinion.............................................................................. -35-
9.9 Financing.................................................................................. -35-
9.10 Powder Metal Holding, Inc. Sale............................................................ -35-
9.11 Intentionally Left Blank................................................................... -35-
9.12 Indemnity Escrow Agreement................................................................. -35-
9.13 Intentionally Left Blank................................................................... -35-
9.14 Release or Termination of Liens............................................................ -35-
9.15 Payment of Indebtedness.................................................................... -35-
9.16 U.S. Real Property Holding Company......................................................... -36-
9.17 Swiss Opinion.............................................................................. -36-
</TABLE>
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<PAGE> 4
<TABLE>
<CAPTION>
<S> <C>
ARTICLE X CONDITIONS PRECEDENT TO SELLER'S OBLIGATIONS........................................ -36-
10.1 Representations and Warranties............................................................. -36-
10.2 Compliance with Covenants.................................................................. -36-
10.3 Absence of Litigation...................................................................... -36-
10.4 Antitrust Filings.......................................................................... -37-
10.5 No Injunction, Etc......................................................................... -37-
10.6 Legal Opinion.............................................................................. -37-
ARTICLE XI CLOSING............................................................................. -37-
11.1 Closing.................................................................................... -37-
11.2 Deliveries by Seller....................................................................... -38-
11.3 Deliveries by Buyer........................................................................ -39-
ARTICLE XII INDEMNIFICATION............................................................................ -39-
12.1 Indemnification by Seller.................................................................. -39-
12.2 Indemnification by Buyer................................................................... -40-
12.3 Notice of Claim............................................................................ -40-
12.4 Defense.................................................................................... -41-
12.5 Time for Claims (Verjahrung)............................................................... -41-
12.6 Limitation................................................................................. -42-
12.7 Characterization........................................................................... -42-
12.8 Indemnity Amounts.......................................................................... -42-
ARTICLE XIII TAX MATTERS......................................................................... -43-
13.1 Straddle Periods........................................................................... -43-
13.2 Carrybacks................................................................................. -43-
ARTICLE XIV TERMINATION......................................................................... -43-
14.1 Termination................................................................................ -43-
14.2 Effect on Obligations...................................................................... -44-
ARTICLE XV EMPLOYEES........................................................................... -45-
ARTICLE XVI MISCELLANEOUS....................................................................... -45-
16.1 Access After the Closing Date.............................................................. -45-
16.2 Payment of Expenses........................................................................ -45-
16.3 Publicity.................................................................................. -46-
16.4 Commercially Reasonable Efforts............................................................ -46-
16.5 Notices.................................................................................... -46-
16.6 Governing Law.............................................................................. -47-
16.7 German Statutory Law....................................................................... -47-
16.8 Counterparts............................................................................... -47-
16.9 Assignment................................................................................. -47-
16.10 Third Party Beneficiaries.................................................................. -48-
16.11 Headings; References....................................................................... -48-
16.12 Amendments; Waiver......................................................................... -48-
16.13 Knowledge.................................................................................. -48-
16.14 Severability............................................................................... -48-
16.15 Entire Agreement........................................................................... -48-
16.16 Arbitration; Submission to Jurisdiction.................................................... -49-
16.17 Governing Language......................................................................... -50-
</TABLE>
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<PAGE> 5
SCHEDULES
Schedule 1.1 - Forecast of EBIT
Schedule 3.4 - Consent and Approvals
Schedule 3.5 - Share Ownership
Schedule 4.3(a) - Direct Subsidiaries
Schedule 4.3(b) - Indirect Subsidiaries
Schedule 4.3(c) - Subsidiary Shares
Schedule 4.3(d) - Other Participation
Schedule 4.4 - No Conflict or Breach
Schedule 4.5 - Consents and Approvals
Schedule 4.8(a) - Owned Real Property
Schedule 4.8(b) - Leased Real Property
Schedule 4.9(a) - Material Contracts with Automotive
Manufacturers
Schedule 4.9(b) - Material Employment Agreements
Schedule 4.9(c) - Material Purchase Orders with Suppliers
Schedule 4.9(d) - Material Equipment Maintenance Agreements
Schedule 4.9(e) - Material Other Agreements
Schedule 4.10 - Intellectual Property
Schedule 4.11 - Litigation
Schedule 4.12 - Tax Matters
Schedule 4.13 - Environmental Protection
Schedule 4.14 - Collective Bargaining Agreement
Schedule 4.15(a) - Employee Benefit Plans
Schedule 4.15(g) - Severance Pay
Schedule 4.15(h) - Employee Benefit Plan Reserves
Schedule 4.16 - Absence of Certain Changes
Schedule 4.18 - Capital Projects
Schedule 4.19 - Properties and Equipment
Schedule 4.20 - Undisclosed Liabilities
Schedule 4.22 - Compliance with Laws
Schedule 4.23 - Materials Provided to the Buyer
Schedule 4.26 - Customer and Suppliers
Schedule 4.27 - Indebtedness
Schedule 5.4 - Consents and Approvals of Buyer
Schedule 5.7 - Financing
Schedule 6.1(e) - Alterations of Material Contracts
Schedule 6.1(k) - Conduct of Business
Schedule 6.11 - Use of Intellectual Property
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<PAGE> 6
KREBSOGE STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (together with all Schedules and
Exhibits hereto, this "Agreement"), dated as of October 11, 1996, is entered
into by and between MAAG HOLDING AG, a Swiss corporation (which, together with
its successors and assigns, is herein referred to as the"Seller"), and SINTER
METALS, INC., a Delaware corporation ("the Buyer").
RECITALS:
WHEREAS, the Seller is the owner of shares representing an
aggregate stated capital (Stammkapital) of DM 29,400,000 (all such shares
hereinafter collectively being referred to as the "Shares") and SGL Carbon AG is
the owner of one share representing an aggregate stated capital (Stammkapital)
of DM 3,700,000 (all such shares hereinafter collectively being referred to as
the "Other Shares"), in KREBSOGE SINTERHOLDING GMBH, a German limited liability
company registered in the Commercial Register of the Local Court of Wipperfurth
under the registration number HRB 1430 (the "Company"), with a total stated
capital (Stammkapital) of DM 33,700,000;
WHEREAS, the Seller desires to sell, and the Buyer desires to
buy from Seller, all of the Shares and all of the Other Shares on the terms and
conditions set forth in this Agreement;
WHEREAS, simultaneously with its purchase of the Shares and
the Other Shares hereunder, the Buyer intends to purchase shares in Powder Metal
Holding, Inc., a Delaware corporation, pursuant to the Powder Metal Agreement,
which has been executed and which shall close simultaneously with this
Agreement;
WHEREAS, prior to the Closing, the Seller intends to purchase
and obtain good title to all of the Other Shares from SGL Carbon AG;
WHEREAS, in connection with or relative to this Agreement, the
Seller and Buyer have executed, delivered and performed certain Seller Ancillary
Documents and Buyer Ancillary Documents, including, without limitation, the Side
Agreement, dated as of September 26, 1996;
NOW, THEREFORE, the parties agree as follows:
ARTICLE I DEFINITIONS
As used in this Agreement, the following terms shall have the
following meanings:
"AFFILIATE" -- Has the meaning ascribed to such term in Rule
12b-2 promulgated under the Exchange Act by the United States
<PAGE> 7
Securities and Exchange Commission, as in effect on the date hereof.
"Aggregate Consideration" defined in Section 2.3.
"ANNUALIZED EBITDA" -- (x) the quotient of (i) EBIT of the
Company and the Subsidiaries, PLUS (ii) depreciation and amortization, PLUS
(iii) all other non-cash charges not in excess of DM 1 million in the aggregate
for the period beginning on January 1, 1996 and ending on the last day of the
month immediately preceding the month in which the Closing occurs divided by the
number of months in such period multiplied by (y) 12.
"BALANCE SHEET DATE" -- June 30, 1996.
"BUYER ANCILLARY DOCUMENT" -- Each other document or agreement
executed or to be executed by the Buyer in connection with or relating to this
Agreement.
"BUYER'S COUNSEL" -- Jones, Day, Reavis & Pogue or such other
counsel as is designated by the Buyer.
"CARTEL OFFICE" -- Defined in Section 8.1.
"CERCLA" -- The Comprehensive Environmental Response
Compensation and Liability Act, as amended.
"CLOSING" -- Defined in Section 11.1.
"CLOSING DATE" -- Defined in Section 11.1.
"COMPANY" -- Krebsoge Sinterholding GmbH, a German limited
liability company.
"COMPANY ACT" -- The German Act on Limited Liability Companies
(Gesetz betreffend die Gesellschaften mit beschrankter Haftung), as amended.
"DELIVERED DOCUMENT" - All documents, lists and disclosures
delivered on October 2, 1996 by Seller to Buyer and certified by Notary Dr.
Pilger as true and correct copies.
"DEUTSCHMARK" or "DM" -- German Marks.
"DIRECT SUBSIDIARIES" -- Defined in Section 4.3.
"EBIT" -- Earnings of the Company and the Subsidiaries before
interest and taxes as calculated in accordance with the principles of Swiss
Accounting and Reporting Recommendations on the basis set forth in the Company's
1996 Forecast of EBIT set forth on Schedule 1.1 excluding, however, any
non-recurring income or charges of whatever nature, all non-recurring expenses
or reductions in reserves and all reversals of accruals.
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<PAGE> 8
"EBITDA SHORTFALL AMOUNT" -- (x) the amount, if any, by which
Annualized EBITDA is less than DM 32.5 million, multiplied by (y) 6.28.
"EFFECTIVE TIME" -- Defined in Section 11.1.
"ENVIRONMENTAL LAWS" -- Any and all federal, state,
provincial, local or municipal laws, rules, orders, regulations, statutes,
ordinances, codes, decrees, requirements of any Governmental Authority or
Requirements of Law (including common law) regulating, relating to or imposing
liability or standards of conduct concerning protection of the environment, as
now or may at any time hereafter be in effect.
"EXCHANGE ACT" -- The Securities Exchange Act of 1934, as
amended from time to time, and the rules and regulations of the United States
Securities and Exchange Commission promulgated from time to time thereunder.
"FINANCIAL STATEMENTS" -- Defined in Section 4.6.
"FINANCING" -- Defined in Section 5.7.
"GERMAN GAAP" -- Generally accepted accounting principles as
in effect in the Federal Republic of Germany from time to time.
"GOVERNMENTAL AUTHORITY" -- Any nation or government, any
province or other political subdivision thereof, and any entity or person
exercising executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government.
"GWB ACT" -- The German Act Against Restraints on Competition
(Gesetz gegen Wettbewerbsbeschrankungen), as amended, and the rules and
regulations promulgated thereunder.
"HAZARDOUS MATERIALS" -- Any hazardous or toxic substances,
materials, pollutants or wastes, defined or regulated as such in or under any
Environmental Law or that could reasonably result in liability under any
Environmental Law, including crude oil petroleum and any fraction thereof.
"HSR ACT" -- The Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as amended, and the rules and regulations thereunder.
"INCOME TAX ACT"" -- The German Income Tax Act
(Einkommenssteuergesetz), as amended.
"INDEBTEDNESS" -- As to any Person, at any time, (a) all
indebtedness of such Person for borrowed money or for the deferred purchase
price of property or services (whether from public or private sources) (other
than current trade liabilities incurred in the ordinary course of business and
payable in accordance with customary practices), (b) any other indebtedness of
such Person
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<PAGE> 9
which is evidenced by a note, bond, debenture or similar instrument, (c) all
obligations of such Person under capitalized leases, (d) all obligations of such
Person in respect of acceptances issued or created for the account of such
Person, (e) all liabilities secured by any lien on any property owned by such
Person even though such Person has not assumed or otherwise become liable for
the payment thereof and (f) all guarantees of any Indebtedness or obligations
referred to in clauses (a) through (e) above.
"INDEMNIFIED PARTY" -- Defined in Section 12.3.
"INDEMNITY AMOUNTS" -- Defined in Section 12.8.
"INDEMNITY ESCROW ACCOUNT" -- Defined in Section 2.4.
"INDEMNITY ESCROW AGREEMENT" -- Defined in Section 2.4.
"INDEMNITY FUND" -- Defined in Section 2.4.
"INDEMNITY FUND DATE" -- Defined in Section 2.4.
"INDEMNITY LETTER OF CREDIT" -- Defined in Section 2.4.
"INDEMNITY OBLIGOR" -- Defined in Section 12.3.
"INDIRECT SUBSIDIARY" -- Defined in Section 4.3.
"INTELLECTUAL PROPERTY" -- Defined in Section 4.10.
"LEASED REAL PROPERTY" -- The land, buildings and structures
leased by the Company or any Subsidiary, as lessee, and listed in Schedule
4.8(b), including any additions thereto or substitutions therefor.
"LOAN AGREEMENTS" -- Defined in Section 9.14.
"LOSS" -- Defined in Section 12.1.
"MATERIAL ADVERSE EFFECT" -- A material adverse effect on or
material adverse change in the business, operations, property, results of
operations or financial condition of the Seller or the Company and the
Subsidiaries, taken as a whole, or the Buyer, as the case may be, or on the
ability of the Seller, the Company and the Subsidiaries or the Buyer, as the
case may be, to consummate the transactions contemplated hereby.
"MATERIAL CONTRACTS" -- All contracts, commitments, agreements
(including agreements for the borrowing of money or the extension of credit),
leases, licenses, guarantees, understandings and obligations, whether written or
oral, to which the Company or either of the Subsidiaries are party or by which
any of them are bound except for (a) contracts with automotive manufacturers
which may be canceled by the Company or either of the Subsidiaries
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<PAGE> 10
without penalty on not more than sixty days' notice; (b) employment contracts
providing for total annual compensation below DM 100,000 and miscellaneous
service contracts terminable on not more than sixty days' notice without
penalty; (c) purchase orders with suppliers involving payment by the Company or
the Subsidiaries of amounts less than DM 375,000 in the aggregate; (d) equipment
maintenance agreements involving payment by the Subsidiaries of amounts less
than DM 375,000 per year in the aggregate; and (e) other contracts not involving
other aggregate liabilities under all such contracts exceeding DM 375,000 in any
twelve month period.
"NET INDEBTEDNESS" -- On the Closing Date, all Indebtedness of
the Company and its Subsidiaries (excluding any accrued but unpaid interest
thereon) less the Company's and the Subsidiaries' cash on hand and cash
deposited in their respective bank accounts.
"NET INDEBTEDNESS ADJUSTMENT" -- The amount by which Net
Indebtedness on the day immediately preceding the Closing Date (i) exceeds DM
117,000,000, in which case the amount of such excess shall be added to the
Purchase Price pursuant to Section 2.3 or (ii) is less than DM 113,000,000, in
which case the amount less than DM 113,000,000 shall be deducted from the
Purchase Price as provided in Section 2.3.
"NON-WHOLLY OWNED SUBSIDIARIES" -- Defined in Section 4.3.
"OFFICER'S CERTIFICATE" -- Defined in Section 12.8.
"OTHER SHARES" -- Any one or more of the Shares of the Company
owned by SGL Carbon AG in the aggregate amount of DM 3,700,000, which constitute
10.98% of the stated capital (Stammkapital) of the Company.
"OWNED REAL PROPERTY" -- The land, building and structures
owned by the Company or any Subsidiary, including any additions thereto or
substitutions therefor.
"PERSON" -- An individual, partnership, corporation, business
trust, joint stock company, limited liability company, trust, unincorporated
association, joint venture, Governmental Authority or other entity of whatever
nature.
"PLANS" -- (a) Employee benefit plans whether or not funded
and whether or not terminated; (b) employment agreements; and (c) personnel
policies or fringe benefit plans, policies, programs and arrangements, whether
or not funded, and whether or not terminated, including, without limitation,
stock bonus, deferred compensation, pension, severance, bonus, vacation, travel,
incentive and health, disability and welfare.
"POWDER METAL AGREEMENT" -- Defined in Section 9.9.
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<PAGE> 11
"PURCHASE PRICE" -- Defined in Section 2.3.
"REAL PROPERTY LEASES" -- Defined in subsection 4.8(b).
"REPRESENTATIVES" -- Defined in Section 7.1.
"REQUIRED CONSENTS" -- Defined in Section 4.5.
"REQUIREMENTS OF LAW" -- As to any Person, the Articles of
Association, (Gesellschaftsvertrag) Certificate of Incorporation, and By-laws or
other organizational or governing documents of such Person, and any federal,
state, local, municipal, foreign, international, multinational or other
administrative order, constitution, ordinance, law (statutory or
otherwise), treaty, rule or regulation or determination of any arbitrator or
court or other Governmental Authority, in each case applicable to or binding
upon such Person or any of its property or to which such Person or any of its
property is subject.
"SELLER" -- MAAG Holding AG, a Swiss corporation, together
with its successors and assigns.
"SELLER ANCILLARY DOCUMENT" -- Each other document or
agreement executed or to be executed by the Seller, the Company or the
Subsidiaries, as the case may be, in connection with or relating to this
Agreement.
"SELLER'S COUNSEL" -- Cadwalader, Wickersham & Taft, or such
other counsel as is designated by Seller.
"SHARES" -- Any one or more of the shares of the Company owned
by the Seller in the aggregate amount of DM 29,400,000, which constitute 87.24%
of the stated capital (Stammkapital) of the Company.
"STOCK CORPORATION ACT" -- The German Act on Stock
Corporations (Aktiengesetz), as amended.
"SUBSIDIARIES" -- Defined in Section 4.3.
"SUBSIDIARY SHARES" -- Defined in Section 4.3.
"SURVIVAL DATE" -- Defined in Section 12.5.
"TAX OR TAXES" -- Any and all taxes, fees, levies, duties,
tariffs, imposts, and other charges of any kind (together with any and all
interest, penalties, additions to tax and additional amounts imposed with
respect thereto) imposed by any government or taxing authority, including,
without limitation: taxes or other charges on or with respect to income,
franchises, windfall or other profits, gross receipts, property, sales, use,
capital stock, payroll, employment, social security, workers' compensation,
unemployment compensation, or net worth; taxes or other charges in the nature of
excise, withholding, ad valorem, stamp, transfer, value added, or gains taxes;
license, registration and
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<PAGE> 12
documentation fees; and customs duties, tariffs, and similar charges.
"TAX RETURN OR TAX RETURNS" -- Any report, return declaration
or other information, or any amendment thereof, required to be filed or supplied
in connection with any Tax.
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<PAGE> 13
ARTICLE II PURCHASE AND SALE OF SHARES AND OTHER
SHARES
2.1 SALE, PURCHASE, TRANSFER, ASSIGNMENT AND ACCEPTANCE
(SCHULDRECHTLICHES UND DINGLICHES RECHTSGESCHAFT). Under the conditions
precedent (aufschiebende Bedingungen) contained in Articles IX and X of this
Agreement, the Seller hereby agrees to sell, and to transfer and assign
ownership to the Buyer, and the Buyer hereby agrees to buy, and to accept
transfer and assignment of ownership from the Seller in respect to, all, and not
less than all, of the Shares and the Other Shares, free and clear of all claims,
liens, security interests, charges, community property interests, equitable
interests, options, pledges, rights of first refusal or restrictions or
encumbrances of any kind, including any restrictions on use, transfer, voting,
receipt of income or other attribute of ownership, other than those created by
the Buyer. The transfer and assignment of ownership (dingliche Wirkung) of the
Shares and the Other Shares by the Seller to the Buyer, and the acceptance by
the Buyer of such transfer and assignment of ownership (dingliches
Rechtsgeschaft), shall occur on the Closing Date as more closely described in
Sections 11.2 and 11.3.
2.2 PROFITS. Upon the effectiveness of the transactions
contemplated in this Agreement, the Buyer and any remaining shareholder shall be
entitled to the profits of the Company and the Subsidiaries in the current
fiscal year and in any previous fiscal year, if such previous profits have not
been distributed to the shareholders of the Company and the Subsidiaries.
2.3 CONSIDERATION. The purchase price (the "Purchase Price")
to be paid for the Shares and the Other Shares shall be an amount equal to (a)
(i) $150,000,000 (the "Aggregate Consideration") minus (ii) the sum of (x) the
principal amount of all Indebtedness of the Company and the Subsidiaries
(whether assumed by the Buyer or paid on behalf of the Seller) and (y) the
EBITDA Shortfall Amount, if any, and (iii) plus or minus, as appropriate, the
Net Indebtedness Adjustment, if any, as appropriate multiplied by (b) a
fraction, the numerator of which shall be the aggregate stated capital
(Stammkapital) of the Shares and the Other Shares sold to the Buyer on the
Closing Date and the denominator of which shall be the aggregate stated capital
(Stammkapital) of all the shares of the Company on a fully-diluted basis. The
Purchase Price shall be paid to Seller by wire transfer of immediately available
funds at the Closing.
2.4 INDEMNITY ESCROW ACCOUNT. (a) At the Closing, the Buyer
shall deposit DM 15,000,000 (which may be in the form of an irrevocable, direct
pay letter of credit or similar bank guarantee (the "Indemnity Letter of
Credit") (in either case acceptable to the Buyer) from a financial institution
acceptable to the Buyer issued to the Escrow Agent on behalf of the Seller) into
an escrow account with an escrow agent mutually acceptable to the Buyer and the
Seller (the "Indemnity Escrow Account"). Such amount or
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<PAGE> 14
instrument shall be held in and paid out of the Indemnity Escrow Account in
accordance with the terms hereof and the terms of an Indemnity Escrow Agreement
to be entered into among the Buyer, the Seller and the escrow agent (the "Escrow
Agent"), in form and substance mutually agreeable among such parties (the
"Indemnity Escrow Agreement").
(b) Pursuant to the terms hereof and of the Indemnity Escrow
Agreement, funds held in the Indemnity Escrow Account or drawn under the
Indemnity Letter of Credit shall be applied by the Escrow Agent to make cash
payments to the Buyer equal to the Indemnity Amounts. The "Indemnity Amounts"
shall be those amounts which are due to the Buyer as indemnification pursuant to
the provisions of Section 12.1 hereof. The Escrow Agent shall promptly pay the
Indemnity Amounts out of the Indemnity Escrow Account to the Buyer in accordance
with Section 12.1 hereof and the Indemnity Escrow Agreement. The aggregate
Indemnity Amounts payable pursuant to Section 12.1 hereof may exceed the amount
of cash deposited by the Buyer on behalf of the Seller in the Indemnity Escrow
Account or the face amount of the Indemnity Letter of Credit deposited therein,
as the case may be.
(c) If the Seller deposited cash in the Indemnity Escrow
Account at the Closing, the Escrow Agent shall pay promptly to the Seller in
immediately available funds (i) on the sixth-month anniversary of the Closing
Date, one-half of the aggregate amount remaining in the Indemnity Escrow Account
on such date and not subject to any claim for Indemnity Amounts, and (ii) on the
Survival Date, the aggregate amount remaining in the Indemnity Escrow Account on
such date and not subject to any claim for Indemnity Amounts. If the Seller
deposited the Indemnity Letter of Credit in the Indemnity Escrow Account at the
Closing, the face amount of the Indemnity Letter of Credit shall be reduced in a
corresponding manner pursuant to the terms of the Indemnity Escrow Agreement.
(d) In the event claims to Indemnity Amounts shall have been
made on or prior to the Survival Date pursuant to Section 12.1, and such claims
shall not be resolved or paid as of such date, an amount (the "Indemnity Fund")
equal to such unresolved or unpaid claims (or an Indemnity Letter of Credit with
a face value equal to such amount) shall be held by the Escrow Agent in escrow,
and not distributed, until following the date of resolution or payment to the
Buyer of such claims, together with interest thereon (the "Indemnity Fund
Date"). Promptly after the Indemnity Fund Date, the Escrow Agent shall pay
promptly to the Seller in immediately available funds the aggregate amount
remaining in the Indemnity Fund or return the Indemnity Letter of Credit.
(e) The Escrow Agent shall retain in the Indemnity Escrow
Account all income earned by the Indemnity Escrow Account pursuant to the
Indemnity Escrow Agreement.
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<PAGE> 15
(f) The Escrow Agent shall pay out of the Indemnity Escrow
Account all fees and expenses associated with the Indemnity Escrow Account, as
provided in the Indemnity Escrow Agreement, including, without limitation, its
own reasonable fees and expenses.
ARTICLE III REPRESENTATIONS AND WARRANTIES
CONCERNING SELLER
The Seller represents and warrants to the Buyer in the form of
an independent guarantee (selbstandiges Garantieversprechen) as follows:
3.1 ORGANIZATION AND GOOD STANDING. The Seller is a stock
corporation duly organized, validly existing and in good standing under the laws
of its jurisdiction of organization, and has all requisite power and authority
to own, operate and lease its properties and assets and to conduct its business
as presently conducted. A True, complete and correct copy of the Excerpt from
the Commercial Registry in respect of the Seller, as amended to date, has been
furnished to the Buyer. No bankruptcy or conciliation proceedings have been
initiated in respect to the Seller.
3.2 AUTHORITY OF SELLER. The Seller has all requisite power
and authority to execute and deliver this Agreement and any Seller Ancillary
Document, and to perform the transactions contemplated hereby and thereby. The
execution, delivery and performance of this Agreement and any Seller Ancillary
Document in connection herewith have been duly and validly authorized by all
necessary corporate and shareholder action on the part of the Seller and no
further such action is required on the part of the Seller or its shareholders.
This Agreement has been, and each of the Seller Ancillary Documents will be, on
or prior to the Closing Date, duly executed and delivered by the Seller and each
constitutes or will constitute a valid and binding obligation of the Seller,
enforceable in accordance with its respective terms, except that enforceability
hereof or thereof may be limited by bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium or other similar laws affecting
creditors' rights generally, general equitable principles (whether considered in
a proceeding in equity or at law) and an implied covenant of good faith and fair
dealing.
3.3 NO CONFLICT OR BREACH. The execution, delivery and
performance of this Agreement and each of the Seller Ancillary
Documents do not and will not:
(a) conflict with or constitute a violation of the
Articles of Association (Statuten), any other constituent documents
and the excerpt from the Commercial Registry of the Seller;
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<PAGE> 16
(b) assuming compliance with the requirements of the GWB Act
(and HSR Act, if required), conflict with or constitute a violation of
any law, statute, judgment, order, decree or regulation of any
legislative body, court, administrative agency, Governmental Authority
or arbitrator applicable to or relating to the Seller or its properties
or assets; or
(c) conflict with, violate or result in a breach of, or
constitute a default (or an event which, with notice or lapse of time
or both would constitute a default) under, or result in the termination
of or accelerate the performance required by, or result in a right of
termination or acceleration under, any mortgage, note, indenture, deed
of trust, lease, loan agreement or other agreement or instrument
applicable to the Seller or its properties or assets, or any subsidy or
incentive provided to the Seller by any federal, state, provincial, or
local judicial authority or Governmental Authority or administrative
agency, except for conflicts, violations, breaches or defaults which,
individually or in the aggregate, could not reasonably be expected to
have a Material Adverse Effect.
3.4 CONSENTS AND APPROVALS. Except as set forth on Schedule
3.4, no (a) consent, approval, authorization, registration or filing with any
federal, state or local judicial or Governmental Authority or administrative
agency (including the German Federal Agency for Reunification-Related
Extraordinary Tasks (Bundesanstalt fur vereinigungsbedingte Sonderaufgaben)),
other than as required under the GWB Act (and, if required, the HSR Act), or (b)
consent, approval, authorization of or notice to any other third party, is
required in connection with the valid execution, delivery and performance by the
Seller of this Agreement or any of the Seller Ancillary Documents or the
consummation by the Seller of the transactions contemplated herein or therein.
3.5 SHARE OWNERSHIP. The Seller is the owner, beneficially and
of record, of all of the Shares and, on the Closing Date, the Other Shares. At
the Closing, the Seller will deliver or cause to be delivered to the Buyer full
right, title and interest in and to the Shares and the Other Shares, free and
clear of all liens, security interests, charges, community property interests,
equitable interests, options, pledges, rights of first refusal or encumbrances
of any kind, including any restrictions on use, transfer, voting, receipt of
income or other attribute of ownership. Except as set forth on Schedule 3.5, the
Seller is not a party to any option, warrant, right, contract, call, put or
other agreement or commitment providing for the disposition or acquisition of
any of the capital stock of the Company, including the Shares and the Other
Shares (other than as set forth in this Agreement). The Shares and the Other
Shares, taken together, do not constitute all or substantially all of the assets
of the Seller for purposes of Article 181 of the Swiss Code of Obligations
(Obligationenrecht) dated March 30, 1911, as amended. On the
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<PAGE> 17
Closing Date, the only holder of the Shares, Other Shares or any other stated
capital (Stammkapital) of the Company other than the Seller is Dr. Lothar
Albano-Muller. Schedule 3.5 contains a complete and correct description of the
development of the stated capital (Stammkapital) and the changes in shareholders
of the Company since its incorporation, including a list of all notarial
documents providing for the incorporation, for the increase or decrease of the
stated capital, and for the transfer of shares in the Company. The Shares
constitute all of the shares of the stated capital of the Company which are
owned by the Seller.
3.6 FINANCIAL ADVISORS. Except for Europeans Investors
Corporate Finance, Inc. and Botts & Company Limited, for whose fees the Seller
shall be solely responsible, the Seller has not retained any finder, broker,
agent or other intermediary to act for it or on its behalf in connection with
the negotiation or consummation of this Agreement, and no party has made any
claim for any brokerage commission, finder's fee or similar payment due from the
Seller. None of the Company or any of the Subsidiaries nor any of their
respective managing directors (Geschaftsfuhrer), officers, directors or
employees has employed any broker, finder or investment banker or incurred any
liability for any brokerage fees, commissions, finders' fees or investment
banking fees in connection with the transactions contemplated hereby.
ARTICLE IV REPRESENTATIONS AND WARRANTIES
CONCERNING THE COMPANY AND SUBSIDIARIES
The Seller represents and warrants to the Buyer in the form of
an independent guarantee (selbstandiges Garantieversprechen) as follows:
4.1 ORGANIZATION AND GOOD STANDING. The Company and each
Subsidiary are each companies duly organized and validly existing under the laws
of its jurisdiction of organization. The Company, each Subsidiary and each
Non-Wholly Owned Subsidiary have all requisite corporate power and authority and
governmental authorizations to own, operate and lease its properties and assets
and to carry on its respective business as presently conducted. The Company,
each Subsidiary and each Non-Wholly Owned Subsidiary have all corporate power
and authority to consummate the transactions contemplated by this Agreement and
any Seller Ancillary Document. Complete and correct copies of each of the
Subsidiaries' constituent documents and governing instruments, each as amended
to date, have been furnished to the Buyer. There are no shareholder resolutions
in existence which amend the Articles of Association (Gesellschaftsvertrag) of
the Company or any Subsidiary and which have not been registered in the
Commercial Register or, if required under applicable law, any similar register.
No bankruptcy or conciliation proceedings have been initiated in respect to the
Company, any Subsidiary or Non- Wholly Owned Subsidiary.
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<PAGE> 18
4.2 CAPITALIZATION. The authorized stated capital
(Stammkapital) of the Company consists of: (i) shares owned by the Seller in the
aggregate nominal amount of DM 29,400,000, (ii) one share in the nominal amount
of DM 3,700,000, and (iii) one share in the nominal amount of DM 600,000. The
Shares and the Other Shares have been validly issued and are fully paid and
nonassessable. The shareholders of the Company and of any Subsidiary are not
required to make additional capital contributions (keine Nachschu(beta)pflicht).
None of the capital contributions of any shareholder of the Company or the
Subsidiary have been paid back to any shareholder. There are no outstanding or
authorized options, warrants, rights, contracts, calls, puts, rights to
subscribe, conversion rights or other agreements or commitments or rights of any
kind to which the Company or the Seller is a party or which are binding upon the
Company providing for the issuance, disposition or acquisition or voting of any
of the stated capital (Stammkapital) or other equity or similar interest of the
Company (other than this Agreement), or giving rise to any rights in connection
with the disposition, acquisition or voting of any of the Shares or the Other
Shares. There are no voting trusts, proxies or any other agreements or
understandings with respect to the voting of any stated capital (Stammkapital)
of the Company. Except as set forth on Schedule 3.5, the Company is not subject
to any obligation (contingent or otherwise) to repurchase or otherwise acquire
or retire any of its stated capital (Stammkapital). The shareholders of the
Company have not resolved to increase the stated capital (Stammkapital) of the
Company.
4.3 SUBSIDIARIES.
(a) DIRECT SUBSIDIARIES. The Company is the owner,
beneficially and of record, of all of the shares of the companies
listed in Schedule 4.3(a) hereto and, except as contained in Delivered
Document 4.5, free and clear of all liens, security interests, charges,
community property interests, equitable interests, options, pledges,
rights of first refusal or restrictions or encumbrances of any kind,
including any restrictions on use, transfer, voting, receipt of income
or other attribute of ownership (other than liens that will be released
at Closing and liens related to Indebtedness assumed by the Buyer).
(Such companies are referred to herein as the "Direct Subsidiaries").
The authorized stated capital (Stammkapital) of each of the Direct
Subsidiaries is as shown in Schedule 4.3(a).
(b) INDIRECT SUBSIDIARIES. The Direct Subsidiaries listed in
Schedule 4.3 (a) are the owners, beneficially and of record, of shares
of the companies listed in Schedule 4.3(b), free and clear of all
liens, security interests, charges, community property interests,
equitable interests, options, pledges, rights of first refusal or
restrictions or encumbrances of any kind, including any restrictions on
use, transfer, voting, receipt of income or other attribute of
ownership (other than liens that will be released at Closing
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and liens related to Indebtedness assumed by the Buyer). (Such
companies other than Krebsoge Excel (Filters) PVT, Ltd., Krebsoge
Feida Danyang Filters and Sintered Metal Components (Pty.) Ltd. are
referred to herein as the "Indirect Subsidiaries," Krebsoge Excel
(Filters) PVT, Ltd., Krebsoge Feida Danyang Filters and Sintered Metal
Components (Pty). Ltd. are referred to herein as the "Non-Wholly Owned
Subsidiaries" and the Indirect Subsidiaries and the Direct
Subsidiaries are referred to herein as the "Subsidiaries". The shares
in the Subsidiaries and the shares in the Non-Wholly Owned
Subsidiaries are collectively referred to herein as the "Subsidiary
Shares"). The authorized stated capital (Stammkapital) of each of the
Indirect Subsidiaries and Non-Wholly Owned Subsidiaries is as shown in
Schedule 4.3(b).
(c) SUBSIDIARY SHARES. All of the Subsidiary Shares have been
validly issued and are fully paid and nonassessable. Except as set
forth on Schedule 4.3(c) and contained in Delivered Document 4.3(c),
there are no outstanding or authorized options, warrants, rights,
contracts, calls, puts, rights to subscribe, conversion rights or
other agreements, commitments or rights of any kind to which any
Subsidiary or Non-Wholly Owned Subsidiary or the Seller or the Company
is a party or which are binding upon any Subsidiary or Non-Wholly
Owned Subsidiary providing for the issuance, disposition, acquisition
or voting of any of its stated capital (Stammkapital), or giving rise
to any rights in connection with the disposition, acquisition or
voting of any of the Subsidiary Shares. Except as set forth on
Schedule 4.3(c), there are no voting trusts, proxies or any other
agreements or understandings with respect to the voting of the stated
capital (Stammkapital) of any Subsidiary or Non-Wholly Owned
Subsidiary. No Subsidiary or Non-Wholly Owned Subsidiary is subject to
any obligation (contingent or otherwise) to repurchase or otherwise
acquire or retire any of its stated capital (Stammkapital).
(d) OTHER PARTICIPATIONS. The Subsidiaries and Non- Wholly Owned
Subsidiaries are the only entities in which the Company owns, directly
or indirectly, any stated capital (Stammkapital), share capital or
other equity interest other than equity interests held for investment
in the ordinary course of business. Except as disclosed on Schedule
4.3 (d), the Company is not a member in any partnership
(Personengesellschaft), including silent partnerships, cooperatives
(Genossenschaften) or joint ventures. Except as disclosed on Schedule
4.3 (d), there are no enterprise contracts (Unternehmensvertrage) as
defined in Sections 291 and 292 of the Stock Corporation Act, to which
the Company or any Subsidiary or Non-Wholly Owned Subsidiary is a
party.
4.4 NO CONFLICT OR BREACH. Except as set forth on Schedule 4.4
or contained in Delivered Document 4.4, the execution, delivery and performance
of this Agreement or the Seller Ancillary
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Documents by the Seller or the performance of this Agreement by the Company does
not and will not:
(a) conflict with or constitute a violation of the Articles of
Association (Gesellschaftsvertrag) or other governing instrument of
the Company or any Subsidiary;
(b) assuming compliance with the requirements of the GWB Act
(and, if required, the HSR Act), conflict with or constitute a
violation of any Requirement of Law applicable to or relating to the
Company or any Subsidiary in any manner that would have a Material
Adverse Effect; or
(c) conflict with, constitute a default under, result in a breach
or acceleration of or, give to others any interest or rights under or
require notice to or the consent of any third party under any
contract, agreement, commitment, mortgage, note, license or other
instrument or obligation applicable to the Company or any Subsidiary
or their respective properties or assets, or any subsidy or incentive
provided to the Company or any Subsidiary by any federal, state,
provincial or local judicial or Governmental Authority or
administrative agency.
4.5 CONSENTS AND APPROVALS. Schedule 4.5 describes each of the
following which is required on the part of the Company or the Subsidiaries in
connection with the execution and delivery by the Seller of this Agreement or
any Seller Ancillary Document or the consummation by the Seller or the Company
or any Subsidiary, of the transactions contemplated herein or therein: (a) each
consent, approval, authorization, registration, permit, notice or filing with
any federal, state or local judicial or Governmental Authority or administrative
agency, other than as required under the GWB Act (and, if required, the HSR Act)
and (b) each consent, approval, authorization of or notice to any other third
party as contained in Delivered Document 4.5, except with respect to clause (a)
or (b) above, such consents, approvals, authorizations and notices as the
failure to obtain or give would not have a Material Adverse Effect. The consents
described on Schedule 4.5 shall be referred to collectively herein as the
"Required Consents."
4.6 FINANCIAL STATEMENTS. The Buyer has received copies of (a)
the audited consolidated financial statements of the Company and its
Subsidiaries for the fiscal years ended December 31, 1994 and December 31, 1995
and (b) unaudited interim consolidated financial statements of the Company and
its Subsidiaries, for the period ended on the Balance Sheet Date. The financial
statements referred to in the previous sentence are sometimes referred to as the
"Financial Statements." The Financial Statements have been prepared in
accordance with German GAAP (Grundsaetze ordnungsgemaesser Buchfuehrung und
Bilanzierung), consistently applied, from books and records which are maintained
in accordance with the controls and procedures of the Company and its
Subsidiaries with the exceptions that such interim statements do not contain the
disclosures required by German GAAP in notes accompanying financial statements,
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<PAGE> 21
and are subject to normal year-end adjustments. The Financial Statements fully
reflect reserves for commitments under any Plan of the Company or its
Subsidiaries, including pension commitments vested prior to December 31, 1986 to
the extent required under German or other applicable law. In respect to
Financial Statements for which the applicable statute of limitations has not
expired, the Company and the Subsidiaries have not obtained improper benefits
from transactions which were concluded with the Seller, with Affiliates, or with
third parties for the benefit of the Seller or Affiliates. A benefit shall for
example be deemed improper if the Company or the Subsidiaries have made or
received shipments, or have provided or received services, for which prices
other than market rate prices were charged for the benefit of the Company or any
Subsidiary. Except as noted the Financial Statements fairly present the
financial condition and results of operation of the Company and each of the
Subsidiaries, taken as a whole, as of the dates and for the periods indicated.
4.7 TITLE TO ASSETS. The Company and each Subsidiary has good
and marketable title to all of its Owned Real Property. Set forth on Schedule
4.8(a) is a list of all Owned Real Property having a value in excess of DM
75,000. The Company has good title to all tangible personal property owned by
the Company or such Subsidiary and used in the operations of the businesses of
the Company and each Subsidiary ("Tangible Personal Property") and to any and
all tangible personal properties necessary to the operation of the business of
each. Seller has heretofore delivered to Buyer a true and accurate list, dated
September 28, 1996, of all Tangible Personal Property owned by the Company or a
Subsidiary having a value in excess of DM 75,000. All such Owned Real Property
and Tangible Personal Property are owned by the Company free and clear of all
liens, charges, equitable interests, options, rights of first refusal,
encumbrances, claims, security interests, mortgages or pledges of any nature,
other than:
(a) liens arising as a consequence of any
Indebtedness;
(b) easements that could not be reasonably expected to
materially adversely affect the full use and enjoyment of the Owned
Real Property or the purposes for which it is currently used and/or
materially detract from its value;
(c) imperfections of title and encumbrances, if any, which, in
the aggregate, are not material to any of the Company or the
Subsidiaries, do not materially detract from the marketability or value
of the properties subject thereto, and could not be reasonably expected
to materially impair the operations of the owner thereof; and
(d) liens for taxes not yet due and payable.
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<PAGE> 22
4.8 REAL PROPERTY.
(a) OWNED. Schedule 4.8(a) contains a description of all Owned
Real Property having a value in excess of DM 75,000. True, correct and
complete copies of (i) certified land register excerpts and surveys of
the Owned Real Property and (ii) all documents evidencing any liens,
charges, equitable interests, options, rights of first refusal,
encumbrances, claims, security interests, mortgages or pledges of any
nature upon the Owned Real Property are contained in Delivered
Document 4.8(a). None of the liens, charges, equitable interests,
options, rights of first refusal, encumbrances, claims, security
interests, mortgages or pledges of any nature upon the Owned Real
Property secure obligations other than those of the Company or the
Subsidiaries. There are no liens, charges, equitable interests,
options, rights of first refusal, encumbrances, claims, security
interests, mortgages or pledges of any nature upon the Owned Real
Property which are not registered in the applicable land register.
None of the Seller or the Company or the Subsidiaries has received any
notice of any appropriation, condemnation or like proceeding, or of
any violation of any applicable zoning law, regulation or other law,
order, regulation or requirement relating to or affecting any Owned
Real Property. To the best knowledge of the Seller, there are no
material physical, structural or mechanical defects in any material
improvements on any of the Owned Real Property.
(b) LEASED. Schedule 4.8(b) and Delivered Document 4.8(b)
contains a description of all Real Property Leases to which the
Company or any Subsidiary is a party (the "Real Property Leases").
Each of the Real Property Leases is valid, binding and enforceable in
accordance with its terms (except that enforceability thereof may be
limited by bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium or other similar laws affecting creditors'
rights generally, general equitable principles (whether considered in
a proceeding in equity or at law) and an implied covenant of good
faith and fair dealing) and is in full force and effect and there have
been no defaults thereunder. None of the Seller or the Company or the
Subsidiaries have received any notice of any appropriation,
condemnation or like proceeding, or of any violation of any applicable
zoning law, regulation or other law, order, regulation or requirement
relating to or affecting any Leased Real Property. To the best
knowledge of the Seller, there are no material physical, structural or
mechanical defects in any material improvements on any of Leased Real
Property. Except as disclosed on Schedule 4.8(b), the sale of the
Shares and/or the Other Shares will not, with respect to any such Real
Property Lease, (i) permit the landlord to accelerate the rent or
cause any material lease terms to be renegotiated, (ii) constitute a
material default
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<PAGE> 23
thereunder, or (iii) except for the Required Consents, require the
consent of the landlord or any third party.
4.9 CONTRACTS. Schedules 4.9 (a)-(e) list all Material
Contracts. Copies of Material Contracts listed in Schedule 4.9 (e) are contained
in Delivered Document 4.9 (e). Each of the Material Contracts is valid, binding
and enforceable against the Company or the Subsidiary party thereto in
accordance with its terms (except that enforceability thereof may be limited by
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium or
other similar laws affecting creditors' rights generally, general equitable
principles (whether considered in a proceeding in equity or at law) and an
implied covenant of good faith and fair dealing) and is in full force and effect
and there have been no breaches or defaults thereunder. Except as disclosed on
Schedule 4.9, none of the sale of the Shares, the sale of the Other Shares, the
execution, delivery or performance of this Agreement or any Seller Ancillary
Document or the consummation of the transactions contemplated herein or therein
will, with respect to any Material Contract, (i) constitute a default
thereunder, (ii) require notice to or the consent of any person or party, except
for the Required Consents, or (iii) affect the continuation, validity and
effectiveness thereof or the terms thereof, except for such defaults, consents
and effects as do not and will not in the aggregate have a Material Adverse
Effect.
4.10 INTELLECTUAL PROPERTY. All of the following which is
owned by, issued to or licensed to either the Company or a Subsidiary is
"Intellectual Property": patents, patent applications, patent disclosures and
inventions (whether or not patentable and whether or not reduced to practice)
and any reissue, continuation, continuation-in-part, revision, extension or
reexamination thereof; trademarks, service marks, trade dress, logos, trade
names and corporate names together with all goodwill associated therewith, and
all translations, adaptations, derivations and combinations of the foregoing;
copyrights and copyrightable works; and all registrations, applications and
renewals for any of the foregoing; trade secrets and confidential information
(including, without limitation, formulae, know-how, manufacturing and production
processes and techniques, research and development information, drawings,
specifications, designs, plans, proposals, technical data, and customer and
supplier lists and related information); computer software (including, without
limitation, data and related documentation); other proprietary rights; and all
copies and tangible embodiments of the foregoing (in whatever form or medium),
in each case including the items claimed by employees of the Company or the
Subsidiaries and including, and all rights associated therewith.
(a) Schedule 4.10 sets forth a complete and correct list of all:
(i) patented or registered Intellectual Property or for which
applications or other applications for such registrations are pending;
(ii) all trade names and unregistered trademarks and service marks
owned or used by the
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<PAGE> 24
Company or a Subsidiary; and (iii) all licenses or similar agreements
or arrangements for the Intellectual Property to which the Company or
a Subsidiary is a party, either as licensee or licensor (including any
intracompany licensing arrangements) other than, in each case,
Intellectual Property that is not material to the Company or any
Subsidiary. None of the Non-Wholly Owned Subsidiaries owns or licenses
Intellectual Property which is material to the business of any
Non-Wholly Owned Subsidiary.
(b) Except as set forth in Schedule 4.10: (i) either the Company
or a Subsidiary owns and possesses all right, title and interest in
and to, or has a valid and enforceable license to use, the
Intellectual Property free and clear of all liens, licenses, security
interests, encumbrances and other restrictions; (ii) no claim by any
third party contesting the validity, enforceability, use or ownership
of any of the Intellectual Property has been made, is currently
outstanding or is threatened, and there are no grounds for the same;
(iii) neither the Company nor any Subsidiary has received any notices
of, and is not aware of any facts which indicate a likelihood of, any
infringement or misappropriation by, or conflict with, any third party
with respect to the Intellectual Property (including, without
limitation, any demand or request that the Company or a Subsidiary
license any rights from a third party); and (iv) to the best knowledge
of the Company, neither the Company nor any Subsidiary has infringed,
misappropriated or otherwise conflicted with any intellectual property
rights or other rights of any third parties other than, in the case of
clauses (ii), (iii) and (iv), those claims, infringements,
misappropriations and conflicts which could not reasonably be expected
to have a Material Adverse Effect.
4.11 LITIGATION. Except as set forth in Schedule 4.11, (i)
there are no claims, actions, suits, inquiries, hearings or investigations
pending or, to the best knowledge of Seller, threatened against the Company, or
any Subsidiary, (ii) to the best knowledge of Seller, there are no claims,
suits, inquiries, hearings or investigations pending or threatened against any
Non-Wholly Owned Subsidiary, except those which could not reasonably be
expected to have a Material Adverse Effect on any such Non-Wholly Owned
Subsidiary or (iii) which seeks to restrain or enjoin the consummation of the
transactions contemplated by this Agreement or any of the Seller Ancillary
Documents.
4.12 TAXES.
(a) The Company and each Subsidiary has paid and discharged, or
has reserved on the Financial Statements or its books and records, all
Taxes required to be paid and currently due as of the Closing Date in
respect of the business and operations of the Company and the
Subsidiaries and the Company and each Subsidiary has filed all Tax
Returns required in
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connection therewith to be filed. Neither the Company nor any
Subsidiary has executed or filed with the German tax authorities or
any other taxing authority, domestic or foreign, any extension or
agreement extending the period for the assessment or collection of any
Taxes, except for permitted statutory extensions. Neither the Company
nor any Subsidiary is a party to any pending action or proceeding and
neither the Company nor any Subsidiary has received written notice of
any audit or review of any Tax Return or report of the Company or any
Subsidiary which would result in the imposition of any Tax upon the
Company or any Subsidiary. In respect to Taxes for which the
applicable statute of limitations has not expired, there have not been
any concealed dividend distributions (verdeckte Gewinnausschuttungen)
by the Company or any of the Subsidiaries to any of its respective
shareholders.
(b) Schedule 4.12(b) sets forth the taxable years of Company and
each Subsidiary as to which the respective statutes of limitations
with respect to Taxes have not expired.
4.13 ENVIRONMENTAL PROTECTION.
(a) Except as set forth on Schedule 4.13, neither of the Company
nor any of the Subsidiaries has received any notice of violation,
alleged violation, noncompliance, liability or potential liability
regarding environmental matters or compliance with Environmental Laws.
To the Seller's knowledge, neither the Company nor any of the
Subsidiaries is subject to any ongoing investigation relating to or
arising out of any environmental matter.
(b) Except as set forth on Schedule 4.13, to the knowledge of the
Seller, neither the Company nor any Subsidiary has transported or
arranged for the transport of any Hazardous Materials (i) to any site
or location listed or proposed to be listed on the National Priorities
List as of September 1, 1996 or any other similar state list; or (ii)
to a location which could reasonably be expected to give rise to
liability under Environmental Laws.
(c) Except as set forth on Schedule 4.13, there is no condition
relative to the Company, or either of the Subsidiaries or their
respective operations or owned or used properties, including, but not
limited to, any contractual relationship, that could reasonably be
expected to result in any material violation of, or liability under,
applicable Environmental Laws or Environmental Permits (as defined
below) or, to the knowledge of the Seller, the Company or any of the
Subsidiaries, could interfere with continued material compliance with
applicable Environmental Laws in the future.
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<PAGE> 26
(d) Each of the Company and the Subsidiaries has obtained, or has
filed, all required applications for, all permits, licenses,
registrations, consents and other authorizations required under any
Environmental Law through the date hereof with respect to the
operation of the Company and the Subsidiaries ("Environmental
Permits"), except where the failure to have such permits or to file
such applications does not have a Material Adverse Effect, and all
such Environmental Permits are, and have continuously been, in full
force and effect.
(e) Except as set forth on Schedule 4.13, to the knowledge of the
Seller, no above or below ground storage tanks have ever been used for
the storage of Hazardous Materials on or at (i) the Owned Real
Property; (ii) the Leased Real Property; or (iii) any previously owned
or leased real property of the Company or the Subsidiaries.
(f) Except as set forth on Schedule 4.13, to the knowledge of the
Seller, there has never been a release (as defined in CERCLA) of
Hazardous Materials at, on, under or from any of the Owned Real
Property or Leased Real Property, or any previously owned or leased
real property of the Company or the Subsidiaries.
4.14 LABOR AND EMPLOYMENT MATTERS. With respect to
employment matters:
(a) On the Closing Date the Company and the Subsidiaries will
employ no more than 1,500 employees. After the execution of this
Agreement, the amendment or termination by the Company or any
Subsidiary of existing employment agreements with any of their
respective managing directors (Geschaftsfuhrer), officers, directors
or employees will require the express written approval of the Buyer
except in the ordinary course of business consistent with past
practice.
(b) Except as disclosed on Schedule 4.14, no collective
bargaining agreements apply to the Company or any Subsidiary. Copies
of all voluntary shops agreements (Betriebsvereinbarungen) are
contained in Delivered Document 4.14.
(c) There is no labor strike, dispute, slowdown, stoppage or
similar labor difficulty pending or threatened against or affecting
the Company or any of the Subsidiaries.
(d) There is no unfair labor practice charge or other complaint
pending or, to the best knowledge of the Seller, threatened against or
otherwise affecting the Company or any Subsidiary.
(e) The Company and Subsidiaries are in compliance with their
obligations pursuant to all notification and bargaining
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<PAGE> 27
obligations arising under any collective bargaining agreement, statute
or otherwise, respecting their employees.
4.15 EMPLOYEE BENEFIT PLANS. Schedule 4.15(a) contains a list
of, and Delivered Document 4.15 contains copies of, all Plans contributed to,
maintained or sponsored by the Company or the Subsidiaries to which any of them
are obligated to contribute, or with respect to which any of them has any
liability or potential liability.
(a) Except as disclosed in Schedule 4.15(a), neither the Company
nor any of the Subsidiaries contributes to, has any obligation to
contribute to or otherwise has any liability or potential liability
with respect to any voluntary Plan which provides health, life
insurance, accident or other "welfare-type" benefits to current or
future retirees or current or former employees, their spouses or
dependents.
(b) Each Plan of the Company and the Subsidiaries has been
maintained, operated, and administered in compliance with its terms
and any related documents or agreements and in compliance with all
applicable laws.
(c) Seller has previously delivered to Buyer true, complete and
correct copies of each of the Plans set forth on Schedule 4.15(a),
including all amendments thereto, and any other documents, forms, or
other instruments relating thereto reasonably requested by Buyer's
counsel.
(d) Except for routine claims for benefits, there is no pending
or threatened assessment, complaint, proceeding, audit, or
investigation of any kind in any court or Governmental Authority with
respect to any Plan of the Company and the Subsidiaries, nor to the
Seller's knowledge is there any basis for one.
(e) With respect to any insurance policy providing funding for
benefits under any Plan, (i) there is no liability of the Company or
the Subsidiaries in the nature of a retroactive or retrospective rate
adjustment, loss sharing arrangement, or other actual or contingent
liability, nor would there be any such liability if such insurance
policy were terminated on the date hereof, and (ii) no insurance
company issuing such policy is in receivership, conservatorship,
liquidation, or similar proceeding and, to the best of the Seller's
knowledge, no such proceedings with respect to any insurer are
imminent.
(f) The Company and the Subsidiaries have reserved all rights
necessary to amend or terminate each of the Plans of the Company and
the Subsidiaries without the consent of any other Person, except (i)
to the extent such rights are limited by any applicable collective
bargaining agreement or law, and (ii) with respect to claims under any
such Plan that are
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accrued but unpaid as of the date of such amendment or termination.
Neither the Company nor the Subsidiaries has agreed or committed to
make any amendments to any of the Plans of the Company and the
Subsidiaries.
(g) Except as disclosed in Schedule 4.15(g), neither the Company
nor any Subsidiary maintains any plans or programs or is a party to
any agreement that could result in the payment of severance pay or
similar compensation prior to the Closing, at the time of the Closing
or during the one-year period commencing on the Closing Date.
Aggregate payments under any such plan, program, or arrangement during
the one-year period commencing on the Closing Date will not exceed DM
150,000.
(h) In the Financial Statements, the Company and the Subsidiaries
have included adequate reserves for existing obligations under any
Plan on the basis of actuarial opinions (versicherungsmathematische
Gutachten) in accordance with Section 6a of the Income Tax Act. Except
as disclosed on Schedule 4.15(h), the Company and the Subsidiaries do
not have obligations under any Plan for which reserves have not been
included in the Financial Statements.
4.16 ABSENCE OF CERTAIN CHANGES. Except as described in
Schedule 4.16, since the Balance Sheet Date, the operations of the Company and
the Subsidiaries have been conducted only in the ordinary course and in a manner
consistent with past practice, and the Company and the Subsidiaries have not:
(a) suffered any uninsured damage, destruction, theft or loss to
any asset of the Company or the Subsidiaries of a value in excess of
DM 500,000 in the aggregate;
(b) sold, transferred, distributed or otherwise disposed of any
assets used in the operation of the Company or the Subsidiaries, or
returned to any customers or otherwise disposed of, any tooling owned
by such customer and in the possession of the Company or any
Subsidiary, except for (i) assets consumed or disposed of in the
ordinary course of business; (ii) assets disposed of in connection
with the acquisition of replacement property of equivalent kind and
value; or (iii) assets which were returned in the ordinary course of
business or that are no longer used or useful in the business or
operations of the Company or the Subsidiaries;
(c) made, authorized, entered into, or permitted to go into
effect any general wage or salary increase for its employees as a
group, other than in the ordinary course of business consistent with
past practice;
(d) amended or terminated, or authorized the amendment or
termination of, any Material Contract or Real Property
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<PAGE> 29
Lease, other than in the ordinary course of business consistent with
past practice;
(e) incurred any material obligation or liability except normal
trade or business obligations incurred in the ordinary course of
business consistent with past practice, except for expenses relating
to the transactions contemplated hereby not to exceed DM 750,000;
(f) experienced or learned of any change or event which could
reasonably be expected to have a Material Adverse Effect; or
(g) agreed or committed, whether in writing or otherwise, to take
any action described in this Section.
4.17 INSURANCE. The insurable properties owned or leased by
the Company or any Subsidiary are, and until the Closing Date will be,
adequately insured by financially sound and reputable insurers at levels of
coverage reasonable and customary in the powder metal industry. All such
policies are in full force and effect and will continue to be in full force and
effect upon the consummation of the transactions contemplated herein and by the
Seller Ancillary Documents. Buyer has been provided with true, correct and
complete copies of all insurance policies relating to or affecting the Owned
Real Property, Real Property Leases or any Material Contract.
4.18 CAPITAL PROJECTS. Schedule 4.18 sets forth each
unfinished capital project with a total cost in excess of DM 75,000 relating to
the business of each of the Company and the Subsidiaries, the Company's
reasonable estimate of the capital expenditures that will be required subsequent
to the Closing Date to complete such projects and the expected date of
completion of such projects. The required capital contributions of the Non-
Wholly Owned Subsidiaries do not, in the aggregate, have a total cost in excess
of 500,000 DM.
4.19 CONDITION OF PROPERTIES AND EQUIPMENT. Except for
equipment not currently used in the operation of the business of the Company or
Subsidiaries and except for the equipment set forth in Schedule 4.19, the assets
and equipment of each of the Company and the Subsidiaries required for the
normal operation of their respective business are in good condition, normal wear
and tear excepted.
4.20 NO UNDISCLOSED LIABILITIES. Each of the Company and the
Subsidiaries has no liabilities or obligations of any nature (absolute, accrued,
contingent or otherwise) that are not fully reflected or reserved against in the
Financial Statements, except for liabilities that may have arisen in the
ordinary and usual course of business and consistent with past practice and
which are disclosed on Schedule 4.20.
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4.21 ENTIRETY OF BUSINESS. The Company and Subsidiaries and
the Owned Real Property, Tangible Personal Property, Leased Real Property and
Intellectual Property constitute all of the companies, businesses, rights,
assets and arrangements necessary to conduct the business of each of the Company
and Subsidiaries as presently conducted, and there are no other companies,
businesses, assets, rights or arrangements necessary to conduct the business of
the Company as presently conducted.
4.22 COMPLIANCE WITH LAWS. Except as set forth in Schedule
4.22, each of the Company and the Subsidiaries (a) is in material compliance
with all laws, regulations, reporting and licensing requirements and orders
applicable to its business or employees conducting its business, the breach or
violation of which could reasonably be expected to have a Material Adverse
Effect; and (b) has received no notification or communication from any
Governmental Authority (i) asserting that the Company or the Subsidiaries are
not in compliance with any of the statutes, treaties, regulations or ordinances
that such Governmental Authority enforces, which noncompliance could reasonably
be expected to have a Material Adverse Effect or (ii) threatening to revoke any
license, franchise, permit or authorization of any Governmental Authority would
have a Material Adverse Effect.
4.23 COMPLETENESS OF WARRANTIES. To the Seller's best
knowledge, the representations made by the Seller on behalf of itself or the
Company or the Subsidiaries in this Agreement (including the Schedules and
Exhibits hereto) and other materials provided to the Buyer by the Seller or the
Company as set forth on Schedule 4.23 do not contain any untrue statement of a
material fact or omit any material fact necessary to make the statements herein
or therein, in light of the circumstances under which they were made, not
misleading.
4.24 INVENTORY. All of the finished goods inventory of the
Company and the Subsidiaries will at the Closing consist of goods useable or
saleable in the ordinary course of the business of the Company and the
Subsidiaries except for such amount of inventory that can be reasonably expected
to be written off in the ordinary course of their businesses determined by
reference to past practice. The Company and the Subsidiaries currently have and
on the Closing Date will have, inventory and work-in-progress in an amount which
is not in excess of the amount of inventory that can reasonably be expected to
be sold in the ordinary course of their business determined by reference to past
practice, except for such amount of inventory that can be reasonably expected to
be written off in the ordinary course of their businesses determined by
reference to past practice.
4.25 RECEIVABLES. All receivables of the Company and the
Subsidiaries which are reflected on the balance sheet of the Company at June 30,
1996 and which are reflected on the books of the Company and the Subsidiaries as
of the Closing Date represent actual, bona fide obligations owing to the Company
or the
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Subsidiaries in the ordinary course of business and are carried at their net
realizable value. At the Closing, such receivables will be free and clear of any
liens, charges, equitable interests, options, rights of first refusal,
encumbrances, claims, security interests, mortgages or pledges of any nature. No
reserve allowance in excess of the recorded reserve is required to be
established in accordance with German GAAP with respect to such receivables
which are reflected on the Balance Sheet of the Company at June 30, 1996, and no
allowance will be required to be established in accordance with German GAAP with
respect to such receivables which will be reflected on the books of the Company
and the Subsidiaries as of the Closing Date. None of such receivables are, or on
the Closing Date, will be past due for a period of more than 90 days.
4.26 CUSTOMERS AND SUPPLIERS. Schedule 4.26 contains a
complete and correct list of (a) the 10 largest customers of and the 10 largest
suppliers to the Company and the Subsidiaries in the aggregate, and any
sole-source suppliers of significant goods or services to the Company and the
Subsidiaries with respect to which alternative sources of supply are not readily
available on comparable terms and conditions, in the case of the customers,
during the 7-month period ended July 31, 1996, and in the case of the suppliers,
during the 6-month period ended June 30, 1996, setting forth the sales by or to
the Company and the Subsidiaries for each such customer or supplier during such
period. The Company has not received written or oral notice that any such
customer or supplier will or may substantially reduce the extent of such
relationship, at any time prior to or after the Closing Date. The Company has
not received written or oral notice of (a) any other existing or contemplated
material modification or change in the business relationship of the Company and
the Subsidiaries with such customers or suppliers, or (b) any existing condition
or state of facts or circumstances, in either case which has, or will materially
adversely affect any such business relationship with any such customer or
supplier.
4.27 INDEBTEDNESS. Schedule 4.27 contains a complete and
correct description of all Indebtedness, including name of creditor, amount
outstanding per September 30, 1996 and amortization and repayment schedule.
ARTICLE V REPRESENTATIONS AND WARRANTIES OF BUYER
The Buyer represents and warrants to the Seller in the form of
an independent guarantee (selbstandiges Garantieversprechen) as follows:
5.1 ORGANIZATION AND GOOD STANDING. The Buyer is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware.
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5.2 AUTHORITY. The Buyer has all requisite power and authority
to execute and deliver this Agreement and to perform the transactions
contemplated hereby. The execution, delivery and performance of this Agreement
have been duly and validly authorized by all necessary corporate and shareholder
action on the part of the Buyer. This Agreement has been duly executed and
delivered by the Buyer and constitutes a valid and binding obligation of the
Buyer, enforceable against the Buyer in accordance with its terms, except that
enforceability thereof may be limited by bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium or other similar laws affecting
creditors' rights generally, general equitable principles (whether considered in
a proceeding in equity or at law) and an implied covenant of good faith and fair
dealing or other applicable law or other similar laws affecting creditors'
rights generally and by principles of equity regarding the availability of
remedies.
5.3 NO CONFLICT OR BREACH. The execution, delivery and
performance of this Agreement and any Buyer Ancillary Document do not and will
not:
(a) conflict with or constitute a violation of the Certificate of
Incorporation or Bylaws or other governing instrument of Buyer;
(b) assuming compliance with the requirements of the GWB Act
(and, if required, the HSR Act), conflict with or constitute a
violation of any Requirement of Law applicable to or relating to
Buyer; or in any manner that would have a Material Adverse Effect; or
(c) conflict with, constitute a default under, result in a breach
or acceleration of or require notice to or the consent of any third
party under any contract, agreement, commitment, mortgage, note,
license or other instrument or obligation to which Buyer is party or
by which it is bound; or in any manner that would have a Material
Adverse Effect.
5.4 CONSENTS AND APPROVALS. No (a) consent, approval,
authorization, registration, permit, notice, or filing with any federal, state
or local judicial or Governmental Authority or administrative agency, other than
as required under the GWB Act (and, if required, the HSR Act), or (b) each
consent, approval, authorization of or notice to any other third party, is
required in connection with the valid execution and delivery by Buyer of this
Agreement or any Buyer Ancillary Document the consummation by Buyer of the
transactions contemplated herein or therein except, in either case, such
consents, approvals, authorizations and notices as the failure to obtain or give
would not have a Material Adverse Effect.
5.5 INTENTIONALLY LEFT BLANK.
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5.6 FINANCIAL ADVISORS. Except for Salomon Brothers Inc, for
whose fees the Buyer shall be solely responsible, the Buyer has not retained any
finder, broker, agent or other intermediary to act for it or on its behalf, has
acted for or on behalf of Buyer in connection with the negotiation or
consummation of this Agreement, and no party has made any claim for any
brokerage commission, finder's fee or similar payment due from Buyer.
5.7 FINANCING. Buyer has secured binding commitments for all
financing (the "Financing") that will be required for it to consummate the
purchase of the Shares and the Other Shares, which are set forth on Schedule 5.7
hereto.
ARTICLE VI COVENANTS OF SELLER
Seller covenants and agrees with Buyer as follows:
6.1 CONDUCT OF BUSINESS. From the date hereof to the Closing
Date, except as provided by this Agreement or as Buyer shall otherwise consent
in writing, Seller shall cause the Company and each Subsidiary to:
(a) continue to carry on its business, maintain its facilities
and equipment, and keep its books of account, records and files in
substantially the same manner as heretofore carried on and maintained;
(b) maintain in full force and effect through the Closing Date
property damage, liability and other insurance with respect to the
assets of the Company and the Subsidiaries at levels of coverage
reasonable and customary and consistent with past practice;
(c) refrain from selling or otherwise transferring or
disposing of assets having an aggregate value in excess of DM 300,000,
except for (i) assets consumed or disposed of in the ordinary course of
business, (ii) assets which are no longer used or, in Seller's
reasonable judgment, useful in the business or operations of the
Subsidiaries or (iii) in connection with the acquisition of replacement
property of equivalent kind or value;
(d) not make any distribution of assets of the Company or any
Subsidiary or declare, pay or set aside for payment any dividend (of
any kind or nature) or distribution with respect to the Shares or the
Other Shares;
(e) not alter the terms of any existing Material Contract
except where such alteration would not have a Material Adverse Effect,
nor enter into any new agreement which, if entered into, would be a
Material Contract except
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for those set forth on Schedule 6.1(e) and those which will have been
provided to Buyer for its comments, at least 5 business days prior to
their execution;
(f) refrain from issuing, selling, delivering, or agreeing to
issue, sell or deliver, any capital stock, warrants, options or
similar rights or other corporate securities of the Company or any
Subsidiary and granting or issuing, or agreeing to grant or issue, any
options, warrants, incentive awards or similar rights calling for the
issuance of such securities;
(g) refrain from repurchasing, redeeming and making a
distribution with respect to, any shares of capital stock of the
Company or any Subsidiary, except as otherwise provided in this
Agreement;
(h) refrain from effecting any recapitalization of stated capital
(Stammkapital) of the Company or any Subsidiary and making any
amendment, whether by merger, consolidation or otherwise, to the
Articles of Association (Gesellschaftsvertrag) of Company or any
Subsidiary;
(i) refrain from (i) merging or consolidating with or into, or
transforming into, any other corporation or entity, (ii) conveying,
selling, leasing or otherwise disposing of in any transaction or
related series of transactions all or substantially all of the
property, business or assets of the Company and the Subsidiaries
(including, without limitation, the capital stock or assets of the
Company and the Subsidiaries), and (iii) acquiring by purchase the
business, assets or stock of any business;
(j) use reasonable efforts to preserve intact the business
organization of the Company and each Subsidiary and to keep available
the services of their present officers and key employees, and use
reasonable efforts to preserve the goodwill of those having business
relationships with the Company and each Subsidiary;
(k) refrain from (i) granting any increase in the compensation of
officers or employees currently receiving total compensation in excess
of DM 100,000 (including any such increase pursuant to any bonus,
pension, profit-sharing or other plan or commitment), except as set
forth on Schedule 6.1(k) and except for reasonable increases in the
ordinary course of business and consistent with past practice, not to
exceed, individually or in the aggregate, 5% of the current base
compensation level; (ii) assuming or incurring any lien in respect to
the property of the Company or any Subsidiary, other than liens made
in the ordinary course of business; (iii) factoring, selling,
transferring or otherwise disposing of any Receivable other than
factors, sales, transfers or dispositions of Receivables in the
ordinary
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course of business; or (iv) entering into any agreement that is
material to the Company and its Subsidiaries taken as a whole, except
in the ordinary course of business;
(l) refrain from taking any action that would have the effect of
deferring any Tax liability of the Company or any Subsidiary from any
taxable period ending at or before the Closing Date in a manner that
is inconsistent with past practice;
(m) refrain from renewing, extending or otherwise amending any of
the agreements listed on Schedule 4.15(a) except as required by law;
(n) refrain from making any capital expenditure other than
payments made pursuant to those capital projects set forth on Schedule
4.18; and
(o) refrain from agreeing, whether in writing or otherwise, to do
any of the foregoing;
in each case, except where failure to do any of the foregoing would not have a
Material Adverse Effect and PROVIDED that nothing contained in this Section
shall require Seller, the Company or any Subsidiary to incur any extraordinary
cost or make any extraordinary payment.
6.2 ACCESS AND INFORMATION.
(a) During the period commencing on the date hereof and ending on
the Closing Date, Seller shall permit Buyer and its counsel,
accountants, advisors, providers of financing, and other
representatives reasonable access during normal business hours to all
the properties, assets, employees, books, records, agreements and
other documents of the Company and the Subsidiaries; PROVIDED that,
Buyer will obtain the approval of Hans Peter Wursch, or any
representative of Botts & Co. or European Investors Corporate Finance,
Inc. prior to each visit to any Company or Subsidiary premises, whose
approval shall not be withheld. Any investigation by Buyer pursuant to
this Section shall be conducted in such manner as not to interfere
unreasonably with the normal operation of the Subsidiaries. Buyer and
its representatives shall be accompanied on any visits to the premises
of the Subsidiaries by representatives of Seller.
(b) The Seller shall, within 15 business days after the date of
this Agreement, provide to Buyer a list of all contracts, commitments,
agreements (including agreements for the borrowing of money or the
extension of credit), leases, licenses, guarantees, understandings and
obligations, whether written or oral, to which the Company or either
of the Subsidiaries are party and which involve a payment by or to the
Company or a Subsidiary exceeding DM 150,000, in the case
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of employment or similar agreements, or DM 75,000 in all other
cases, in any twelve-month period.
6.3 NO SOLICITATION. From the date hereof to the Closing Date,
neither Seller, the Company, the Subsidiaries nor any representatives
(including, without limitation, attorneys, investment bankers and accountants)
of Seller, the Company or the Subsidiaries will directly or indirectly, through
any partner, managing director, officer, director, employee, agent, affiliate or
otherwise (a) solicit, initiate or encourage, directly or indirectly, the
submission of inquiries, proposals or offers from any Person relating to any
acquisition or purchase of assets or capital stock of the Company or any
Subsidiary or any other transaction that would result in the transfer of control
of the Company, any Subsidiary or an investment by any Person in the Company or
any Subsidiary (each an "Acquisition Proposal") or (b) participate in any
discussions or negotiations regarding an Acquisition Proposal or any of the
foregoing or furnish to any Person any information concerning the Company or any
Subsidiary or any of the foregoing, or (c) otherwise cooperate in any way with,
or assist or participate in, facilitate or encourage, any effort or attempt by
any other Person to do or seek any of the foregoing.
6.4 CONFIDENTIALITY. Following the Closing, Seller agrees to
retain in confidence, and to require its directors, managing directors,
officers, employees, consultants, professional representatives and agents
(collectively, "Seller Representatives") to retain in confidence all information
concerning the Company and the Subsidiaries and further agrees that, following
the Closing, it will not use for its own benefit and will not use or disclose to
any third party, or permit the use or disclosure to any third party of, any such
information, except that Seller may disclose the information to those of the
Seller Representatives who need the information for the proper performance of
their assigned duties with respect to the consummation of the transactions
contemplated hereby and the preparation of appropriate Tax Returns. In making
such information available to its Representatives, Seller shall take any and all
precautions necessary to ensure that the Seller Representatives use the
information only as permitted hereby. Notwithstanding the foregoing, such
information may be disclosed (a) if it is required by court order or decree or
applicable law or in connection with the preparation of Tax Returns, (b) if it
is ascertainable or obtained from public or published information, or (c) if it
is received from a third party not known to the recipient to be under an
obligation to keep such information confidential. If Seller shall be required to
make disclosure of any such information by operation of law (other than in
connection with the preparation of Tax Returns), Seller shall give Buyer prior
notice of the making of such disclosure and shall use all reasonable efforts to
afford Buyer an opportunity to contest the making of such disclosure.
6.5 REPAYMENT OF INDEBTEDNESS. At the Closing, the Buyer shall
determine which Indebtedness of the Company and the
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Subsidiaries shall be paid at the Closing (which Indebtedness shall include the
Indebtedness referenced in clause (i) of Section 9.15), and the Buyer shall, as
directed by and on behalf of the Seller, cause such Indebtedness (including all
accrued but unpaid interest thereon) to be paid out of the Aggregate
Consideration at the Closing.
6.6 INTENTIONALLY LEFT BLANK.
6.7 OTHER ACTIONS. The Seller shall not, and shall not permit
the Company or any of its Subsidiaries to, take any action that would, or that
could reasonably be expected to, result in (i) any of the representations and
warranties of the Seller or the Company and the Subsidiaries set forth in this
Agreement that are qualified as to materiality becoming untrue, (ii) any of such
representations and warranties that are not so qualified becoming untrue in any
material respect, or (iii) any of the conditions set forth in Section 9.1 not
being satisfied.
6.8 INTENTIONALLY LEFT BLANK.
6.9 WORKING CAPITAL. The Company and each of its Subsidiaries
will not (i) delay payment of any accounts payable beyond normal and customary
terms, (ii) fail to maintain adequate inventory or replenish inventory
consistent with past practice, or (iii) accelerate payment of any accounts
receivable other than in the ordinary course.
6.10 DIRECTOR RESIGNATIONS. The Seller shall, after
consultation with the Buyer and with its express approval, cause all
Seller-appointed members of the Company's or any Subsidiary's supervisory board
(Aufsichtsrat), advisory committee (Beirat/Verwaltungsrat) or any other
governing body, if any, to resign effective as of the Closing.
6.11 INTELLECTUAL PROPERTY. Except for the licenses set forth
in Schedule 6.11, after the Closing the Seller shall refrain from using, and
shall ensure that its Affiliates will not use, directly or indirectly, any
Intellectual Property.
6.12 OTHER ASSISTANCE. To the extent requested by the Buyer,
the Seller shall reasonably cooperate with and assist the Buyer in the
preparation of a registration statement or similar offering document relating to
a proposed issuance of securities of the Buyer. In connection therewith, the
Seller shall make available to the Buyer and its representatives and agents the
officers and employees of the Company and the Subsidiaries and the legal
accounting and other professional advisors to the Seller, the Company and the
Subsidiaries at reasonable times and locations. All reasonable out-of-pocket
expenses incurred by the Seller, the Company or the Subsidiaries in connection
with such cooperation and assistance shall be promptly paid by the Buyer.
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6.13 CONSENTS. Prior to the Closing Date, the Seller shall use
its best efforts to obtain or cause to be obtained all Required Consents,
including, without limitation, paying reasonable consideration necessary to
obtain such consent.
ARTICLE VII COVENANTS OF BUYER
Buyer covenants and agree with Seller as follows:
7.1 CONFIDENTIALITY. In consideration of the confidential
nature of certain of the information which will be provided to Buyer by Seller,
the Company and the Subsidiaries prior to the Closing, Buyer agrees to retain in
confidence, prior to the Closing, and to require its directors, officers,
employees, consultants, professional representatives and agents (collectively,
its "Representatives") to retain in confidence all information transmitted or
disclosed to it by Seller, the Company and the Subsidiaries, and further agrees
that, prior to the Closing, it will not use for its own benefit and will not use
or disclose to any third party, or permit the use or disclosure to any third
party of, any information so obtained or revealed, except that Buyer may
disclose the information to (i) those of its Representatives who need the
information for the proper performance of their assigned duties with respect to
the consummation of the transactions contemplated hereby, (ii) the parties from
which Buyer seeks financing and their representatives and (iii) in a
registration statement or similar offering document relating to a proposed
issuance of securities by Buyer. In making such information available to its
Representatives, Buyer shall take any and all precautions necessary to ensure
that its Representatives use the information only as permitted hereby.
Notwithstanding anything to the contrary in the foregoing provisions, such
information may be disclosed (a) where it is necessary to any regulation
authorities or governmental agencies, (b) if it is required by court order or
decree or applicable law, (c) if it is ascertainable or obtained from public or
published information, or (d) if it is received from a third party not known to
the recipient to be under an obligation to keep such information confidential.
If Buyer shall be required to make disclosure of any such information by
operation of law, Buyer shall give Seller prior notice of the making of such
disclosure and shall use all reasonable efforts to afford Seller an opportunity
to contest the making of such disclosure. In the event that the Closing shall
not occur, Buyer shall immediately deliver, or cause to be delivered, to Seller
(without retaining any copies thereof) any and all documents, statements or
other written information obtained from Seller, the Company or any Subsidiary
that contain confidential information of Seller.
7.2 DISCLOSURE TO SELLER. The Buyer will notify the Seller if
the Buyer knows or learns of the existence of any facts which cause any of the
representations and warranties contained in Article III or IV to be or become
untrue, PROVIDED, HOWEVER, that
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such disclosure shall not affect any of the Buyer's rights or remedies pursuant
to this Agreement.
7.3 MANAGEMENT NOTIFICATION. After the Closing, Buyer shall
notify the management of the Company of the change in the ownership of the
Shares, as required by Section 16 of the Company Act.
ARTICLE VIII MUTUAL COVENANTS
8.1 GWB FILINGS. Buyer and Seller shall, as promptly as
practicable following the execution of this Agreement, and in cooperation with
each other, file with (if required under the HSR Act) the Department of Justice
and the Federal Trade Commission (if required under the HSR Act), and the German
Federal Cartel Office (Bundes-kartellamt, the "Cartel Office") premerger
notification pursuant to Section 24a of the GWB Act, and each shall use its
reasonable efforts to obtain earliest termination of all waiting periods under
the GWB Act and (if required), the HSR Act. Buyer shall be responsible for and
shall pay all fees assessed in connection with the filing of such forms and
documents.
8.2 CASUALTY OR LOSS. The risk of any loss, damage or
impairment, confiscation or condemnation of any of the assets of the
Subsidiaries from any cause whatsoever shall be borne by Seller at all times
prior to the completion of the Closing. In the event of any loss, damage or
impairment, confiscation or condemnation of any such assets prior to the
completion of the Closing, Seller shall have the option, but shall not be
required, to expend such funds and take such other actions as are necessary to
repair, replace or restore such assets to their prior condition. If Seller has
commenced but not completed the restoration or replacement of such assets before
the Closing Date, the Closing Date shall be postponed during such period not to
extend beyond the date specified in subsection 14.1(e) to permit completion of
the repair or replacement of the damage or loss. If such assets have not been
restored or replaced by such date, Buyer may then take the action specified in
subsection 14.1(c). Alternatively, Buyer may, at its option, proceed to Closing
as of such date and complete the restoration and replacement of such damaged
assets after the Closing Date, in which event Seller shall assign to Buyer the
right to receive all insurance proceeds payable in connection with such damage
to or destruction of the assets.
8.3 FURTHER ACTIONS.
(a) Seller and Buyer will notify each other immediately of any
litigation, arbitration or administrative proceeding pending or to
its/their knowledge, threatened against either of them, the Company or
any Subsidiary which challenges the transactions contemplated in this
Agreement.
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(b) Subject to the terms and conditions of this Agreement,
Seller and Buyer each agree to use commercially reasonable efforts to
take, or cause to be taken, all action and to do, or cause to be done,
all things necessary, proper or advisable to consummate and make
effective the transactions contemplated in this Agreement and to
satisfy the conditions hereto.
(c) The Seller and the Buyer agree (i) to furnish upon request
to each other such further information, (ii) to execute and deliver to
each other such other documents, and (iii) to do such other acts and
things, all as the other party may reasonably request for the purpose
of carrying out the content of this Agreement, the Seller Ancillary
Documents, the Buyer Ancillary Documents and the documents referred to
herein and therein.
(d) Prior to the Closing or the termination of this Agreement
pursuant to Section 14(e), the Seller and Buyer will notify each other
immediately orally and in writing if the satisfaction of any condition
to the Closing is or becomes impossible.
ARTICLE IX CONDITIONS PRECEDENT TO BUYER'S OBLIGATIONS
The obligation of the Buyer to consummate the transactions
contemplated by this Agreement, including the Buyer's obligations pursuant to
Section 12.2 hereunder, and excluding the obligations contained in Articles VI,
VII, VIII and XVI of this Agreement, is subject to the satisfaction of the
following conditions on or before the Closing Date, unless specifically waived
(mit schuldrechtlicher und dinglicher Wirkung) in writing by the Buyer on or
prior to the Closing Date (such waiver shall not constitute a waiver of Buyer's
rights pursuant to Section 12.1 hereof):
9.1 REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Seller contained in this Agreement (other than in Section 4.19)
(i) shall have been true and correct in all material respects on the date of
this Agreement (except the representations and warranties which relate to the
Other Shares but only insofar as such representations and warranties relate to
the Other Shares) and (ii) shall be true and correct in all material respects
(except that those representations which expressly contain a materiality
qualifier each shall be true and correct in all respects, giving effect to each
such qualifier) on the Closing Date as though made on and as of the Closing
Date. Buyer shall have received a certificate executed by an officer of the
Seller dated as of the Closing Date, certifying the satisfaction of the
conditions in this Section 9.1.
9.2 COMPLIANCE WITH COVENANTS. Seller shall have duly
performed and complied in all material respects with all covenants,
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agreements and obligations required by this Agreement to be performed or
complied with by it on or prior to the Closing. Buyer shall have received a
certificate executed by an officer of Seller dated as of the Closing Date,
certifying the satisfaction of the conditions in this Section 9.2.
9.3 ABSENCE OF LITIGATION. No action or proceeding shall be
pending by or before any court or other governmental body or agency seeking to
(a) restrain, prohibit or invalidate the transactions contemplated by this
Agreement in whole or material part or that may have the effect of preventing,
delaying, making illegal, or otherwise interfering with any of the transactions
contemplated by this Agreement or the Seller Ancillary Documents or the Buyer
Ancillary Documents, or (b) impose material limitations on the Buyer's freedom
of action with respect to the Company and its Subsidiaries or any material
portion thereof or all or a material portion of the assets or businesses of the
Buyer.
9.4 ANTITRUST FILINGS.
(a) The Cartel Office
(i) shall not have notified the parties within
one month from the filing of the premerger
notification that it will investigate the
transactions contemplated by this Agreement,
or
(ii) after having made the notification pursuant
to proviso (i) of this Section 9.4, the
Cartel Office shall not have prohibited the
transactions contemplated by this Agreement
within four months from the filing of the
premerger notification, or
(iii) the Cartel Office shall have informed the
parties prior to the expiration of the time
periods referred to in provisos (i) and (ii)
of this Section 9.4 that it will not
investigate the transactions contemplated by
this Agreement.
(b) All applicable waiting periods under the HSR Act
shall have expired or been terminated.
9.5 REQUIRED CONSENTS. All Required Consents and the consents
listed on Schedule 3.4 shall have been obtained by Seller, the Company or the
Subsidiaries, as the case may be, except where failure to have such consent
would not have a Material Adverse Effect.
9.6 NO INJUNCTION, ETC. No preliminary or permanent injunction
or other order, decision or decree issued by any court
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of competent jurisdiction in the United States or the Federal Republic of
Germany or by any United States or German federal or state, foreign or
provincial, governmental or regulatory body nor any statute, rule, regulation or
executive order promulgated or enacted by any United States or German federal or
state, foreign or provincial, governmental authority which restrains, enjoins or
otherwise prohibits the transactions contemplated hereby shall be in effect.
9.7 ACQUISITION OF OTHER SHARES. Seller shall have (i)
purchased, for good and valuable consideration, and (ii) acquired good title to
each and all of the Other Shares free and clear of all liens, security
interests, charges, community property interests, equitable interests, options,
pledges, rights of first refusal or encumbrances of any kind, including any
restrictions on use, transfer, voting, receipt of income or other
attribute of ownership.
9.8 LEGAL OPINION. Buyer shall have received from Seller's
Counsel an opinion, dated the Closing Date, that the Seller, the Company and the
Subsidiaries are duly organized and validly existing under the laws of their
respective jurisdiction of organization as well as the jurisdiction of their
respective headquarters, that the Seller has all requisite power and authority
to execute and deliver this Agreement and the transactions contemplated thereby,
that the Agreement constitutes a valid and binding obligation of the Seller,
that the Seller has, at the time of the Closing, full legal and equitable title
to the Shares and the Other Shares, that at the Closing good and marketable
title to the Shares and the Other Shares, free and clear of any claims, liens,
equities or encumbrances, will pass to the Buyer and that the Company has,
directly or indirectly full legal and equitable title to the Subsidiary Shares.
9.9 FINANCING. The Buyer shall have received proceeds of the
Financing.
9.10 POWDER METAL HOLDING, INC. SALE. The transactions
contemplated by the Purchase Agreement, dated the date hereof, between the Buyer
and the Seller relating to the sale of Powder Metal Holding, Inc. and its
subsidiaries (the "Powder Metal Agreement") shall have occurred simultaneously
with the Closing.
9.11 INTENTIONALLY LEFT BLANK.
9.12 INDEMNITY ESCROW AGREEMENT. The Indemnity Escrow
Agreement shall have been executed by the parties and the amounts required
thereunder shall have been funded or instruments deposited as provided in
Section 2.4.
9.13 INTENTIONALLY LEFT BLANK.
9.14 RELEASE OR TERMINATION OF LIENS. Other than any liens
created by the Buyer or liens relating to Indebtedness which
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the Buyer has agreed to assume, all liens, security interests, charges,
community property interests, equitable interests, options, pledges, rights of
first refusal or restriction or encumbrance of any kind, including any
restrictions on use, transfer, voting, receipt of income or other attribute of
ownership, on any of (i) the Shares, (ii) the Other Shares or (iii) the assets
or properties of the Seller, the Company or the Subsidiaries shall have been
terminated, and the Buyer shall have received written evidence of such releases.
9.15 PAYMENT OF INDEBTEDNESS. To the extent Buyer has not
agreed to assume, the following shall be paid in full (i) the unpaid principal
amount owing by the Company to MAAG Overseas International N.V. Curacao,
together with any and all accrued but unpaid interest thereon computed through
the day preceding the Closing Date, (ii) the unpaid principal amount owing to
the Company's banks together with any and all accrued but unpaid interest
thereon computed through the day preceding the Closing Date and (iii) loans from
former and existing shareholders together with any and all accrued but unpaid
interest thereon computed through the day preceding the Closing Date (such loan
agreements, the "Loan Agreements") and (iii) all other Indebtedness of the
Company and the Subsidiaries outstanding as of the Closing Date, together with
any accrued but unpaid interest thereon through the Closing Date.
9.16 U.S. REAL PROPERTY HOLDING COMPANY. The Seller shall
certify to Buyer that neither the Company nor any of the Subsidiaries is a
United States Real Property Holding Company as such term is defined under the
United States Internal Revenue Code of 1986, as amended, and the rules and
regulations thereunder.
9.17 SWISS OPINION. Buyer shall have received from a Swiss law
firm acceptable to Buyer an opinion, dated the Closing Date, that the Shares,
the Other Shares, and the Shares as defined under the Powder Metal Agreement
together do not constitute all or substantially all the assets of the Seller for
purposes of Article 181 of the Swiss Code of Obligations (Obligationenrecht),
dated March 30, 1911, as amended.
ARTICLE X CONDITIONS PRECEDENT TO SELLER'S OBLIGATIONS
The obligations of Seller to consummate the transaction
contemplated by this Agreement (including the Seller's obligations pursuant to
Section 12.1 hereunder), and excluding the obligations contained in Articles VI,
VII, VIII and XVI of this Agreement, are subject to the satisfaction of each of
the following conditions on or before the Closing Date, unless specifically
waived (mit schuldrechtlicher und dinglicher Wirkung) in writing by Seller prior
to the Closing (such waiver shall not constitute a waiver of Seller's rights
pursuant to Section 12.2 hereof):
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10.1 REPRESENTATIONS AND WARRANTIES. Notwithstanding any
notice provided pursuant to Section 7.3, the representations and warranties of
Buyer contained in this Agreement shall have been true and correct on the date
of this Agreement and shall be true and correct in all material respects (except
that those representations which expressly contain a materially qualifier each
shall be true and correct in all respects, giving effect to each such qualifier)
on the Closing Date as through made on and as of the Closing Date. Seller shall
have received a certificate executed by an officer of Buyer dated as of the
Closing Date, certifying the satisfaction of the conditions in this Section.
10.2 COMPLIANCE WITH COVENANTS. Buyer shall have duly
performed and complied with in all material respects all covenants, agreements
and obligations required by this Agreement to be performed or complied with by
it on or before the Closing Date. Seller shall have received a certificate
executed by an officer of Buyer dated as of the Closing Date, certifying the
satisfaction of the conditions in this Section.
10.3 ABSENCE OF LITIGATION. No action or proceeding against
Buyer shall be pending by or before any court or other Governmental Authority
seeking to restrain, prohibit or invalidate the transactions contemplated by
this Agreement.
10.4 ANTITRUST FILINGS.
(a) The Cartel Office
(i) shall not have notified the parties within one month
from the filing of the premerger notification that it
will investigate the transactions contemplated by this
Agreement, or
(ii) after having made the notification pursuant to proviso
(i) of this Section 9.4, the Cartel Office shall not
have prohibited the transactions contemplated by this
Agreement within four months from the filing of the
premerger notification, or
(iii) the Cartel Office shall have informed the parties
prior to the expiration of the time periods referred to
in provisos (i) and (ii) of this Section 9.4 that it
will not investigate the transactions contemplated by
this Agreement.
(b) All applicable waiting periods under the HSR Act
shall have expired or been terminated.
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10.5 NO INJUNCTION, ETC. No preliminary or permanent
injunction or other order, decision or decree issued by any court of competent
jurisdiction in the Federal Republic of Germany or by any German federal or
state, foreign or provincial governmental or regulatory body nor any statute,
rule, regulation or executive order promulgated or enacted by any German federal
or state, foreign or provincial governmental authority which restrains, enjoins
or otherwise prohibits the transactions contemplated hereby shall be in effect.
10.6 LEGAL OPINION. Seller shall have received from Buyer's
Counsel an opinion, dated the Closing Date, that the Buyer is duly organized and
validly existing under the laws of its jurisdiction of organization, that the
Buyer has all requisite power and authority to execute and deliver this
Agreement and the transactions contemplated thereby, and that the Agreement
constitutes a valid and binding obligation of the Buyer.
ARTICLE XI CLOSING
11.1 CLOSING. The closing of the sale by Seller of the Shares
and the Other Shares to Buyer (the "Closing") shall take place at the offices of
Cadwalader, Wickersham & Taft in New York, New York or such other place as
agreed to by Seller and Buyer at 6:00 a.m., local time, on the later to occur of
(i) December 10, 1996 or (ii) fifth business day after the date on which the
conditions contained in Sections 9.4 and 10.4 are met; PROVIDED, HOWEVER, as
follows: (a) if one or more conditions to this Agreement is not satisfied by
such date, the party benefiting from such condition may elect, in its sole
discretion, one or more postponements of the Closing for the purpose of enabling
such condition to be satisfied; and (b) upon agreement of the parties hereto,
the Closing may be postponed to a future date, PROVIDED that, notwithstanding
the provisions of the preceding subparagraphs (a) and (b), in no event may the
Closing be postponed beyond January 31, 1997. The date of the Closing is
referred to as the "Closing Date." The Closing when completed shall be deemed to
have occurred at 12:01 a.m., local time, on the Closing Date (the "Effective
Time").
11.2 DELIVERIES BY SELLER. At the Closing, Seller
shall deliver or cause to be delivered to Buyer the following:
(a) A certificate of an officer of Seller confirming the
satisfaction of the conditions set forth in Sections 9.1 and 9.2.
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(b) A copy of all corporate resolutions authorizing the
execution, delivery and performance of this Agreement and the Seller
Ancillary Documents, and the consummation of the transactions
contemplated herein or therein.
(c) The legal opinions referred to in Section 9.8 and 9.17, the
Indemnity Escrow Agreement and the lien releases and terminations
referred to in Section 9.14.
(d) A certificate certifying as to the matters referred to in
Section 9.15.
(e) A written statement by both the Seller and the Buyer stating
that the conditions precedent contained in Articles IX and X of this
Agreement have been met, such statement to be signed by Buyer and
Seller before a notary public and subsequently furnished with an
apostille, and to be delivered subsequent to the Closing to Notary Dr.
Pilger, Wiesenau 43, 60323 Frankfurt am Main, Germany or such other
notary as Buyer and Seller may agree.
(f) Satisfactory evidence, in Buyer's reasonable judgment, that
all Indebtedness (other than that Indebtedness Buyer has agreed to
assume) has been repaid or discharged.
(g) The termination agreements (Aufhebungsvertrage) regarding any
consulting and support agreement (Beratungsvertrag) or similar
agreement amongst the Seller and the Company or any Subsidiary.
(h) Such other documents, certificates and information as Buyer
may reasonably request.
11.3 DELIVERIES BY BUYER. At the Closing, Buyer shall deliver
or cause to be delivered to Seller the following:
(a) A certificate of an officer of Buyer confirming the
satisfaction of the conditions set forth in Sections 10.1 and 10.2 as
to representations, warranties and covenants.
(b) A copy of all corporate resolutions authorizing the
execution, delivery and performance of this Agreement and the Buyer
Ancillary Documents, and the consummation of the transactions
contemplated herein or therein.
(c) The legal opinion referred to in Section 10.5 and the
Indemnity Agreement.
(d) The Purchase Price, paid by a wire transfer of immediately
available funds in accordance with the terms of Section 2.3.
(e) A written statement by both the Seller and the Buyer stating
that the conditions precedent contained in Articles IX
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and X of this Agreement have been met, such statement to be signed by
Buyer and Seller before a notary public and subsequently furnished
with an apostille, and to be delivered subsequent to the Closing to
Notary Dr. Pilger, Wiesenau 43, 60323 Frankfurt am Main, Germany or
such other notary as Buyer and Seller may agree.
(f) Such other documents, certificates and information as Seller
may reasonably request.
ARTICLE XII INDEMNIFICATION
12.1 INDEMNIFICATION BY SELLER. Subject to the provisions of
Sections 2.4, 12.5 and 12.6, the Seller shall indemnify, defend and hold
harmless Buyer and its officers, directors, employees, agents and Affiliates
from, against and with respect to any and all loss, damage, claim, obligation,
liability, cost and expense (including, without limitation, reasonable
attorneys' fees and costs and expenses incurred in investigating, preparing,
defending against or prosecuting any litigation, claim, proceeding or demand),
of any kind or character (a "Loss") arising out of or in connection with any of
the following:
(a) any breach of any of the representations or warranties of
Seller contained in this Agreement (other than those contained in
Sections 4.18 and 4.24 or the first three sentences of Section 4.25);
(b) any failure by Seller to perform or observe, or to have
performed or observed any covenant or agreement to be performed or
observed by it pursuant to this Agreement;
(c) all liability for Taxes in excess of DM 15,000, or payable by
or with respect to, the Company and the Subsidiary for any period
ending on or before the end of the day immediately preceding the
Closing Date and that portion of a Straddle Period up to and including
the Closing Date ("Pre-Closing Tax Period");
(d) any debt or liability of any Company or Subsidiary to the
extent not disclosed on the balance sheet included in the Financial
Statements, on any Schedule hereto, or not otherwise expressly assumed
by Buyer hereunder; or
(e) any matter set forth on Schedule 4.5, 4.10(b) (ii), (iii) and
(iv), 4.11, 4.13, 4.16(e), 4.20, and 4.22 to the extent Losses
relating thereto exceed, in the aggregate together with Losses arising
in connection with any matter set forth on Schedule 4.5, 4.10, 4.11,
4.13, 4.16(e), 4.20 and 4.22 of the Powder Metal Agreement, $1.5
million.
12.2 INDEMNIFICATION BY BUYER. Buyer shall indemnify, defend
and hold harmless each of the Seller, the Company and the
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Subsidiaries and their respective officers, directors, employees, agents and
Affiliates from, against and with respect to any Loss arising out of or in
connection with any of the following:
(a) any breach of any of the representations and warranties of
Buyer contained in this Agreement;
(b) any failure by Buyer to perform or observe, or to have
performed or observed any covenant or agreement to be performed or
observed by it pursuant to this Agreement;
(c) Buyer's operation of the Company and the Subsidiaries on and
after the Effective Time;
(d) all liability for Taxes of any Company or Subsidiary for any
taxable period ending after the Closing Date (except to the extent
such taxable period is a Straddle Period in which case Buyer's
indemnity will cover only that portion of such Taxes that are not
attributable to the Pre-Closing Tax Period).
12.3 NOTICE OF CLAIM. If any third party shall notify any
party (the "Indemnified Party") with respect to any matter (a "Third Party
Claim") which may give rise to a claim for indemnification against the other
party (the "Indemnity Obligor") under this Article XII, then the Indemnified
Party shall, within 30 days following receipt of such Third Party Claim,
promptly notify the Indemnity Obligor in writing of any claim for recovery,
specifying in reasonable detail the nature of the Loss and the amount of the
liability estimated to arise therefrom. If the Indemnified Party does not so
notify the Indemnity Obligor within 30 days of its discovery of a claim for
recovery, such claim shall be barred only to the extent that the Indemnity
Obligor is prejudiced by such failure to notify. The Indemnified Party shall
provide to the Indemnity Obligor as promptly as practicable thereafter all
information and documentation reasonably requested by the Indemnity Obligor to
verify the claim asserted.
12.4 DEFENSE. If the facts relating to a Loss arise out of the
claim of any third party, or if there is any claim against a third party
available by virtue of the circumstances of the Loss, the Indemnity Obligor may,
by giving written notice to the Indemnified Party within 15 days following its
receipt of the notice of such claim, elect to assume the defense or the
prosecution thereof, including the employment of counsel or accountants at its
cost and expense; PROVIDED, HOWEVER, that during the interim the Indemnified
Party shall use its commercially reasonable efforts to take all action (not
including settlement) reasonably necessary to protect against further damage or
loss with respect to the Loss. The Indemnified Party shall have the right to
employ counsel separate from counsel employed by the Indemnity Obligor in any
such action and to participate therein, but the fees and expenses of such
counsel shall be at the Indemnified Party's own expense, unless (i) the
employment thereof has been
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specifically authorized by the Indemnity Obligor, (ii) such Indemnified Party
will have been advised by counsel reasonably satisfactory to the Indemnity
Obligor that there may be one or more legal defenses available to it which are
different from or additional to those available to the Indemnity Obligor and in
the reasonable judgment of such counsel it is advisable for such Indemnified
Party to employ separate counsel, or (iii) the Indemnity Obligor has failed to
assume the defense of such action and employ counsel reasonably satisfactory to
the Indemnified Party. Whether or not the Indemnity Obligor chooses so to defend
or prosecute such claim, all the parties hereto shall cooperate in the defense
or prosecution thereof and shall furnish such records, information and testimony
and shall attend such conferences, discovery proceedings and trials as may be
reasonably requested in connection therewith. The Indemnity Obligor shall not be
liable for any settlement of any such claim effected without its prior written
consent. In the event of payment by the Indemnity Obligor to the Indemnified
Party in connection with any Loss arising out of a third party claim, the
Indemnity Obligor shall be subrogated to and shall stand in the place of the
Indemnified Party as to any events or circumstances in respect of which the
Indemnified Party may have any right or claim against such third party relating
to such Indemnified Matter. The Indemnified Party shall cooperate with the
Indemnity Obligor in prosecuting any subrogated claim. The Indemnity Obligor
will take no action in connection with any claim that would adversely affect the
Indemnified Party without the consent of the Indemnified Party.
12.5 TIME FOR CLAIMS (Verjahrung). Any claim asserted with
respect to Sections 12.1(a) or (b) (other than in respect of Section 6.4) or
12.2(a) or (b) (other than in respect of Section 7.1) must be submitted to the
Indemnity Obligor in writing, or invoked in official proceedings, by April 15,
1998 (the "Survival Date"), other than claims with respect to (i) Sections 4.12
and 4.15, which may be submitted until sixty (60) days following the expiration
of the longest applicable statute of limitations, (ii) Section 4.13, which may
be submitted until the third anniversary of the Closing Date, and (iii) Sections
3.5 and 4.3 (solely with respect to the ownership of the Subsidiary Shares),
which may be submitted at any time without limitation.
12.6 LIMITATION. Notwithstanding the provisions of Section
12.1, neither Seller nor the Buyer shall have any indemnification obligation
under this Agreement
(a) (i) with respect to the Seller, in excess of DM 30,000,000
and (ii) with respect to both Buyer and Seller unless and until and to
the extent that the aggregate amount of the Losses of the Indemnified
Party exceeds DM 375,000 in the aggregate provided, that Losses arising
from an indemnification obligation under Section 12.1(c) or resulting
from a breach of a representation or warranty contained in this clause
(ii) and shall also be applied toward the
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aggregate of Losses when determining whether such threshold of DM
375,000 shall have been met;
(b) with respect to an indemnification obligation resulting from
a breach of the representation and warranty contained in the last
sentence of Section 4.25, in excess of the amount of such receivable
giving rise to such breach, net of any recorded reserve on the books
of the Company and the Subsidiaries at the time of the Closing with
respect to such receivable. Buyer agrees to assign to Seller any such
receivable for which Buyer has received an indemnification payment
pursuant to this Article XII.
12.7 CHARACTERIZATION. Any payments pursuant to this Article
XII shall be treated by the parties as adjustments to the Purchase Price for tax
purposes, unless otherwise required by law.
12.8 INDEMNITY AMOUNTS. If the Buyer shall incur any Losses
(whether pursuant to a Third Party Claim or otherwise) or determine that it is
likely to incur any Losses and shall consider that it is entitled to be
indemnified against such Losses, the Buyer shall deliver a certificate signed by
an officer thereof (an "Officer's Certificate"), to the Seller which Officer's
Certificate shall (i) state that the Buyer has incurred Losses, or anticipates
that it will incur Losses for which the Buyer is entitled to indemnification
pursuant to Section 12.1 and (ii) specify in reasonable detail each individual
Loss included in the amount so stated, the date such Loss was incurred, the
basis for any anticipated Loss and the nature of the misrepresentation or breach
of warranty or agreement to which each such Loss is related and the computation
of the amount to which the Buyer claims to be entitled hereunder. In the event
that the Seller shall object to the indemnification of the Buyer in respect of
any Loss specified in an Officer's Certificate, the Seller shall, within 30 days
of receiving such Officer's Certificate, deliver to the Buyer a written notice
to such effect and the Seller and the Buyer shall, within the 30-day period
beginning on the date of receipt by the Buyer of such written objection, attempt
in good faith to agree upon the rights of the respective parties with respect to
each of such claims to which the Seller shall have so objected. If the Buyer and
the Seller shall succeed in reaching agreement on their respective rights with
respect to any of such claims, the Buyer and the Seller shall promptly prepare
and sign a memorandum setting forth such agreement. If no agreement is reached,
the Buyer may commence a cause of action in any court having competent
jurisdiction with respect to the Indemnity Escrow Account. The amounts set forth
in (A) claims specified in any Officer's Certificate to which the Seller shall
not object in writing within 30 days after its receipt of such Officer's
Certificate, (B) claims covered by a memorandum of agreement of the nature
described in this Section 12.8 and (C) claims the validity and amount of which
shall have been determined by a final judgment are hereinafter referred to,
collectively, as the "Indemnity Amounts."
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ARTICLE XIII TAX MATTERS
13.1 STRADDLE PERIODS. In the case of any taxable
period that includes (but does not end on) the Closing Date (a
"Straddle Period"):
(a) real, personal and intangible property Taxes ("Property
Taxes") of the Company and the Subsidiaries for the Pre-Closing Tax
period shall include the amount of such property Taxes for the entire
Straddle Period multiplied by a fraction, the numerator of which is
the number of days during the Straddle Period that are in the
Pre-Closing Tax Period and the denominator of which is the number of
days in the Straddle Period; and
(b) the Taxes of the Company and the Subsidiaries (other than
Property Taxes) attributable to the Pre-Closing Tax Period shall be
computed as if such taxable period ended at the end of the day on the
Closing Date and the amount of Taxes attributable to such period shall
be based upon a closing of the books of the applicable Company and
Subsidiary at the end of the day on the Closing Date.
13.2 CARRYBACKS. Buyer shall not be entitled to carryback any
Losses, credits or other Tax benefit items of the Company or the Subsidiaries
that arises in a taxable period (or portion thereof) ending after the Closing
Date to a Pre-Closing Tax Period of Company, Seller, the Company or the
Subsidiaries.
ARTICLE XIV TERMINATION
14.1 TERMINATION. This Agreement may be terminated at any time
prior to the Closing:
(a) by the mutual written consent of Seller and Buyer;
(b) by Seller (if Seller is not then in breach of any term of
this Agreement), if Buyer shall (i) fail to perform in any material
respect its agreements contained herein to be performed on or prior to
the Closing Date, or (ii) materially breach any of its representations
or warranties contained herein, which failure or breach is not cured
within ten days after Seller has notified Buyer of its intent to
terminate this Agreement pursuant to this subparagraph;
(c) by Buyer (if Buyer is not then in breach of any term of this
Agreement), if Seller shall (i) fail to perform in any material
respect its agreements contained herein required to be performed on or
prior to the Closing Date, or (ii) materially breach any of its
representations or warranties contained herein, which failure or
breach is not cured within
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ten days after Buyer has notified Seller of its intent to terminate
this Agreement pursuant to this subparagraph;
(d) by either Seller or Buyer, if there shall be any
nonappealable or final order, writ, injunction or decree of any court
or governmental or regulatory agency binding on Seller or Buyer which
prohibits or restrains Seller or Buyer from consummating the
transactions contemplated hereby (other than temporary injunctions);
(e) by Buyer, if any of the conditions in Article IX has not been
satisfied as of the Closing Date or if satisfaction of such a
condition is or becomes impossible (other than through the failure of
Buyer to comply with its obligations under this Agreement) and Buyer
has not waived such condition on or before the Closing Date; or (ii)
by Seller, if any of the conditions in Article X has not been
satisfied as of the Closing Date or if satisfaction of such a
condition is or becomes impossible (other than through the failure of
Seller to comply with its obligations under this Agreement) and Seller
has not waived such condition on or before the Closing Date; or
(f) by either the Seller or the Buyer, if the Closing has not
occurred by January 31, 1997, for any reason other than delay or
nonperformance of the party seeking such termination.
14.2 EFFECT ON OBLIGATIONS. Termination of this Agreement
pursuant to this Article shall terminate all obligations of the parties
hereunder, except for the obligations under Sections 16.3 (with respect to
expenses), 16.4 (with respect to publicity) and 7.1 (with respect to
confidentiality); PROVIDED, HOWEVER, that termination pursuant to subparagraphs
(b) or (c) of Section 14.1 shall not relieve the defaulting or breaching party
from any liability to the other party hereto.
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ARTICLE XV EMPLOYEES
It is the Buyer's present intention to cause the Company and
the Subsidiaries to continue to provide, immediately following the Closing
compensation levels and employee benefit programs the same as or reasonably
comparable to the compensation levels and employee benefit programs provided by
the Company and the Subsidiaries prior to the Closing, and to continue to credit
service under the employee benefit programs of the Company and the Subsidiaries
following the Closing in a manner consistent with the manner in which service
has been credited under such programs prior to the Closing. Notwithstanding the
foregoing, however, the parties recognize that the Company and the Subsidiaries
may, subject to the requirements of applicable law, any applicable voluntary
shop agreement (Betriebsvereinbarung) and any applicable collective bargaining
agreement, change the compensation levels or benefit programs provided by the
Company and the Subsidiaries following the Closing in ways that either the
Company or any Subsidiary determines to be necessary or appropriate for the
operation of its business.
ARTICLE XVI MISCELLANEOUS
16.1 ACCESS AFTER THE CLOSING DATE. After the Closing Date,
the Buyer shall provide the Seller with reasonable access during normal business
hours to copies of all of the books and records of the Company and the
Subsidiaries whenever requested by the Seller, and the Buyer shall retain such
books and records for the later of the end of the normal document retention
period of the Buyer; PROVIDED that the Buyer shall retain all required Tax books
and records until 60 days following the expiration of the applicable statute of
limitations. At the request and expense of the Seller, the Buyer shall deliver
copies of any such books and records to the Seller. At the Seller's out of
pocket expense, the Buyer shall use reasonable efforts to cause any of the
employees of the Company or any Subsidiary or the Buyer who were previously
employed by the Company or any Subsidiary to meet with the Seller and its
representatives and agents (including counsel and accountants) at such times and
places as the Seller may reasonably request in order to provide the Seller with
information concerning the operation of the Company and the Subsidiaries and the
conduct of their business by the Company or such Subsidiary prior to the Closing
Date.
16.2 PAYMENT OF EXPENSES.
(a) Except as provided in Sections 8.1 and 8.2, all costs of
transferring the Shares and the Other Shares to Buyer in accordance
with this Agreement, including recordation, notarial, registration,
stamp, transfer and documentary taxes and fees, and any federal, state
or local excise, sales or use taxes, and any filings or grant fees
imposed by any
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governmental authority, shall be paid one-half by Seller and one-half
by Buyer.
(b) All costs, including recordation, notarial, registration,
stamp, transfer and documentary taxes and fees, and any federal, state
or local excise, sales or use taxes, and any filings or grant fees
imposed by any governmental authority caused by, or arising from, any
liquidation, merger, sale or transfer by or of the Company or any
Subsidiary or assets of the Company or any Subsidiary which occurs
after the Closing shall be paid by Buyer.
(c) Except as otherwise expressly provided in this Agreement,
each of the parties shall bear its own expenses, including the fees of
any attorneys and accountants engaged by such party, in connection
with this Agreement, the Seller Ancillary Documents and the Buyer
Ancillary Documents and the consummation of the transactions
contemplated herein or therein.
16.3 PUBLICITY. Seller and Buyer agree that they will not make
any press releases or other announcements prior to the Closing with respect to
the transactions contemplated hereby, except as required by applicable law,
without the prior approval of all other parties. The Seller acknowledges that
the Buyer is required to make certain public disclosures and filings pursuant to
the Exchange Act with respect to the transactions contemplated hereby.
16.4 COMMERCIALLY REASONABLE EFFORTS. Each party hereto agrees
to use commercially reasonable efforts to effect the Closing set forth in this
Agreement and otherwise to consummate the transactions contemplated by this
Agreement. Specifically, but without limiting the generality of the foregoing,
each of Buyer and Seller shall use commercially reasonable efforts to make or
obtain all consents, approvals, authorizations, registrations and filings with
all federal, state, provincial or local judicial or governmental authorities or
administrative agencies as are required in connection with the consummation of
the transactions contemplated by this Agreement.
16.5 NOTICES. All notices, demands and other communications
made hereunder shall be in writing and shall be given either by personal
delivery, by nationally recognized overnight courier (with charges prepaid) or
by telecopy (with telephone confirmation), and shall be deemed to have been
given or made when personally delivered, the day following the date deposited
with such overnight courier service or when transmitted to telecopy machine and
confirmed by telephone, addressed to the respective parties at the following
addresses (or such other address for a party as shall be specified by like
notice):
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If to Seller:
Maag Holding AG
Hardstrasse 219
Zurich, Switzerland CH-8023
Attn: Samuel Gartmann
Telephone: 011-41-1-278-7215
Telecopy: 011-41-1-271-9204
With a copy (which shall not constitute notice) to:
Cadwalader, Wickersham & Taft
100 Maiden Lane
New York, NY 10038
Attn: Jonathan M. Wainwright, Esq.
Telephone: (212) 504-6122
Telecopy: (212) 504-6666
If to Buyer:
Sinter Metals, Inc.
Terminal Tower
50 Public Square/Suite 3200
Cleveland, OH 44113
Attn: Joseph W. Carreras
Telephone: (216) 771-6700
Telecopy: (216) 344-7631
With a copy (which shall not constitute notice) to:
Jones, Day, Reavis & Pogue
North Point
901 Lakeside Avenue
Cleveland, OH 44114
Attn: Christopher M. Kelly, Esq.
Telephone: (216) 586-3939
Telecopy: (216) 579-0212
16.6 GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the Federal Republic of Germany,
without regard to conflict of laws principles.
16.7 GERMAN STATUTORY LAW. Sections 460 and 464 of the German
Civil Code (BGB) and Section 377 of the German Commercial Code (HGB) shall not
apply to this Agreement. Section 460 of the German Civil Code (BGB) provides
that a seller shall not be liable to the buyer for the breach of a
representation or warranty, if the buyer has knowledge of such breach prior to
the consummation of the sale. The exclusion of Section 460 from this Agreement
shall not entitle the Buyer to indemnification pursuant to this Agreement in
respect to matters which were disclosed by the Seller in any Schedule (including
such Delivered Documents, which are incorporated by reference in any Schedule to
this Agreement), with
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the exception of the Schedules listed in Section 12.1 (e) hereof. The mere
listing of agreements in any Schedule, however, shall not be regarded as a
disclosure of a matter for purposes of the preceding sentence. For the purposes
of clarification with respect to Schedules 4.9(a), (b), (e) and 4.10, 4.15(a)
the Parties hereto acknowledge that the preceding sentence shall not increase
the Seller's liability with respect to the matters set forth in Section 4.9,
4.10 and 4.15.
16.8 COUNTERPARTS. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
16.9 ASSIGNMENT. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
permitted assigns. Neither this Agreement nor any of the rights, interest or
obligations hereunder shall be assigned by either of the parties hereto without
the prior written consent of the other party hereto, and any purported
assignment without such consent shall be void; PROVIDED, HOWEVER, that the Buyer
may, without the consent of the Seller, (i) grant a security interest in its
rights under this Agreement to a lender as security for Buyer's obligations to
such lender and (ii) assign its rights hereunder to one or more wholly-owned
subsidiaries of the Buyer, but no such grant of security interest or assignment
shall release the Buyer from its obligations hereunder.
16.10 THIRD PARTY BENEFICIARIES. None of the provisions of
this Agreement or any document contemplated hereby is intended to grant any
right or benefit to any person or entity which is not a party to this Agreement.
16.11 HEADINGS; REFERENCES. The article and section headings
contained in this Agreement are solely for the purpose of reference, are not
part of this Agreement and shall not in any way affect the meaning or
interpretation of this Agreement. When a reference is made in this Agreement to
a clause Section, subsection or Article, such reference shall be to such clause,
Section, subsection or Article of this Agreement unless otherwise indicated.
16.12 AMENDMENTS; WAIVER. Any waiver, amendment, modification
or supplement of or to any term or condition of this Agreement shall be
effective only if in writing and signed by both parties hereto, and the parties
hereto waive the right to amend the provisions of this Section orally. No waiver
by any party of any of the provisions hereof shall be effective unless
explicitly set forth in writing and executed by the party so waiving. The waiver
by any party hereto of a breach of any provision of this Agreement shall not
operate or be construed as a waiver of any other or subsequent breach. No
failure on the part of either party hereto to exercise, and no delay in
exercising, any right hereunder shall operate as a waiver thereof. The remedies
herein are cumulative and not exclusive of any remedies provided by law.
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<PAGE> 57
16.13 KNOWLEDGE. Whenever used herein with respect to the
Seller the Company and its Subsidiaries, the term "knowledge" or "best
knowledge" shall mean the actual knowledge of Dr. Lothar Albano-Muller, Dr.
Manfred Weber and Dr. Volker Arnhold. Notwithstanding any notice provided
pursuant to Section 7.3, the Seller acknowledges and agrees that the Buyer's
right to rely on the representations and warranties of the Seller with respect
to itself and the Company and its Subsidiaries shall not be affected in any way
by any investigation conducted by the Buyer.
16.14 SEVERABILITY. In the event that any provision in this
Agreement shall be determined to be invalid, illegal or unenforceable in any
respect, the remaining provisions of this Agreement shall not be in any way
impaired, and the illegal, invalid or unenforceable provision shall be fully
severed from this Agreement and there shall be automatically added in lieu
thereof a provision as similar in terms and intent to such severed provision as
may be legal, valid and enforceable.
16.15 ENTIRE AGREEMENT. This Agreement and the Schedules
hereto together with the Seller Ancillary Documents and the Buyer Ancillary
Documents, constitute the entire contract between the parties hereto pertaining
to the subject matter hereof, and supersede all prior agreements and
understandings between the parties with respect to such subject matter (except
with respect to that certain Confidentiality Agreement by and between Buyer and
Seller which shall not be superseded hereby in the event of a termination of
this Agreement for any reason before Closing).
16.16 ARBITRATION; SUBMISSION TO JURISDICTION.
(a) Any dispute relating to this Agreement or the Seller
Ancillary Documents or the Buyer Ancillary Documents or the performance
by the parties of their respective obligations hereunder, which is not
resolved after the parties' attempt at amicable negotiations, shall be
finally settled by arbitration. If such a dispute arises, either party
may initiate arbitration proceedings by filing a demand for arbitration
with the other party and the New York, New York, office of the American
Arbitration Association (the "AAA"). In making the selection of the
arbitrators, each party will select one arbitrator and the two
arbitrators selected will mutually agree upon the third arbitrator in
accordance with the Commercial Rules of Arbitration of the AAA. If the
two selected arbitrators are unable to agree on the third arbitrator,
then the third arbitrator will be selected in accordance with the
Commercial Rules of Arbitration of the AAA. All arbitration proceedings
shall be held in New York, New York. The arbitrator's award resulting
from such arbitration may be confirmed and entered as a final judgment
in any court of competent jurisdiction and enforced accordingly.
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<PAGE> 58
(b) The enforcement of any arbitration award or any legal action
or proceeding relating in any way to any matter concerning any
arbitration proceedings pursuant to Section 16.5(a) above may be
brought and enforced in the federal courts of the United States for
the Southern District of New York, and (i) the Seller accepts for
itself, the Company and the Subsidiaries and in respect of its
property, and (ii) the Buyer accepts for itself and in respect of its
property, each generally, irrevocably and unconditionally, the
jurisdiction of each such court in respect of any such action or
proceeding; PROVIDED, THAT if for whatever reason the federal courts
of the United States for the Southern District of New York will not or
cannot hear such action or proceeding, it may be brought and enforced
in the courts of the State of New York in The City of New York,
Borough of Manhattan. The Seller and the Buyer each agree that a
judgment, after exhaustion of all available appeals, in any such
action or proceeding shall be conclusive and binding upon, and may be
enforced in any other jurisdiction, by a suit upon such judgment, a
certified copy of which shall be conclusive evidence of the judgment.
The Seller and the Buyer each irrevocably designate, appoint and
empower CT Corporation System, with offices at 1633 Broadway, New
York, New York 10019, as its designee, appointee and agent to receive
service of any and all legal process, summons, notices and documents
which may be served in any such action or proceeding and agree that
the failure of any such agent to give any advice of service of process
to it shall not impair or affect the validity of such service or of
any such judgment based thereon. If for any reason such designee,
appointee and agent shall cease to be available to act as such, the
Seller and the Buyer each agree to designate a new designee, appointee
and agent in New York City on the terms and for the purposes of this
provision reasonably satisfactory to the other party. The Seller and
the Buyer each further irrevocably consent to the service of process
out of any of the aforementioned courts in any such action or
proceeding by the mailing of copies thereof by registered or certified
mail, postage prepaid, to such party, at its address set forth in
Section 16.6, such service to become effective 30 days after such
mailing. Nothing herein shall affect the right of the Seller or the
Buyer to serve process in any other manner permitted by law or to
commence legal proceedings or otherwise proceed against the Seller or
the Buyer in any other jurisdiction.
(c) The Seller and the Buyer each hereby irrevocably waive any
objection which it may now or hereafter have to the laying of venue of
any of the aforesaid actions or proceedings arising out of or in
connection with any matter concerning any arbitration proceedings
pursuant to Section 16.5(a) above or in the courts referred to in
clause (b) above, and hereby further irrevocably waive and agree not
to plead or claim in any such court that any such action or proceeding
brought in
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<PAGE> 59
any such court has been brought in an inconvenient or improper forum.
16.17 GOVERNING LANGUAGE. The English version of this
Agreement shall govern any interpretation of its provisions. To the extent
German terms are provided in the governing English version of this Agreement,
such German wording shall prevail for purposes of interpretation.
[REMAINDER OF PAGE LEFT BLANK INTENTIONALLY]
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<PAGE> 60
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be signed by its duly authorized officer as of the date first above
written.
MAAG HOLDING AG
By:
------------------------------
Name:
Title:
SINTER METALS, INC.
By:
------------------------------
Name:
Title:
<PAGE> 1
EXHIBIT 3.1
-----------
RESTATED CERTIFICATE OF INCORPORATION
OF
SINTER METALS, INC.
(Originally incorporated December 27, 1991
under the name of PPMI Holdings, Inc.)
(Adopted pursuant to Sections 242 and 245
of the Delaware General Corporation Law)
Sinter Metals, Inc., a corporation organized and existing
under the laws of the State of Delaware, hereby certifies as follows:
1. The original Certificate of Incorporation was filed with
the Secretary of State on December 27, 1991 under the name "PPMI Holdings,
Inc.," and a Certificate of Amendment was filed on each of the respective dates:
February 5, 1992, November 17, 1993 and April 25, 1994.
2. This Restated Certificate of Incorporation restates,
integrates and further amends the Corporation's Certificate of Incorporation, as
amended to read in its entirety as follows:
FIRST: The name of the Corporation is Sinter Metals, Inc.
(hereinafter the "Corporation").
SECOND: The address of the Corporation's registered office in
the State of Delaware is 1209 Orange Street, City of Wilmington, County of New
Castle. The name of the Corporation's registered agent at such address is The
Corporation Trust Company.
THIRD: The purpose of the Corporation is to engage in any
lawful act or activity for which a corporation may be organized under the
General Corporation Law of the State of Delaware as set forth in Title 8 of the
Delaware Code (the "GCL").
FOURTH: Section 1. AUTHORIZED STOCK. The total number of
shares which the Corporation shall have the authority
<PAGE> 2
2
to issue is 30,000,000 shares and the shares shall be divided into classes as
follows: (i) 5,000,000 shares of Preferred Stock, par value .001 per share (the
"Preferred Stock"), which are not classified, (ii) 20,000,000 shares of Class A
Common Stock, par value $.001 per share ("Class A Common Stock") and (iii)
5,000,000 shares of Class B Common Stock, par value $.001 per share ("Class B
Common Stock" and together with the Class A Common Stock, the "Common Stock").
Section 2. PREFERRED STOCK. Shares of Preferred Stock
of any class or of any series of any class may be issued from
time to time.
The Board of Directors is hereby authorized, within the
limitations and restrictions stated in this Article FOURTH, to fix by resolution
or resolutions the designation of each class of Preferred Stock or series
thereof and the powers, preferences and relative, participating, optional or
other special rights, and qualifications, limitations or restrictions thereof,
including, without limiting the generality of the foregoing, such provisions as
may be desired concerning voting, redemption, dividends, dissolution or the
distribution of assets, conversion or exchange, and such other subjects or
matters as may be fixed by resolution or resolutions of the Board of Directors
under the GCL.
Section 3. COMMON STOCK. The Common Stock shall be subject to
all of the preferences and rights of the Preferred Stock and any class or series
thereof that may be fixed by a resolution or resolutions of the Board of
Directors pursuant to this Article FOURTH, and shall have the following terms:
(a) CLASS A COMMON STOCK. The holders of Class A
Common Stock shall be entitled to one vote for each share of Class A Common
Stock held by them on all matters to be voted on by the stockholders of the
Corporation.
(b) CLASS B COMMON STOCK. The holders of Class B
Common Stock shall not be entitled to any voting rights, except for statutory
voting rights.
(c) DIVIDENDS; LIQUIDATION. The holders of each
class of Common Stock shall be entitled to receive dividends as and when
declared by the Board of Directors out of any funds legally available for
payment of such dividends. Each share of Common Stock, of any class, shall rank
equally with all other shares of Common Stock, of any class, as to the payment
of dividends and other distributions upon liquidation or otherwise. No dividends
shall be paid on any class of then outstanding Common Stock unless dividends are
paid on a pro rata basis to all other then outstanding shares of all other
classes of Common Stock. In the event of the making of any dividend or
distribution payable in shares of Common Stock or in the event of any split-up
of the Common Stock, the holders of Class A Common Stock shall be entitled to
receive only shares of Class A Common
<PAGE> 3
3
Stock and the holders of Class B Common Stock shall be entitled to receive only
shares of Class B Common Stock.
(d) CONVERSION RIGHTS.
(i) CLASS A COMMON STOCK. Shares of Class A Common Stock are
not convertible.
(ii) CLASS B COMMON STOCK. Each share of Class B Common Stock
shall be convertible at the option of the holder thereof into one fully paid and
non-assessable share of Class A Common Stock.
(iii) SURRENDER OF CERTIFICATES. Each conversion of shares of
Class B Common Stock into shares of Class A Common Stock will be effected by the
surrender of the certificate or certificates representing the shares to be
converted at the principal office of the Corporation at any time during normal
business hours, together with (x) a written notice by the holder of such shares
of Class B Common Stock stating that such holder desires to convert the shares,
or a stated number of shares, of Class B Common Stock represented by such
certificate or certificates into shares of Class A Common Stock and (y) a
certificate that states for the benefit of the Company and its stockholders that
such conversion will not violate, or cause the violation of, any regulatory
provisions applicable to a small business investment company. Such notice shall
also state the denominations in which the certificate or certificates for such
Class A Common Stock are to be issued. Such conversion will be deemed to have
been effected as of the close of business on the date on which such certificate
or certificates have been surrendered and such notice and certificate been
received, and at such time the rights of the holder of the converted shares of
Class B Common Stock as such holder will cease and the holder will be deemed to
have become the holder or holders of record or the shares of Class A Common
Stock represented thereby.
(iv) ISSUANCE OF NEW CERTIFICATES. Promptly after such
surrender and the receipt of such written notice and certificate, the
Corporation will issue and deliver to the holder in accordance with the
surrendering holder's instructions each of the following:
(x) the certificate or certificates representing
the shares of Class A Common Stock issuable upon such
conversion; and
(y) a certificate representing any shares of Class B
Common Stock which were represented by the certificate or certificates
delivered to the Corporation in connection with such conversion but
which were not converted into shares of Class A Common Stock.
(v) ISSUANCE TAX. The issuance of certificates representing
shares of Class A Common Stock received upon
<PAGE> 4
4
conversion of shares of Class B Common Stock will be made without charge to the
holders of such shares for any issuance tax in respect thereof or other cost
incurred by the Corporation in connection with such conversion and the related
issuance of Class A Common Stock.
(e) Except as otherwise provided in this Article FOURTH, the
Class A Common Stock and Class B Common Stock shall be identical in all
respects.
Section 4. CONVERSION OF EXISTING CAPITAL STOCK. Upon the
filing of this Restated Certificate of Incorporation with the Secretary of State
of the State of Delaware and without any action on the part of any holder
thereof, each outstanding share of: (i) Class A Common Stock, par value $.01 per
share (the "Old Class A Common Stock") shall be reclassified and converted into
14.385 shares of Class A Common Stock; (ii) Class B Common Stock, par value $.01
per share (the "Old Class B Common Stock" and together with the Old Class A
Common Stock, the "Old Common Stock") shall be reclassified and converted into
14.385 shares of Class A Common Stock; and (iii) 8% Cumulative Preferred Stock,
par value $.01 per share (the "Old Preferred Stock") shall be converted into and
exchanged for the right to receive One Hundred Dollars ($100.00), plus all
accrued but unpaid dividends thereon, whether or not declared, up to and
including the date on which this Restated Certificate of Incorporation is filed
with the Secretary of State of the State of Delaware (the "Redemption
Consideration").
Notwithstanding the foregoing, in the event that the
reclassifications or conversions described above would result in any holder of
shares of Old Common Stock holding in such capacity a share of Class A Common
Stock that is not an integral multiple of one, the effect of such
reclassification or conversion shall be such that the shares of Class A Common
Stock to each holder issued as a result of the reclassification or conversion
shall be the integral multiple of one closest to the product of the conversion
ratio (14.385) and the respective number of shares of Old Common Stock held by
such holder with fractions of 0.50 or greater being rounded to the next higher
integral multiple of one and fractions less than 0.50 being rounded down to the
next lower integral multiple of one. No consideration will be paid in lieu of
fractions that are rounded down or eliminated.
After the filing of this Restated Certificate of
Incorporation, each holder of (i) any certificate or certificates representing
shares of Old Common Stock, upon the surrender of the same to the Corporation,
shall receive a certificate or certificates representing the whole number of
shares of Class A Common Stock which such holder is entitled to receive pursuant
to the terms and conditions of this Section 6 of Article FOURTH, and (ii) any
certificate or certificates representing shares of Old Preferred Stock, upon the
surrender of the same to the Corporation, shall receive the Redemption
Consideration which such holder is entitled to receive pursuant to the terms and
<PAGE> 5
5
conditions of this Section 6 of Article FOURTH. Pending the surrender of any
certificate or certificates formerly representing the Old Common Stock or Old
Preferred Stock, such certificate or certificates shall be deemed for all
purposes, as a result of the reclassifications or conversions provided for in
this Section 6 of Article FOURTH and without any action on the part of any
holder thereof, to evidence only the right to receive one or more certificates
representing shares of Class A Common Stock or the Redemption Consideration, as
the case may be, in accordance with the terms and conditions of this Section 6
of Article FOURTH.
FIFTH: The following provisions are inserted for the
management of the business and the conduct of the affairs of the Corporation,
and for further definition, limitation and regulation of the powers of the
Corporation and of its directors and stockholders:
(a) The business and affairs of the Corporation shall be
managed by or under the direction of the Board of Directors.
(b) The directors shall have concurrent power with the
stockholders to make, alter, amend, change, add to or repeal the
by-laws of the Corporation (as amended from time to time, the
"By-Laws").
(c) The number of directors of the Corporation shall be as
from time to time fixed by, or in the manner provided in, the By-Laws.
Election of directors need not be by written ballot unless the By-Laws
so provide.
(d) In addition to the powers and authority hereinbefore or by
statute expressly conferred upon them, the directors are hereby
empowered to exercise all such powers and do all such acts and things
as may be exercised or done by the Corporation, subject, nevertheless,
to the provisions of the GCL, this Restated Certificate of
Incorporation, and any By-Laws adopted by the stockholders; PROVIDED,
HOWEVER, that no By-Laws hereafter adopted by the stockholders shall
invalidate any prior act of the directors which would have been valid
if such By-Laws had not been adopted.
SIXTH: Subject to the rights of the holders of any
series of Preferred Stock:
(a) any action required or permitted to be taken by the
stockholders of the Corporation must be effected at a duly called
annual or special meeting of stockholders of the Corporation and may
not be effected by any consent in writing of such stockholders; and
(b) special meetings of stockholders of the
Corporation may be called only by (i) the Chairman of the
<PAGE> 6
6
Board, (ii) the President of the Corporation, or the Secretary of the
Corporation; and shall be called by the Secretary of the Corporation
within 10 calendar days after receipt of either (x) the written request
of a majority of the total number of directors that the Corporation
would have if there were no vacancies (the "Whole Board"), or (y)
written requests of holders of a majority of the Voting Stock in
accordance with the By-Laws. For purposes of this Restated Certificate
of Incorporation, "Voting Stock" means stock of the Corporation of any
class or series entitled to vote generally in the election of
directors.
Meetings of stockholders may be held within or without the
State of Delaware, as the By-Laws may provide. The books of the Corporation may
be kept (subject to any provision contained in the GCL) outside the State of
Delaware at such place or places as may be designated from time to time by the
Board of Directors or in the By-Laws.
At any annual meeting or special meeting of stockholders of
the Corporation, only such business will be conducted or considered as has been
brought before such meeting in the manner provided in the By-Laws.
Notwithstanding anything contained in this Restated Certificate of Incorporation
to the contrary, the affirmative vote of at least 80% of the Voting Stock,
voting together as a single class, will be required to amend or repeal, or adopt
any provision inconsistent with, this Article SIXTH.
The provisions of this Article SIXTH shall become effective
only upon the consummation of the closing of the Corporation's initial public
offering contemplated by the Registration Statement on Form S-1 of the
Corporation filed with the Securities and Exchange Commission and identified by
file no. 33-82390.
SEVENTH: Each person who is or was or had agreed to become a
director or officer of the Corporation, or each such person who is or was
serving or who had agreed to serve at the request of the Board of Directors or
an officer of the Corporation as an employee or agent of the Corporation or as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise (including the heirs, executors,
administrators or estate of such person), shall be indemnified by the
Corporation to the full extent permitted by the GCL or any other applicable laws
as presently or hereafter in effect. Without limiting the generality of the
effect of the foregoing, the Corporation may enter into one or more agreements
with any person which provide for indemnification greater or different than that
provided in this Article. Any repeal or modification of this Article SEVENTH
shall not adversely affect any right or protection existing hereunder
immediately prior to such repeal or modification.
<PAGE> 7
7
EIGHTH: To the full extent permitted by the GCL or any other
applicable laws presently or hereafter in effect, no director of the Corporation
shall be personally liable to the Corporation or its stockholders for or with
respect to any acts or omissions in the performance of his or her duties as a
director of the Corporation. Any repeal or modification of this Article EIGHTH
shall not adversely affect any right or protection of a director of the
Corporation existing immediately prior to such repeal or modification.
NINTH: The Corporation reserves the right to amend, alter,
change or repeal any provision contained in this Restated Certificate of
Incorporation, in the manner now or hereafter prescribed by statute except as
otherwise provided by this Restated Certificate of Incorporation, and all rights
conferred upon stockholders herein are granted subject to this reservation.
TENTH: Section 1. BUSINESS COMBINATIONS WITH INTERESTED
STOCKHOLDERS. Notwithstanding anything contained in this Restated Certificate of
Incorporation to the contrary, the Corporation will not engage in any Business
Combination with any Interested Stockholder for a period of three years
following the date that such stockholder became an Interested Stockholder,
unless (a) prior to such date the Board of Directors approved the transaction
that resulted in the stockholder becoming an Interested Stockholder, (b) upon
consummation of the transaction that resulted in the stockholder becoming an
Interested Stockholder, the Interested Stockholder owned at least 85% of the
Voting Stock outstanding at the time the transaction commenced, excluding for
purposes of determining the number of shares outstanding those shares owned by
(i) Persons who are directors and also officers of the Corporation and (ii)
employee stock plans maintained by the Corporation or any direct or indirect
majority-owned subsidiary of the Corporation in which employee participants do
not have the right to determine confidentially whether shares held subject to
the plan will be tendered in a tender or exchange offer, or (c) on or subsequent
to such date the Business Combination is approved by the Board of Directors and
authorized at an annual or special meeting of stockholders, and not by written
consent, by the affirmative vote of at least 66-2/3% of the Voting Stock which
is not Owned by the Interested Stockholder.
Section 2. EXCEPTIONS. The restrictions contained in
Section 1 of this Article TENTH will not apply if:
(a) a stockholder becomes an Interested Stockholder
inadvertently and (i) as soon as practicable divests sufficient shares
so that such stockholder ceases to be an Interested Stockholder and
(ii) would not, at any time within the three-year period immediately
prior to a Business Combination between the Corporation and such
stockholder, have been an Interested Stockholder but for the
inadvertent acquisition; or
<PAGE> 8
8
(b) the Business Combination is proposed prior to the
consummation or abandonment and subsequent to the earlier of the public
announcement or the notice required under this paragraph (b) of a
proposed transaction which (i) constitutes one of the transactions
described in the second sentence of this paragraph (b); (ii) is with or
by a Person who either was not an Interested Stockholder during the
previous three years or who became an Interested Stockholder with the
approval of the Board of Directors; and (iii) is approved or not
opposed by a majority of the members of the Board of Directors then in
office (but not less than one) who were Directors prior to any Person
becoming an Interested Stockholder during the previous three years or
were recommended for election or elected to succeed such Directors by a
majority of such Directors. The proposed transactions referred to in
the preceding sentence of this paragraph (b) are limited to (x) a
merger or consolidation of the Corporation (except for a merger in
respect of which, pursuant to Section 251(f) of the GCL, no vote of the
stockholders of the Corporation is or would have been required), (y) a
sale, lease, exchange, mortgage, pledge, transfer, or other disposition
(in one transaction or a series of transactions), whether as part of a
dissolution or otherwise, of assets of the Corporation or of any direct
or indirect majority-owned subsidiary of the Corporation (other than to
any direct or indirect wholly owned subsidiary of the Corporation or to
the Corporation) having an aggregate market value equal to 50% or more
of either the aggregate market value of all of the assets of the
Corporation determined on a consolidated basis of the aggregate market
value of all the outstanding stock of the Corporation, or (z) a
proposed tender or exchange offer for 50% or more of the outstanding
Voting Stock. The Corporation will give at least 20 calendar days
notice to all Interested Stockholders prior to the consummation of any
of the transactions described in clauses (x) or (y) of the second
sentence of this paragraph (b).
Section 3. CERTAIN DEFINITIONS. For purposes of this
Article TENTH:
(a) "Affiliate" means a Person that directly, or indirectly
through one or more intermediaries, Controls, or is Controlled By, or
is Under Common Control With (each as hereinafter defined) another
Person.
(b) "Associate," when used to indicate a relationship with any
Person, means (i) any corporation or organization of which such Person
is a Director, officer, or partner or is, directly or indirectly, the
Owner of 20% or more of any class of Voting Stock, (ii) any trust or
other estate in which such Person has at least a 20% beneficial
interest or as to which such Person serves as trustee or in a similar
fiduciary capacity, and (iii) any relative or spouse of such
<PAGE> 9
9
Person, or any relative of such spouse, who has the same residence as
such Person.
(c) "Business Combination" means:
(i) any merger or consolidation of the Corporation or
any direct or indirect majority-owned subsidiary of the
Corporation with (A) the Interested Stockholder or (B) with
any other corporation if the merger or consolidation is caused
by the Interested Stockholder and as a result of such merger
or consolidation Section 1 of this Article TENTH is not
applicable to the surviving corporation;
(ii) any sale, lease, exchange, mortgage, pledge,
transfer, or other disposition (in one transaction or a series
of transactions), except proportionately as a stockholder of
the Corporation, to or with the Interested Stockholder,
whether as part of a dissolution or otherwise, of assets of
the Corporation or of any direct or indirect majority-owned
subsidiary of the Corporation which assets have an aggregate
market value equal to 10% or more of either the aggregate
market value of all the assets of the Corporation determined
on a consolidated basis or the aggregate market value of all
the outstanding stock of the Corporation;
(iii) any transaction which results in the issuance
or transfer by the Corporation or by any direct or indirect
majority-owned subsidiary of the Corporation of any stock of
the Corporation or of such subsidiary to the Interested
Stockholder, except (A) pursuant to the exercise, exchange, or
conversion of securities exercisable for, exchangeable for, or
convertible into stock of the Corporation or any such
subsidiary which securities were outstanding prior to the time
that the Interested Stockholder became such, (B) pursuant to a
dividend or distribution paid or made, or the exercise,
exchange, or conversion of securities exercisable for,
exchangeable for, or convertible into stock of the Corporation
or any such subsidiary which security is distributed, pro rata
to all holders of a class or series of stock of the
Corporation subsequent to the time the Interested Stockholder
became such, (C) pursuant to an exchange offer by the
Corporation to purchase stock made on the same terms to all
holders of such stock, or (D) any issuance or transfer of
stock by the Corporation; PROVIDED, HOWEVER, that in no case
under subclauses (B), (C), or (D) of this clause (iii) will
there be an increase in the Interested Stockholder's
proportionate share of the stock of any class or series of the
Corporation or of the Voting Stock;
<PAGE> 10
10
(iv) any transaction involving the Corporation or any
direct or indirect majority-owned subsidiary of the
Corporation which has the effect, directly or indirectly, of
increasing the proportionate share of the stock of any class
or series, or securities convertible into the stock of any
class or series, of the Corporation or of any subsidiary which
is Owned by the Interested Stockholder, except as a result of
immaterial changes due to fractional share adjustments or as a
result of any purchase or redemption of any shares of stock
not caused, directly or indirectly, by the Interested
Stockholder; or
(v) any receipt by the Interested Stockholder of the
benefit, directly or indirectly (except proportionately as a
stockholder of the Corporation), of any loans, advances,
guarantees, pledges, or other financial benefits (other than
those expressly permitted in clauses (i)-(iv) of this
paragraph (c)) provided by or through the Corporation or any
direct or indirect majority-owned subsidiary of the
Corporation.
(d) "Control," including the terms "Controlling," "Controlled
by," and "Under Common Control With," means the possession, directly or
indirectly, of the power to direct or cause the direction of the
management and policies of a Person, whether through the ownership of
Voting Stock, by contract, or otherwise. A Person who is the Owner of
20% or more of a corporation's outstanding stock entitled to vote
generally in the election of directors will be presumed to have Control
of such corporation, in the absence of proof by a preponderance of the
evidence to the contrary. Notwithstanding the foregoing, a presumption
of Control will not apply where such Person holds such voting stock, in
good faith and not for the purpose of circumventing this Article TENTH,
as an agent, bank, broker, nominee, custodian, or trustee for one or
more Owners who do not individually or as a group have Control of such
corporation.
(e) "Interested Stockholder" means any Person (other than the
Corporation and any direct or indirect majority-owned subsidiary of the
Corporation) that (i) is the Owner of 15% or more of the Voting Stock
or (ii) is an Affiliate or Associate of the Corporation and was the
Owner of 15% or more of the outstanding Voting Stock at any time within
the three-year period immediately prior to the date on which it is
sought to be determined whether such Person is an Interested
Stockholder, and the Affiliates and Associates of such Person;
PROVIDED, HOWEVER, that the term Interested Stockholder will not
include any Person whose Ownership of shares in excess of the 15%
limitation set forth herein is the result of action taken solely by the
Corporation unless and until such Person thereafter acquires additional
shares of Voting Stock, except as a result of further corporate action
not caused, directly or indirectly, by such Person.
<PAGE> 11
11
For the purpose of determining whether a Person is an Interested
Stockholder, the Voting Stock deemed to be outstanding will include
stock deemed to be Owned by such Person through application of
paragraph (f) of this Section 3 but will not include any other unissued
stock of the Corporation that may be issuable pursuant to any
agreement, arrangement, or understanding, or upon exercise of
conversion rights, warrants, options, or other rights.
(f) "Owner" including the terms "Own," "Owned," and
"Ownership" when used with respect to any stock means a Person that
individually or with or through any of its Affiliates or Associates:
(i) beneficially owns such stock, directly or
indirectly; or
(ii) has (A) the right to acquire such stock (whether
such right is exercisable immediately or only after the
passage of time) pursuant to any agreement, arrangement, or
understanding, or upon the exercise of conversion rights,
exchange rights, warrants, options, or other rights; PROVIDED,
HOWEVER, that a Person will not be deemed the Owner of stock
tendered pursuant to a tender or exchange offer made by such
Person or any of such Person's Affiliates or Associates until
such tendered stock is accepted for purchase or exchange or
(B) the right to vote such stock pursuant to any agreement,
arrangement, or understanding; PROVIDED, HOWEVER, that a
Person will not be deemed to be the Owner of any stock because
of such Person's right to vote such stock if the agreement,
arrangement, or understanding to vote such stock arises solely
from a revocable proxy given in response to a proxy
solicitation made to 10 or more persons; or
(iii) has any agreement, arrangement, or
understanding for the purpose of acquiring, holding, voting
(except voting pursuant to a revocable proxy as described in
subclause (B) of clause (ii) of this paragraph (g)), or
disposing of such stock with any other Person that
beneficially owns, or whose Affiliates or Associates
beneficially own, directly or indirectly such stock; PROVIDED,
HOWEVER, that a Person may not be deemed to Own any stock
solely as a result of such Person being a party to a
stockholders agreement to which the Corporation is a party.
(g) "Person" means any individual, corporation,
partnership, unincorporated association, or other entity.
Section 4. POWERS OF THE BOARD OF DIRECTORS. For purposes of
this Article TENTH, a majority of the Whole Board will have the power to make
all determinations pursuant to this Article TENTH, including with respect to (a)
whether a Person is
<PAGE> 12
12
an Interested Stockholder, (b) the number of shares of Voting Stock owned by a
Person, (c) whether a Person is an Affiliate or Associate of another Person, and
(d) the aggregate fair market value of assets and stock of the Corporation.
Section 5. INTERPRETATIONS. Each of the provisions of this
Article TENTH that is also a part of Section 203 of the GCL will be interpreted
in a manner consistent with the judicial interpretations that have been, or may
in the future be, rendered with respect to such provisions of Section 203 of the
GCL.
Section 6. AMENDMENT, REPEAL, ETC. Notwithstanding anything
contained in this Restated Certificate of Incorporation to the contrary, the
affirmative vote of at least 80% of the Voting Stock voting together as a single
class, is required to amend or repeal, or adopt any provision inconsistent with,
this Article TENTH.
Section 7. EFFECTIVENESS. The provisions of this Article TENTH
shall become effective only upon the consummation of the closing of the
Corporation's initial public offering contemplated by the Registration Statement
on Form S-1 of the Corporation filed with the Securities and Exchange Commission
and identified by file no. 33-82390.
<PAGE> 13
13
IN WITNESS WHEREOF, the foregoing Restated Certificate of
Incorporation, having been duly adopted by the stockholders of the Corporation
in a written consent of stockholders pursuant to Section 228 of the General
Corporation Law of the State of Delaware, and written notice of such consent
having been given to all stockholders who did not sign such consent, has been
duly signed by Donald L. LeVault, the President of the Corporation, and attested
by Richard A. McLean, the Secretary of the Corporation, this day of October,
1994.
SINTER METALS, INC.
By:
-----------------------
Donald L. LeVault
President
Attest:
--------------------------
Richard A. McLean
Secretary
<PAGE> 1
EXHIBIT 3.2
-----------
SINTER METALS, INC.
RESTATED BY-LAWS
<PAGE> 2
SINTER METALS, INC.
BY-LAWS
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
PAGE
----
ARTICLE I
<S> <C>
MEETINGS OF STOCKHOLDERS........................................... 1
Section 1. TIME AND PLACE OF MEETINGS........................................................ 1
Section 2. ANNUAL MEETING.................................................................... 1
Section 3. SPECIAL MEETINGS.................................................................. 1
Section 4. NOTICE OF MEETINGS................................................................ 2
Section 5. QUORUM............................................................................ 3
Section 6. VOTING............................................................................ 3
Section 7. ORDER OF BUSINESS................................................................. 4
ARTICLE II
DIRECTORS.................................................. 8
Section 1. POWERS............................................................................ 8
Section 2. NUMBER, ELECTION, AND TERMS OF DIRECTORS.......................................... 8
Section 3. NOMINATIONS OF DIRECTORS.......................................................... 9
Section 4. REGULAR MEETINGS.................................................................. 12
Section 5. SPECIAL MEETINGS.................................................................. 12
Section 6. QUORUM............................................................................ 12
Section 7. WRITTEN ACTION.................................................................... 12
Section 8. PARTICIPATION IN MEETINGS BY CONFERENCE TELEPHONE................................. 13
Section 9. COMMITTEES........................................................................ 13
Section 10. COMPENSATION...................................................................... 14
Section 11. RULES............................................................................. 14
ARTICLE III
NOTICES................................................... 14
Section 1. GENERALLY......................................................................... 14
Section 2. WAIVERS........................................................................... 15
ARTICLE V
OFFICERS................................................... 15
Section 1. GENERALLY......................................................................... 15
Section 2. COMPENSATION...................................................................... 15
Section 3. SUCCESSION........................................................................ 16
Section 4. AUTHORITY AND DUTIES.............................................................. 16
Section 5. CHAIRMAN.......................................................................... 16
Section 6. PRESIDENT......................................................................... 16
Section 7. EXECUTION OF DOCUMENTS AND ACTION WITH RESPECT TO SECURITIES OF OTHER
CORPORATIONS...................................................................... 17
Section 8. VICE PRESIDENT.................................................................... 17
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C> <C>
Section 9. SECRETARY AND ASSISTANT SECRETARIES............................................... 18
Section 10. TREASURER AND ASSISTANT TREASURERS................................................ 19
ARTICLE V
STOCK.................................................... 19
Section 1. CERTIFICATES...................................................................... 19
Section 2. TRANSFER.......................................................................... 20
Section 3. LOST, STOLEN OR DESTROYED CERTIFICATES............................................ 20
Section 4. RECORD DATE....................................................................... 21
Section 5. BENEFICIAL OWNERS................................................................. 22
ARTICLE VI
GENERAL PROVISIONS.............................................. 22
Section 1. FISCAL YEAR....................................................................... 22
Section 2. CORPORATE SEAL.................................................................... 22
Section 3. RELIANCE UPON BOOKS, REPORTS AND RECORDS.......................................... 22
Section 4. TIME PERIODS...................................................................... 23
Section 5. DIVIDENDS......................................................................... 23
ARTICLE VII
AMENDMENTS.................................................. 23
Section 1. AMENDMENTS........................................................................ 23
</TABLE>
ii
<PAGE> 4
SINTER METALS, INC.
RESTATED BY-LAWS
ARTICLE I
MEETINGS OF STOCKHOLDERS
Section 1. TIME AND PLACE OF MEETINGS. All meetings of the
stockholders for the election of Directors or for any other purpose shall be
held at such time and place, within or without the State of Delaware, as may be
designated by the Board of Directors, or by the Chairman of the Board, the
President or the Secretary in the absence of a designation by the Board of
Directors, and stated in the notice of the meeting or in a duly executed waiver
of notice thereof.
Section 2. ANNUAL MEETING. An annual meeting of the
stockholders, shall be held at such date and time as shall be designated from
time to time by the Board of Directors, at which meeting the stockholders shall
elect by a plurality vote the Directors to succeed those whose terms expire and
shall transact such other business as may properly be brought before the
meeting.
Section 3. SPECIAL MEETINGS. Special meetings of the
stockholders, for any purpose or purposes, unless otherwise prescribed by law or
by the Corporation's certificate of incorporation (as amended from time to time,
the "Certificate of Incorporation"), may be called only by (i) the Chairman of
the Board, (ii) the President of the Corporation, or (iii) the
<PAGE> 5
2
Secretary of the Corporation; and shall be called by the Secretary of the
Corporation within 10 calendar days after receipt of the written request of
either (x) a majority of the total number of directors that the Corporation
would have if there were no vacancies (the "Whole Board"), or (y) holders of a
majority of the Voting Stock. For purposes of these By-Laws, "Voting Stock"
means stock of the Corporation of any class or series entitled to vote generally
in the election of directors. Any written requests to hold a special meeting
shall be sent to the President and the Secretary at the principal executive
office of the Corporation and shall state the purpose or purposes of the
proposed meeting.
Section 4. NOTICE OF MEETINGS. Written notice of every meeting
of the stockholders, stating the place, date and hour of the meeting and, in the
case of a special meeting, the purpose or purposes for which the meeting is
called, shall be given not less than ten nor more than sixty days before the
date of the meeting to each stockholder entitled to vote at such meeting, except
as otherwise provided herein or by law. When a meeting is adjourned to another
place, date or time, written notice need not be given of the adjourned meeting
if the place, date and time thereof are announced at the meeting at which the
adjournment is taken; PROVIDED, HOWEVER, that if the adjournment is for more
than thirty days, or if after the adjournment a new record date is fixed for the
adjourned meeting, written notice of the place, date and time of the adjourned
meeting shall be given in conformity herewith. At any adjourned meeting, any
business
<PAGE> 6
3
may be transacted which might have been transacted at the original meeting.
Section 5. QUORUM. The holders of a majority of the stock
issued and outstanding and entitled to vote thereat, present in person or
represented by proxy, shall constitute a quorum at all meetings of the
stockholders for the transaction of business except as otherwise provided by law
or by the Certificate of Incorporation. If, however, such quorum shall not be
present or represented at any meeting of the stockholders, the stockholders
entitled to vote thereat, present in person or represented by proxy, shall have
power to adjourn the meeting from time to time, without notice other than
announcement at the meeting, until a quorum shall be present or represented. In
determining whether a quorum is present, abstentions and broker non-votes shall
be counted as shares present at any meeting of stockholders.
Section 6. VOTING. Except as otherwise provided by law or by
the Certificate of Incorporation, each stockholder shall be entitled at every
meeting of the stockholders to one vote for each share of stock having voting
power standing in the name of such stockholder on the books of the Corporation
on the record date for the meeting and such votes may be cast either in person
or by written proxy. Every proxy must be in a form reasonably acceptable to the
Corporation, be duly executed and filed with the Secretary of the Corporation. A
stockholder may revoke any proxy that is not irrevocable by attending the
meeting and voting in person or by filing an instrument in writing
<PAGE> 7
4
revoking the proxy or another duly executed proxy bearing a later date with the
Secretary of the Corporation. The vote upon any question brought before a
meeting of the stockholders may be by voice vote, unless the holders of a
majority of the outstanding shares of all classes of stock entitled to vote
thereon present in person or by proxy at such meeting shall so determine. Every
vote taken by written ballot shall be counted by one or more inspectors of
election appointed by the Board of Directors. When a quorum is present at any
meeting, the vote of the holders of a majority of the stock which has voting
power present in person or represented by proxy shall decide any question
properly brought before such meeting, unless the question is one upon which by
express provision of law, the Certificate of Incorporation or these By-Laws, a
different vote is required, in which case such express provision shall govern
and control the decision of such question. Abstentions on any question properly
brought before any meeting shall be treated as a vote against any such question
and broker non-votes shall not be counted with respect to any such question in
determining whether the question has received the requisite approval of the
stockholders.
Section 7. ORDER OF BUSINESS. (a) The Chairman, or such other
officer of the Corporation designated by a majority of the Board of Directors,
will call meetings of the stockholders to order and will act as presiding
officer thereof. Unless otherwise determined by the Board prior to the meeting,
the presiding officer of the meeting of the stockholders will also determine the
order of business and have the authority in his or
<PAGE> 8
5
her sole discretion to regulate the conduct of any such meeting, including
without limitation by imposing restrictions on the persons (other than
stockholders of the Corporation or their duly appointed proxies) who may attend
any such stockholders' meeting, by ascertaining whether any stockholder or his
proxy may be excluded from any meeting of the stockholders based upon any
determination by the presiding officer, in his or her sole discretion, that any
such person has unduly disrupted or is likely to disrupt the proceedings
thereat, and by determining the circumstances in which any person may make a
statement or ask questions at any meeting of the stockholders.
(b) At an annual meeting of the stockholders, only such
business will be conducted or considered as is properly brought before the
meeting. To be properly brought before an annual meeting, business must be (i)
specified in the notice of meeting (or any supplement thereto) given by or at
the direction of the Board in accordance with Section 4 of this Article I, (ii)
otherwise properly brought before the meeting by the presiding officer or by or
at the direction of a majority of the Board of Directors, or (iii) otherwise
properly requested to be brought before the meeting by a stockholder of the
Corporation in accordance with Paragraph (c) of this Section 7.
(c) For business to be properly requested by a stockholder to
be brought before an annual meeting, the stockholder must (i) be a stockholder
of the Corporation of record at the time of the giving of the notice for such
annual meeting provided for in these By-Laws, (ii) be entitled to vote
<PAGE> 9
6
at such meeting, and (iii) have given timely notice thereof in writing to the
Secretary. To be timely, a stockholder's notice must be delivered to or mailed
and received at the principal executive offices of the Corporation not less than
60 calendar days prior to the annual meeting; PROVIDED, HOWEVER, that in the
event public announcement of the date of the annual meeting is not made at least
75 calendar days prior to the date of the annual meeting, notice by the
stockholder to be timely must be so received not later than the close of
business on the 10th calendar day following the day on which public announcement
is first made of the date of the annual meeting. A stockholder's notice to the
Secretary must set forth as to each matter the stockholder proposes to bring
before the annual meeting (A) a description in reasonable detail of the business
desired to brought before the annual meeting and the reasons for conducting such
business at the annual meeting, (B) the name and address, as they appear on the
Corporation's books, of the stockholder proposing such business and the
beneficial owner, if any, on whose behalf the proposal is made, (C) the class
and number of shares of the Corporation that are owned beneficially and of
record by the stockholder proposing such business and by the beneficial owner,
if any, on whose behalf the proposal is made, and (D) any material interest of
such stockholder proposing such business and the beneficial owner, if any, on
whose behalf the proposal is made in such business. Notwithstanding the
foregoing provisions of this Paragraph (c), a stockholder must also comply with
all applicable requirements of the Securities Exchange Act
<PAGE> 10
7
of 1934, as amended, and the rules and regulations thereunder with respect to
the matters set forth in this Paragraph (c). For purposes of this Paragraph (c)
and Paragraph (c) of Section 3 of Article II of these By-Laws, "public
announcement" means disclosure in a press release reported by the Dow Jones News
Service, Associated Press, or comparable national news service or in a document
publicly filed by the Corporation with the Securities and Exchange Commission
pursuant to Sections 13, 14, or 15(d) of the Securities Exchange Act of 1934, as
amended, or furnished to stockholders. Nothing in this Paragraph (c) will be
deemed to affect any rights of stockholders to request inclusion of proposals in
the Corporation's proxy statement pursuant to Rule 14a-8 under the Securities
Exchange act of 1934, as amended.
(d) At a special meeting of stockholders, only such business
may be conducted or considered as is properly brought before the meeting. To be
properly brought before a special meeting, business must be (i) specified in the
notice of the meeting given by or at the direction of the Chairman or a majority
of the Board of Directors in accordance with Section 4 of Article I of these
By-Laws (ii) otherwise properly brought before the meeting by the presiding
officer or by or at the direction of a majority of the Board of Directors.
(e) The determination of whether any business sought to be
brought before any annual or special meeting of the stockholders is properly
brought before such meeting in accordance with this Section 7 will be made by
the presiding officer of such meeting. If the presiding officer determines
<PAGE> 11
8
that any business is not properly brought before such meeting, he or she will so
declare to the meeting that any such business not properly brought before the
meeting will not be conducted or considered.
ARTICLE II
DIRECTORS
Section 1. POWERS. The business and affairs of the Corporation
shall be managed by or under the direction of its Board of Directors, which may
exercise all such powers of the Corporation and do all such lawful acts and
things as are not by law or by the Certificate of Incorporation directed or
required to be exercised or done by the stockholders.
Section 2. NUMBER, ELECTION, AND TERMS OF DIRECTORS. (a) The
Board of Directors shall consist of one or more members. The number of the
Directors of the Corporation shall be fixed by resolution of the Board of
Directors or by the stockholders at the annual meeting. Unless otherwise
prescribed in the Certificate of Incorporation, Directors may be elected by the
stockholders only at an annual meeting of stockholders. Election of Directors of
the Corporation need not be by written ballot unless requested by the Chairman
or by the stockholders owning a majority interest of the entire capital stock of
the Corporation issued and outstanding and entitled to vote who are present in
person or represented by proxy at a meeting of the stockholders at which
Directors are to be elected.
(b) Unless otherwise prescribed by the Certificate of
Incorporation, newly created directorships resulting from any
<PAGE> 12
9
increase in the number of Directors and vacancies on the Board resulting from
death, resignation, disqualification, removal, or other cause will be filled
solely by the affirmative vote of a majority of the remaining Directors then in
office, even though less than a quorum of the Board, or by a sole remaining
Director. Any Director elected in accordance with the preceding sentence will
hold office until the next annual meeting of the stockholders and until such
Director's successor has been elected and qualified. No decrease in the number
of Directors constituting the Board may shorten the term of any incumbent
Director.
(c) Unless otherwise prescribed by the Certificate of
Incorporation, any Director may be removed from office by the stockholders only
for cause and only in the manner provided in this Paragraph (c). At any annual
meeting or special meeting of the stockholders, the notice of which states that
the removal of a Director or Directors is among the purposes of the meeting, the
affirmative vote of the stockholders owning at least an 80% interest of the
entire capital stock of the Corporation issued and outstanding and entitled to
vote, may remove such Director or Directors for cause.
Section 3. NOMINATIONS OF DIRECTORS. (a) Only persons who are
nominated in accordance with the following procedures will be eligible for
election at a meeting of stockholders as Directors of the Corporation.
(b) Nominations of persons for election as Directors of the
Corporation may be made only at an annual meeting of
<PAGE> 13
10
stockholders (i) by or at the direction of the Board or (ii) by any stockholder
who is a stockholder of record at the time of giving of notice provided for in
this Section 3 who is entitled to vote for the election of Directors at such
meeting, and who complies with the procedures set forth in this Section 3. All
nominations by stockholders must be made pursuant to timely notice in proper
written form to the Secretary.
(c) To be timely, a stockholder's notice must be delivered to
or mailed and received at the principal executive offices of the Corporation not
less than 60 calendar days prior to the annual meeting of stockholders;
PROVIDED, HOWEVER, that in the event that public announcement of the date of the
annual meeting is not made at least 75 calendar days prior to the date of the
annual meeting, notice by the stockholder to be timely must be so received not
later than the close of business on the 10th calendar day following the day on
which public announcement is first made of the date of the annual meeting. To be
in proper written form, such stockholder's notice must set forth or include (i)
the name and address, as they appear on the Corporation's books, of the
stockholder giving the notice and of the beneficial owner, if any, on whose
behalf the nomination is made; (ii) a representation that the stockholder giving
the notice is a holder of record of stock of the Corporation entitled to vote at
such annual meeting and intends to appear in person or by proxy at the annual
meeting to nominate the person or persons specified in the notice; (iii) the
class and number of shares of stock of the Corporation owned beneficially and of
record by the stockholder
<PAGE> 14
11
giving the notice and by the beneficial owner, if any, on whose behalf the
nomination is made; (iv) a description of all arrangements or understandings
between or among any of (A) the stockholder giving the notice, (B) the
beneficial owner on whose behalf the notice is given, (C) each nominee, and (D)
any other person or persons (naming such person or persons) pursuant to which
the nomination or nominations are to be made by the stockholder giving the
notice; (v) such other information regarding each nominee proposed by the
stockholder giving the notice as would be required to be included in a proxy
statement filed pursuant to the proxy rules of the Securities and Exchange
Commission had the nominee been nominated, or intended to be nominated, by the
Board; and (vi) the signed consent of each nominee to serve as a director of the
Corporation if so elected. At the request of the Board, any person nominated by
the Board for election as a Director must furnish to the Secretary that
information required to be set forth in a stockholder's notice of nomination
which pertains to the nominee. The presiding officer of any annual meeting will,
if the facts warrant, determine that a nomination was not made in accordance
with the procedures prescribed by this Section 3, and if he or she should so
determine, he or she will so declare to the meeting and the defective nomination
will be disregarded. Notwithstanding the foregoing provisions of this Section 3,
a stockholder must also comply with all applicable requirements of the
Securities Exchange Act of 1934, as amended, and the rules and regulations
<PAGE> 15
12
thereunder with respect to the matters set forth in this Section 3.
Section 4. REGULAR MEETINGS. Regular meetings of the
Board of Directors may be held without notice at such time and place as shall
from time to time be determined by the Board of Directors.
Section 5. SPECIAL MEETINGS. Special meetings of the Board of
Directors may be called by the Chairman of the Board or the President on one
day's written or telephonic notice to each director by whom such notice is not
waived, given either personally, by mail, overnight delivery service or
telegram, or by telephone, and shall be called by the President or the
Secretary.
Section 6. QUORUM. At all meetings of the Board of Directors,
a majority of the total number of Directors then in office shall constitute a
quorum for the transaction of business, and the act of a majority of the
Directors present at any meeting at which there is a quorum shall be the act of
the Board of Directors. If a quorum shall not be present at any meeting of the
Board of Directors, the Directors present thereat may adjourn the meeting from
time to time to another place, time or date, without notice other than
announcement at the meeting, until a quorum shall be present.
Section 7. WRITTEN ACTION. Any action required or
permitted to be taken at any meeting of the Board of Directors or of any
committee thereof may be taken without a meeting if all members of the Board or
committee, as the case may be, consent
<PAGE> 16
13
thereto in writing, and the writing or writings are filed with the minutes or
proceedings of the Board or committee.
Section 8. PARTICIPATION IN MEETINGS BY CONFERENCE TELEPHONE.
Members of the Board of Directors, or any committee designated by the Board of
Directors, may participate in a meeting of the Board of Directors, or any such
committee, by means of conference telephone or similar communications equipment
by means of which all persons participating in the meeting can hear each other,
and such participation in a meeting shall constitute presence in person at the
meeting.
Section 9. COMMITTEES. The Board of Directors may, by
resolution passed by a majority of the Board, designate one or more committees,
each committee to consist of one or more of the Directors of the Corporation and
each to have such lawfully delegable powers and duties as the Board may confer.
Each such committee shall serve at the pleasure of the Board of Directors. The
Board may designate one or more Directors as alternate members of any committee,
who may replace any absent or disqualified member at any meeting of the
committee. Except as otherwise provided by law, any such committee, to the
extent provided in the resolution of the Board of Directors, shall have and may
exercise all the powers and authority of the Board of Directors in the
management of the business and affairs of the Corporation, and may authorize the
seal of the Corporation to be affixed to all papers which may require it. Any
committee or committees so designated by the Board shall have such name or names
as may be determined from time to time by resolution
<PAGE> 17
14
adopted by the Board of Directors. Unless otherwise prescribed by the Board of
Directors, a majority of the members of the committee shall constitute a quorum
for the transaction of business, and the act of a majority of the members
present at a meeting at which there is a quorum shall be the act of such
committee. Each committee shall prescribe its own rules for calling and holding
meetings and its method of procedure, subject to any rules prescribed by the
Board of Directors, and shall keep a written record of all actions taken by it.
Section 10. COMPENSATION. The Board of Directors may establish
such compensation for, and reimbursement of the expenses of, Directors for
attendance at meetings of the Board of Directors or committees, or for other
services by Directors to the Corporation, as the Board of Directors may
determine.
Section 11. RULES. The Board of Directors may adopt such
special rules and regulations for the conduct of their meetings and the
management of the affairs of the Corporation as they may deem proper, not
inconsistent with law or these By-Laws.
ARTICLE III
NOTICES
Section 1. GENERALLY. Whenever by law or under the provisions
of the Certificate of Incorporation or these By-Laws, notice is required to be
given to any director or stockholder, it shall not be construed to mean personal
notice, but such notice may be given in writing, by mail, addressed to such
director or stockholder, at his address as it appears on the records of the
Corporation, with postage thereon prepaid, and
<PAGE> 18
15
such notice shall be deemed to be given at the time when the same shall be
deposited in the United States mail. Notice to Directors may also be given by
telegram or telephone.
Section 2. WAIVERS. Whenever any notice is required to be
given by law or under the provisions of the Certificate of Incorporation or
these By-Laws, a waiver thereof in writing, signed by the person or persons
entitled to such notice, whether before or after the time of the event for which
notice is to be given, shall be deemed equivalent to such notice. Attendance of
a person at a meeting shall constitute a waiver of notice of such meeting,
except when the person attends a meeting for the express purpose of objecting,
at the beginning of the meeting, to the transaction of any business because the
meeting is not lawfully called or convened.
ARTICLE V
OFFICERS
Section 1. GENERALLY. The officers of the Corporation shall be
elected by the Board of Directors and shall consist of a President, a Secretary
and a Treasurer. The Board of Directors may also choose any or all of the
following: a Chairman of the Board of Directors, one or more Vice Presidents,
one or more Assistant Secretaries and Assistant Treasurers and other officers.
Any number of offices may be held by the same person. Officers need not be
stockholders of the Corporation and, except for the Chairman of the Board, need
not be a Director.
Section 2. COMPENSATION. The compensation of all officers
and agents of the Corporation who are also Directors of
<PAGE> 19
16
the Corporation shall be fixed by the Board of Directors. The Board of Directors
may delegate the power to fix the compensation of other officers and agents of
the Corporation to an officer of the Corporation.
Section 3. SUCCESSION. The officers of the Corporation shall
hold office until their successors are elected and qualified. Any officer
elected or appointed by the Board of Directors may be removed at any time by the
affirmative vote of a majority of the Directors. Any vacancy occurring in any
office of the Corporation may be filled by the Board of Directors.
Section 4. AUTHORITY AND DUTIES. Each of the officers of the
Corporation shall have such authority and shall perform such duties as are
stated in these By-Laws or as may be specified from time to time by the Board of
Directors in a resolution which is not inconsistent with these By-Laws.
Section 5. CHAIRMAN. The Chairman shall preside at all
meetings of the stockholders and of the Board of Directors and he shall have
such other duties and responsibilities as may be assigned to him by the Board of
Directors. The Chairman shall be the Chief Executive Officer of the Corporation.
The Chairman may delegate to any qualified person authority to chair any meeting
of the stockholders, either on a temporary or a permanent basis.
Section 6. PRESIDENT. The President shall, subject to
the control of the Board of Directors and, if there be one, the Chairman, be
responsible for the active management and direction of the business and
affairs of the Corporation. In case of the
<PAGE> 20
17
inability or failure of the Chairman to perform the duties of that office, the
President shall perform the duties of the Chairman, unless otherwise determined
by the Board of Directors.
Section 7. EXECUTION OF DOCUMENTS AND ACTION WITH RESPECT TO
SECURITIES OF OTHER CORPORATIONS. Each of the President and the Chairman shall
have, and are hereby given, full power and authority, except as otherwise
required by law or directed by the Board of Directors, (a) to execute, on behalf
of the Corporation, all duly authorized contracts, agreements, deeds,
conveyances or other obligations of the Corporation, applications, consents,
proxies and other powers of attorney, and other documents and instruments, and
(b) to vote and otherwise act on behalf of the Corporation, in person or by
proxy, at any meeting of stockholders (or with respect to any action of such
stockholders) of any other corporation in which the Corporation may hold
securities and otherwise to exercise any and all rights and powers which the
Corporation may possess by reason of its ownership of securities of such other
corporation. In addition, each of the President or the Chairman may delegate to
other officers, employees and agents of the Corporation the power and authority
to take any action which they authorized to take under this Section 7, with such
limitations as either the President or the Chairman may specify; such authority
so delegated by the President or the Chairman shall not be re-delegated by the
person to whom such execution authority has been delegated.
Section 8. VICE PRESIDENT. Each Vice President, however
titled, shall perform such duties and services and shall
<PAGE> 21
18
have such authority and responsibilities as shall be assigned to or required
from time to time by the Board of Directors or the President or the Chairman.
Section 9. SECRETARY AND ASSISTANT SECRETARIES. (a) The
Secretary shall attend all meetings of the stockholders and all meetings of the
Board of Directors and record all proceedings of the meetings of the
stockholders and of the Board of Directors and shall perform like duties for the
standing committees when requested by the Board of Directors or the President of
the Chairman. The Secretary shall give, or cause to be given, notice of all
meetings of the stockholders and meetings of the Board of Directors. The
Secretary shall perform such duties as may be prescribed by the Board of
Directors or the President. The Secretary shall have charge of the seal of the
Corporation and authority to affix the seal to any instrument. The Secretary or
any Assistant Secretary may attest to the corporate seal by handwritten or
facsimile signature. The Secretary shall keep and account for all books,
documents, papers and records of the Corporation except those for which some
other officer or agent has been designated or is otherwise properly accountable.
The Secretary shall have authority to sign stock certificates.
(b) Assistant Secretaries, in the order of their seniority,
shall assist the Secretary and, if the Secretary is unavailable or fails to act,
perform the duties and exercise the authorities of the Secretary.
<PAGE> 22
19
Section 10. TREASURER AND ASSISTANT TREASURERS. (a) The
Treasurer shall have the custody of the funds and securities belonging to the
Corporation and shall deposit all moneys and other valuable effects in the name
and to the credit of the Corporation in such depositories as may be designated
by the Treasurer with the prior approval of the Board of Directors or the
President or the Chairman. The Treasurer shall disburse the funds and pledge the
credit of the Corporation as may be directed by the Board of Directors and shall
render to the Board of Directors and the President and the Chairman, as and when
required by them, or any of them, an account of all transactions by the
Treasurer.
(b) Assistant Treasurers, in the order of their seniority,
shall assist the Treasurer and, if the Treasurer is unable or fails to act,
perform the duties and exercise the powers of the Treasurer.
ARTICLE V
STOCK
Section 1. CERTIFICATES. Certificates representing shares of
stock of the Corporation shall be in such form as shall be determined by the
Board of Directors, subject to applicable legal requirements. Such certificates
shall be numbered and their issuance recorded in the books of the Corporation,
and such certificate shall exhibit the holder's name and the number of shares
and shall be signed by, or in the name of the Corporation by (i) either the
President or the Chairman; and (ii) the Secretary or an Assistant Secretary or
the Treasurer or an
<PAGE> 23
20
Assistant Treasurer of the Corporation. Any or all of the signatures and the
seal of the Corporation, if any, upon such certificates may be facsimiles,
engraved or printed.
Section 2. TRANSFER. Upon surrender to the Corporation or the
transfer agent of the Corporation of a certificate for shares duly endorsed or
accompanied by proper evidence of succession, assignment or authority to
transfer, it shall be the duty of the Corporation to issue, or to cause its
transfer agent to issue, a new certificate to the person entitled thereto,
cancel the old certificate and record the transaction upon its books.
Section 3. LOST, STOLEN OR DESTROYED CERTIFICATES. The
Secretary may direct a new certificate or certificates to be issued in place of
any certificate or certificates theretofore issued by the Corporation alleged to
have been lost, stolen or destroyed upon the making of an affidavit of that
fact, satisfactory to the Secretary, by the person claiming the certificate of
stock to be lost, stolen or destroyed. As a condition precedent to the issuance
of a new certificate or certificates the Secretary may require the owner of such
lost, stolen or destroyed certificate or certificates to give the Corporation a
bond in such sum and with such surety or sureties as the Secretary may direct as
indemnity against any claims that may be made against the Corporation with
respect to the certificate alleged to have been lost, stolen or destroyed or the
issuance of the new certificate.
<PAGE> 24
21
Section 4. RECORD DATE. (a) In order that the Corporation may
determine the stockholders entitled to notice of or to vote at any meeting of
stockholders or any adjournment thereof, the Board of Directors may fix a record
date, which record date shall not precede the date upon which the resolution
fixing the record date is adopted by the Board of Directors, and which record
date shall not be more than sixty nor less than ten days before the date of such
meeting. If no record is fixed by the Board of Directors, the record date for
determining stockholders entitled to notice of or to vote at a meeting of
stockholders shall be at the close of business on the day next preceding the day
on which notice is given, or, if notice is waived, at the close of business on
the day next preceding the day on which the meeting is held. A determination of
stockholders of record entitled to notice of or to vote at a meeting of
stockholders shall apply to any adjournment of the meeting; provided, however,
that the Board of Directors may fix a new record date for the adjourned meeting.
(b) In order that the Corporation may determine the
stockholders entitled to receive payment of any dividend or other distribution
or allotment of any rights or the stockholders entitled to exercise any rights
in respect of any change, conversion or exchange of stock, or for the purpose of
any other lawful action, the Board of Directors may fix a record date, which
record date shall not precede the date upon which the resolution fixing the
record date is adopted, and which record date shall be not more than sixty days
prior to such action.
<PAGE> 25
22
If no record date is fixed, the record date for determining stockholders for any
such purpose shall be at the close of business on the day on which the Board of
Directors adopts the resolution relating thereto.
Section 5. BENEFICIAL OWNERS. The Corporation shall be
entitled to recognize the exclusive right of a person registered on its books as
the owner of shares to receive dividends, and to vote as such owner, and to hold
liable for calls and assessments a person registered on its books as the owner
of shares, and shall not be bound to recognize any equitable or other claim to
or interest in such share or shares on the part of any other person, whether or
not it shall have express or other notice thereof, except as otherwise provided
by law.
ARTICLE VI
GENERAL PROVISIONS
Section 1. FISCAL YEAR. The fiscal year of the Corporation
shall end on December 31 of each year unless altered by the Board of Directors.
Section 2. CORPORATE SEAL. The Board of Directors may adopt a
corporate seal and use the same by causing it or a facsimile thereof to be
impressed or affixed or reproduced or otherwise.
Section 3. RELIANCE UPON BOOKS, REPORTS AND RECORDS. Each
director, each member of a committee designated by the Board of Directors, and
each officer of the Corporation shall, in the performance of his or her duties,
be fully protected in relying
<PAGE> 26
23
in good faith upon the records of the Corporation and upon such information,
opinions, reports or statements presented to the Corporation by any of the
Corporation's officers or employees, or committees of the Board of Directors, or
by any other person as to matters the director, committee member or officer
believes are within such other person's professional or expert competence and
who has been selected with reasonable care by or on behalf of the Corporation.
Section 4. TIME PERIODS. In applying any provision of these
By-Laws which requires that an act be done or not be done a specified number of
days prior to an event or that an act be done during a period of a specified
number of days prior to an event, calendar days shall be used, the day of the
doing of the act shall be excluded and the day of the event shall be included.
Section 5. DIVIDENDS. The Board of Directors may from time to
time declare and the Corporation may pay dividends upon its outstanding shares
of capital stock, in the manner and upon the terms and conditions provided by
law and the Certificate of Incorporation.
ARTICLE VII
AMENDMENTS
Section 1. AMENDMENTS. The Board or the stockholders may make,
amend, and repeal any provision of these By-Laws. Any By-Law made by the Board
under the powers conferred hereby may be amended or repealed by the Board
(except as specified in any such By-Law so made or amended) or by the
stockholders in the manner provided herein. Notwithstanding the foregoing and
anything
<PAGE> 27
24
contained herein to the contrary, Sections 3 and 7 of Article I and Sections 2
and 3 of Article II of these By-Laws, as well as this Section 1, may not be
amended or repealed by the stockholders, and no provision inconsistent therewith
may be adopted by the stockholders, without the affirmative vote of the holders
of at least 80% of the entire capital stock the Corporation issued and
outstanding and entitled to vote, voting together as a single class; PROVIDED,
HOWEVER, that if any such proposed amendment or repeal or adoption of an
inconsistent provision is approved by the affirmative vote of the holders of a
majority, but less than 80%, of the entire capital stock the Corporation issued
and outstanding and entitled to vote, voting together as a single class, such
proposed amendment, repeal, or adoption of an inconsistent provision will become
effective 12 months after such approval. Notwithstanding anything contained
herein to the contrary, the affirmative vote of the holders of at least 80% of
the entire capital stock the Corporation issued and outstanding and entitled to
vote, voting together as a single class, is required to amend or repeal, or to
adopt any provisions inconsistent with this Article VII.
<PAGE> 1
Exhibit 4.1
-----------
TEMPORARY CERTIFICATE -- EXCHANGEABLE FOR DEFINITIVE ENGRAVED CERTIFICATE WHEN
READY FOR DELIVERY
SINTER METALS, INC.
INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE
THIS CERTIFICATE IS TRANSFERABLE IN CITY OF NEW YORK, NEW YORK OR IN
PITTSBURGH, PENNSYLVANIA
CLASS A COMMON STOCK CUSIP 82934Q 10 1
SEE REVERSE FOR CERTAIN DEFINITIONS
THIS CERTIFIES THAT
IS THE OWNER OF
FULLY PAID AND NON-ASSESSABLE SHARES OF CLASS A COMMON STOCK, PAR VALUE
$.001 PER SHARE
Sinter Metals, Inc. transferable on the books of the Corporation by the holder
hereof in person or by duly authorized attorney upon surrender of this
certificate properly endorsed. This certificate is not valid until
countersigned by the Transfer Agent and Registrar of the Corporation.
DATED:
SECRETARY CHAIRMAN OF THE BOARD
COUNTERSIGNED AND REGISTERED
MELLON SECURITIES TRUST COMPANY
(PITTSBURGH, PENNSYLVANIA AND NEW YORK, NEW YORK)
TRANSFER AGENT AND REGISTRAR
By
AUTHORIZED SIGNATURE
<PAGE> 2
SINTER METALS, INC.
Sinter Metals, Inc. will furnish without charge to each stockholder who so
requests the powers, designations, preferences and relative, participating,
optional or other special rights of each class of stock or series thereof of
the Corporation and the qualifications, limitations or restrictions of such
preferences and/or rights.
For Value received, ____________ hereby sell, assign and transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFICATION NUMBER OF ASSIGNEE
[ ]_________________________________
______________________________________________________________________________
Please print or typewrite name and address
including postal zip code of assignee
______________________________________________________________________________
______________________________________________________________________________
________________________________________________________________ of the Shares
represented by the within Certificate, and do hereby irrevocably constitute
and appoint
______________________________________________________________________ Attorney
to transfer the said shares on the books of the within named Corporation with
full power of substitution in the premises.
Dated _________________________________________________________________________
____________________________
In Presence of
_________________________________
<PAGE> 1
EXHIBIT 4.3
-----------
STOCKHOLDERS' AGREEMENT
-----------------------
THIS STOCKHOLDERS' AGREEMENT (this "Agreement") is made and
entered into as of this 18th day of October, 1994, by and among Sinter Metals,
Inc., a Delaware corporation (the "Company"), and the stockholders
(collectively, the "Stockholders" and singularly "Stockholder") listed on
EXHIBIT A attached hereto (including Citicorp Venture Capital, Ltd., a Delaware
corporation ("CVC"), Joseph W. Carreras ("Carreras"), Donald L. LeVault
("LeVault") and Richard A. McLean ("McLean")). This Agreement shall become
effective immediately prior to the time at which the Company's Class A Common
Stock, par value $.001 per share (the "New Class A Common Stock"), is registered
pursuant to Section 12 of the Securities Exchange Act of 1934 (the "Effective
Time") in connection with the offering described in the Registration Statement
on Form S-1 filed with the Securities and Exchange Commission on August 3, 1994
and as amended (Registration No. 33-82390) (the "Public Offering"). The Amended
and Restated Stockholders' Agreement by and among the Company and the
stockholders of the Company dated as of November 16, 1993 will terminate as of
the Effective Time. As of the Effective Time, the shares of the Company's Class
A Common Stock, par value $.01 per share (the "Old Class A Stock") and the
Company's Class B Common Stock, par value $.01 per share (the "Old Class B
Common Stock;" and together with the Old Class A Common Stock, the "Old Common
Stock"), will represent all of the
<PAGE> 2
issued and outstanding shares of the Company's capital stock. Prior to the
consummation of the public offering of the New Class A Common Stock, (1) the Old
Common Stock will be converted into the New Class A Common Stock and (2) the
Company will issue to CVC and Key Equity Capital Corporation, an Ohio
corporation ("KECC"), shares of the Company's Class B Common Stock, par value
$.001 per share (the "New Class B Common Stock"; collectively, the New Class A
Common Stock and New Class B Common Stock is the "New Common Stock."
WHEREAS, the parties to this Agreement are the record and
beneficial owners of all of the issued and outstanding shares of capital stock
of the Company in the respective amounts set forth opposite their names on
EXHIBIT A; and
WHEREAS, the parties to this Agreement desire to set forth
their mutual understandings and agreements with respect to their rights and
obligations as stockholders of the Company.
NOW, THEREFORE, in consideration of the mutual promises and
covenants and subject to the terms and conditions herein set forth, the parties
hereby agree as follows:
SECTION 1. SHARES SUBJECT TO AGREEMENT. All of the shares of
the Old Common Stock and the New Common Stock (including, without limitation,
shares issuable hereafter upon exercise of stock options or upon conversion of
the Old Class B Common Stock or the New Class B Common Stock) now or hereafter
owned, legally or beneficially, by any party to this Agreement (collectively,
the "Shares"), shall be subject to the provisions of this Agreement.
2
<PAGE> 3
SECTION 2. "PIGGYBACK" REGISTRATIONS.
(a) Subject to Section 2(f) hereof, if the Company at
any time proposes to register any of its equity securities (as defined in the
Securities Act of 1933 (the "Act") ("Equity Securities")) under the Act on Form
S-1, S-2 or S-3 or any successor form (but not Form S-4 or S-8) or on any other
form upon which may be registered securities similar to the Shares, it will at
each such time give notice to all Stockholders of its intention to do so. Upon
the written request of any Stockholder given to the Company within 15 days after
receipt of any such notice, the Company shall cause the Shares which the Company
has been requested to register by such Stockholder to be registered under the
Act, to the extent required to permit the sale or other disposition by such
Stockholder of the Shares so registered as part of the offering described in the
registration statement.
(b) If, in the written opinion of the underwriter or
underwriters managing the public offering which is the subject of such
registration (or in the event that such distribution shall not be underwritten,
in the written opinion of an investment banking firm of recognized standing
reasonably satisfactory to the Stockholders requesting registration) the total
amount of the securities to be so registered, when added to the total number of
Shares which the Stockholders have requested to be registered pursuant to this
Section 2, will exceed the maximum amount of securities of the Company that can
be marketed (i) at a price reasonably related to their then current market
value; or (ii) without otherwise materially and adversely affecting the
3
<PAGE> 4
entire offering, including, without limitation, through a material reduction of
the net proceeds of the offering payable to the Company, then the Company shall
have the right to exclude from such registration such amount of Shares, pro rata
from each Stockholder requesting his or its Shares be registered (based on the
number of Shares requested to be so registered) that it would otherwise be
required to register pursuant to this Section 2 as is necessary to reduce the
total amount of securities to be so registered to the maximum amount of
securities that can be so marketed. Shares proposed to be registered and sold in
an underwritten public offering for the account of any of the Stockholders shall
be sold to prospective underwriters selected or approved by the Company and on
the terms and subject to the conditions of one or more underwriting agreements
negotiated between the Company, the selling Stockholders and the prospective
underwriters. The Stockholders who desire to sell any of the Shares in a
proposed public offering shall provide the Company and the prospective
underwriters with such information as the Company or prospective underwriters
may reasonably request, including without limitation, such information as may be
required by the National Association of Securities Dealers, Inc. or the
Securities and Exchange Commission. The Company may withdraw any registration
statement initiated by the Company at any time before it becomes effective, or
postpone such offering of securities, without obligation or liability to the
holders of the Shares. Each Stockholder who sells Shares in a registered
offering pursuant to this Section 2 shall be responsible for
4
<PAGE> 5
payment of any underwriting discounts or commissions with respect to the Shares
sold for such Stockholder's account, and for the costs of any counsel or other
third parties retained by such Stockholder, and the Company shall be responsible
for payment of all expenses incurred by the Company in connection with the
preparation and filing of the registration statement. Unless otherwise agreed by
the Company and the Stockholders who participate in a given offering, any
over-allotment option granted to the underwriters shall be participated in by
the Company and such selling Stockholders pro rata in accordance with the
relative number of shares to be offered by each in the principal offering. Each
Stockholder who desires to participate in a registered offering shall enter into
custody agreements, powers of attorney, underwriting agreements customary for
such offerings and reasonably satisfactory to the Company and the Underwriters
at such time as reasonably requested by the Company or the Underwriters.
(c) INDEMNIFICATION BY THE COMPANY. In the event of any
registration under the Act of any Shares pursuant to this Section 2, the Company
shall indemnify and hold harmless each holder of Shares to be registered and
each other Person, if any, who controls such holder within the meaning of the
Act and each other Person (including underwriters) who participates in the
offering of such Shares against any losses, claims, damages or liabilities,
joint or several, to which such holder of Shares to be registered or controlling
Person or participating Person may become subject under the Act or otherwise,
insofar as such
5
<PAGE> 6
losses, claims, damages or liabilities (or proceedings in respect thereof) arise
out of or are based upon any untrue statement or alleged untrue statement of any
material fact contained, on the effective date thereof, in any registration
statement under which such Shares are registered under the Act, in any
preliminary prospectus or final prospectus contained therein, or in any
amendment or supplement thereof, or arise out of or are based upon the omission
or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, and will
reimburse such holder of Shares or such controlling Person or participating
Person in connection with investigating or defending any such loss, claim,
damage, liability or proceeding; PROVIDED, HOWEVER, that the Company will not be
liable in any such case to any such holder or other Person to the extent that
any such loss, claim, damage or liability arises out of or is based upon (i) an
untrue statement or alleged untrue statement or omission or alleged omission
made in such registration statement, said preliminary or final prospectus or
said amendment or supplement in reliance upon and in conformity with written
information furnished to the Company by such holder or such controlling or
participating Person, as the case may be, specifically for use in the
preparation thereof; or (ii) an untrue statement or alleged untrue statement,
omission or alleged omission in a prospectus if such untrue statement or alleged
untrue statement, omission or alleged omission is corrected in an amendment or
supplement to the prospectus which amendment or supplement is delivered to such
holder and other
6
<PAGE> 7
Person and such holder or other Person thereafter fails to deliver such
prospectus as so amended or supplemented prior to or concurrently with the sale
of such Stock to the Person asserting such loss, claim, damage, liability or
expense. For purposes of this Agreement, "Persons" shall mean an individual, a
corporation, a partnership, an association, a trust or other entity or
organization.
(d) INDEMNIFICATION BY THE HOLDERS OF SHARES WHICH ARE
REGISTERED. It shall be a condition of the Company's obligation under this
Section 2 to effect any registration under the Act that there shall have been
delivered to the Company an agreement or agreements duly executed by each holder
of Shares to be so registered, whereby such holder agrees to indemnify and hold
harmless the Company, each other Person referred to in subparts (1), (2) and (3)
of Section 11(a) of the Act in respect of such registration statement and each
other Person, if any, that controls the Company within the meaning of the Act
against any losses, claims, damages or liabilities, joint or several, to which
the Company, or such other Person or such Person controlling the Company may
become subject under the Act or otherwise, but only to the extent that such
losses, claims, damages or liabilities (or proceedings in respect thereof) arise
out of or are based upon any untrue statements or alleged untrue statement of
any material fact contained, on the effective date thereof, in any registration
statement under which such Shares are registered under the Act, in any
preliminary prospectus or final prospectus contained therein or in any amendment
or
7
<PAGE> 8
supplement thereto, or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, which, in each such
case, has been made in or omitted from such registration statement, said
preliminary or final prospectus or said amendment or supplement in reliance
upon, and in conformity with, written information furnished to the Company by
such holder of Shares specifically for use in the preparation thereof. The
Company shall be entitled to receive indemnities from underwriters, selling
brokers, dealer managers and similar securities industry professionals
participating in the distribution, to the same extent as provided above, with
respect to information with respect to such Persons so furnished in writing by
such Persons specifically for inclusion in any prospectus or registration
statement.
(e) CONDUCT OF INDEMNIFICATION PROCEEDINGS. (i) Any Person
entitled to indemnification hereunder shall (A) give prompt written notice to
the indemnifying party; and (B) unless in such indemnified party's reasonable
judgment, a conflict of interest may exist between such indemnified and
indemnifying parties with respect to such claim, permit such indemnifying party
to assume the defense of such claim with counsel reasonably satisfactory to the
indemnified party. Whether or not such defense is assumed by the indemnifying
party, the indemnifying party shall not be subject to any liability for any
settlement made without its consent (but such consent shall not be unreasonably
withheld). No indemnifying party shall consent to
8
<PAGE> 9
the entry of any judgment or enter into any settlement which does not include as
an unconditional term thereof the giving by the claimant or plaintiff to such
indemnified party of a release from all liability in respect of such claim or
litigation. An indemnifying party who is not entitled to, or elects not to,
assume the defense of the claim, shall not be obligated to pay the fees and
expenses of more than one counsel for all parties indemnified by such
indemnifying party with respect to such claim, unless in the reasonable judgment
of any indemnified party a conflict of interest may exist between such
indemnified party and any other such indemnified parties with respect to such
claim, in which event the indemnifying party shall be obligated to pay the fees
and expenses of such additional counsel or counsels.
(ii) If for any reason the indemnification provided for in the
preceding Sections 2(b) and 2(c) is unavailable to an indemnified party as
contemplated thereby, the indemnifying party shall contribute to the amount paid
or payable by the indemnified party as a result of such loss, claim, damage or
liability in such proportion as is appropriate to reflect not only the relative
benefits received by the indemnified party and the indemnifying party, but also
the relative fault of the indemnified party and the indemnifying party, as well
as any other relevant equitable considerations. No Person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Act) shall be
entitled to contribution from any Person who was not guilty of fraudulent
misrepresentation.
9
<PAGE> 10
(f) The provisions of this Section 2 shall not apply, and the
Company shall be under no obligation to register any of the Shares, or take any
other actions required by this Section 2, with respect to any registration, or
proposed registration, by the Company of (a) shares of stock having a preference
in liquidation, redemption, dividends or voting over the shares of its common
stock (however designated) ("Preferred Stock") or (b) any shares of common stock
(however designated) into which shares of Preferred Stock or any debt securities
of the Company may, by the terms of such instruments, be converted.
SECTION 3. CORPORATE GOVERNANCE.
(a) During the term of this Agreement, the Stockholders agree
that they will not vote the Shares, if any, held by them in favor of any
proposal to change the number of members of the Board of Directors of the
Company (the "Board") from its current size of seven (7) persons. Each
Stockholder hereby agrees to take any and all action necessary (including,
without limitation, voting their shares or, to the extent then permitted by the
Company's Certificate of Incorporation and ByLaws (each as amended from time to
time), executing and delivering written consents of stockholders, or calling
special stockholders' meetings) to elect to the Board (the "Initial Board") the
following seven (7) individuals:
(i) Carreras;
(ii) LeVault;
(iii) E. Joseph Hochreiter;
(iv) William H. Roj;
10
<PAGE> 11
(v) Charles E. Volpe;
(vi) David Y. Howe; and
(vii) John F. Kirby; PROVIDED, HOWEVER, that if,
upon completion of the Public Offering, KECC does not
own at least 740,344 shares of Common Stock, John F.
Kirby shall be replaced by a person designated by
CVC.
(b) At any annual or special meeting of the Company's
stockholders occurring on or after the completion of the Public Offering, or by
consent in writing of such Stockholders in lieu thereof (to the extent then
allowed by the Company's Certificate of Incorporation and By-Laws), at which or
pursuant to which some or all of the members of the Board are to be elected
(other than the Initial Board), each Stockholder hereby agrees to take any and
all action necessary (including, without limitation, voting their shares or, to
the extent then permitted by the Company's Certificate of Incorporation and
By-Laws, executing and delivering written consents of stockholders, or calling
special stockholders' meetings) to elect to the Board of Directors of the
Company the following seven (7) individuals:
(i) one (1) individual designated in writing by CVC;
PROVIDED, HOWEVER, that if CVC's ownership of
Common Stock is reduced below ten percent (10%)
of the total number of shares of Common Stock of
the Company then outstanding, CVC's right to
designate an individual shall terminate;
11
<PAGE> 12
(ii) one (1) individual designated in writing by KECC;
PROVIDED, HOWEVER, that if KECC ceases to own at least
740,344 shares of Common Stock, KECC's right to
designate an individual shall be transferred to CVC if
CVC then holds at least twenty-five percent (25%) of
the total number of shares of Common Stock then
outstanding, and otherwise the right created by this
clause (ii) shall terminate;
(iii) Carreras, for so long as he serves as an officer of
the Company, and thereafter the person who then serves
as the first ranking executive officer of the Company;
(iv) LeVault, for so long as he serves as an officer of the
Company, and thereafter the person who then serves as
the second ranking executive officer of the Company;
and
(v) three (3) individuals nominated by the Directors then
serving, at least two of whom shall not be employees of
the Company or otherwise be affiliates (as defined in
the Act) of the Company.
(c) If any vacancy on the Board occurs during the term of this
Agreement, the Stockholders shall use their best efforts to cause the Directors
remaining in office to elect to fill such vacancy in a manner consistent with
the provisions of Section 3(b) hereof.
12
<PAGE> 13
(d) Each Stockholder promptly shall inform the Company of any
Shares such Stockholder owns beneficially that are held through nominee or
"street" name. Certificate representing the Shares shall be stamped with a
legend stating that such shares are subject to the terms of this Agreement.
(e) The number of members of the Board may be increased from
seven (7) persons from time to time at the discretion of the Board; PROVIDED,
HOWEVER, that such increases shall require the approval of six (6) of the
directors then in office. In the event that the size of the Board is increased,
the additional members shall be persons selected by such process as the Board
determines.
SECTION 4. HOLDBACK AGREEMENT. If the Company at any time
proposes to register any of its Equity Securities under the Act, the
Stockholders agree, upon written request of the Company (the "Holdback Notice"),
not to effect any public or private sale, transfer or other disposition of any
Shares or any other Equity Securities for the period of time set forth in the
Holdback Notice (the "Holdback Period"). The Holdback Period shall be determined
in the sole discretion of the Board after consultation with the underwriter or
underwriters managing the public offering. Each Stockholder agrees to deliver to
the Underwriters and the Company a written confirmation of the foregoing in form
reasonably satisfactory to the Underwriters.
13
<PAGE> 14
SECTION 5. MISCELLANEOUS.
(a) WAIVERS AND AMENDMENTS. This Agreement may not be amended
or modified and compliance herewith may not be waived (either generally or in a
particular instance and either retroactively or prospectively) except by a
writing signed by all of the parties hereto; PROVIDED, HOWEVER, that EXHIBIT A
of this Agreement shall be automatically updated by the Company in the event
that the number of Shares held by the existing Stockholders change and/or Shares
are issued or transferred to new stockholders of the Company who agree to be
bound by the provisions of this Agreement and sign a counterpart hereof.
(b) NOTICES. Any notice, request, consent and other
communication required or permitted under this Agreement shall be in writing and
shall be deemed to have been duly given (i) when received if personally
delivered, (ii) one day after being sent by recognized overnight delivery
service, or (iii) five days after being sent by registered or certified mail,
return receipt requested, postage prepaid, to the parties at their respective
addresses set forth below.
If to the Company:
Sinter Metals, Inc.
The Terminal Tower
Suite 3200
50 Public Square
Cleveland, Ohio 44113
Attention: Joseph W. Carreras
14
<PAGE> 15
with a copy to:
Jones, Day, Reavis & Pogue
North Point
901 Lakeside Avenue
Cleveland, Ohio 44114
Attention: William H. Roj, Esq.
If to CVC:
Citicorp Venture Capital, Ltd.
399 Park Avenue, 14th Floor
New York, New York 10004
Attention: William Comfort
If to KECC:
Key Equity Capital Corporation
Society Center
127 Public Square
Cleveland, Ohio 44114
Attention: John F. Kirby
Notices to all other Stockholders will be addressed and delivered to the address
set forth below that Stockholder's name on EXHIBIT A or to such other person or
at such other place as any of the parties may from time to time furnish to the
other parties in writing.
(c) PARTIES IN INTEREST. All the terms and provisions of this
Agreement shall be binding upon and inure to the benefit of and be enforceable
by the parties hereto.
(d) HEADINGS. The headings of the Sections and paragraphs of
this Agreement have been inserted for convenience of reference only and do not
constitute a part of this Agreement.
(e) CHOICE OF LAW. It is the intention of the parties that the
laws of the State of Delaware shall govern the validity of this Agreement, the
construction of its terms, and
15
<PAGE> 16
the interpretation of the rights and duties of the parties, without giving
effect to the choice of law provisions thereof.
(f) COUNTERPARTS. This Agreement may be executed concurrently
in two or more counterparts, each of which shall be deemed an original, but all
of which together shall constitute one and the same instrument.
(g) SEVERABILITY. If any provision of this Agreement shall be
deemed or declared to be unenforceable, invalid or void, such provisions shall
be ineffective only to the extent of such unenforceability or invalidity and the
same shall not impair any of the other provisions of this Agreement, which shall
be enforced in accordance with their respective terms.
(h) TERMINATION OF AGREEMENT; TERMINATION OF RESTRICTIONS.
This Agreement and all restrictions on Shares owned by Stockholders shall
terminate at the earliest of (a) such time as the rights of both CVC and KECC to
designate individuals to serve on the Board terminate, (b) the unanimous written
agreement of the Stockholders to this Agreement, (c) the consummation of a
merger or consolidation of the Company into another entity and which is not
controlled directly or indirectly by any of the Stockholders, individually or in
a group, where the Company is not the survivor, (d) the consummation of an
acquisition of another entity and which is not controlled directly or indirectly
by any of the Stockholders individually or in a group by merger, consolidation,
exchange of shares or otherwise) in a transaction in which the Company issues
shares of its Common Stock that exceed twenty-five percent (25%) of the
16
<PAGE> 17
then outstanding Common Stock, (e) the sale of all or substantially all of the
Company's assets, (f) the effectiveness of the Shareholders' Agreement dated as
of November 18, 1993 by and among the Company, PMI Powder Metal Holding, Ltd.,
CVC, KECC and Heller Financial, Inc.; (g) the issuance or sale by the Company,
other than upon conversion of any of the Shares that are Old or New Class B
Common Stock to shares of Old or New Class A Common Stock, to any person or
affiliated group of persons (consisting either of a group of Affiliates or a
group as such term is used in Section 13(d)(3) of the Securities Exchange Act of
1934) of voting securities, or of options, warrants or other rights to acquire
voting securities, where such securities or rights to acquire securities would
represent 50% or more of the Company's securities generally eligible to vote in
the election of directors of the Company; (h) the date on which the aggregate
number of shares of Old or New Class A Common Stock and Old or New Class B
Common Stock owned by the Stockholders then party to this Agreement shall be
less than twenty-five percent (25%) of the outstanding shares of Class A Common
Stock, or (i) the tenth anniversary of this Agreement. The obligations of each
party to this Agreement shall terminate upon the sale of all of the Shares held
by such person. This Agreement shall in no event restrict the freedom of any
party hereto to sell, pledge, transfer or otherwise dispose of any Shares.
Furthermore, the obligations of each of Carreras, LeVault and McLean hereunder
shall terminate, and each such person shall cease to be a party hereunder, if
and when such person ceases to be employed by the Company in a
17
<PAGE> 18
position substantially equivalent, or superior to, the position now held by such
person.
[THE REST OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK]
18
<PAGE> 19
IN WITNESS WHEREOF, the parties have executed, or have caused
to be executed, this Stockholders' Agreement as of the day and year first
written above.
SINTER METALS, INC.
By: ______________________________
Name:
Its:
CITICORP VENTURE CAPITAL, LTD.
By:______________________________
Name:
Its:
-----------------------------------
Joseph W. Carreras
-----------------------------------
Donald L. LeVault
-----------------------------------
Richard A. McLean
19
<PAGE> 20
EXHIBIT A
---------
<TABLE>
<CAPTION>
Class A Class B
Common Stock Common Stock
------------ ------------
<S> <C> <C>
Citicorp Venture Capital, Ltd. 878,325* 2,443,307*
399 Park Avenue, 14th Floor
New York, New York 10004
Joseph W. Carreras 479,452 -
50 Public Square, Suite 3200
Cleveland, Ohio 44113
Donald L. LeVault 202,713 -
R.R. 2, Box 47
Emporium, Pennsylvania 15834
Richard A. McLean 104,061 -
R.R. 2, Box 47
Emporium, Pennsylvania 15834
<FN>
* Assumes that Citicorp Venture Capital, Ltd. receives an aggregate of
416,911 shares of Class A Common Stock under the Exchange Agreement,
which is based upon an initial public offering price of $13.00 per
share. Such number will change to the extent the initial public
offering price differs from $13.00 per share.
</TABLE>
20
<PAGE> 1
EXHIBIT 10.1
------------
1994 KEY EMPLOYEE STOCK INCENTIVE PLAN
1. The total number of shares that may be issued and sold
under options granted pursuant to this 1994 Key Employee Stock Incentive Plan
(this "Stock Incentive Plan") shall not exceed 474,705 shares of the Class A
Common Stock, par value $.001 per share ("Class A Common Stock"), of Sinter
Metals, Inc., a Delaware corporation (the "Company"), except to the extent of
adjustments required or authorized by Paragraph 5 of this Stock Incentive Plan.
Such shares may be treasury shares or shares of original issue or a combination
of the foregoing.
2. The Board of Directors of the Company may, from time to
time and upon such terms and conditions as it may determine, authorize the
granting to officers (including officers who are members of the Board of
Directors) and to other key employees of the Company or any of its subsidiaries
of options to buy from the Company shares of Class A Common Stock and may fix
the number of shares to be covered by each such option. Successive options may
be granted to the same person whether or not the option or options first granted
to such person remain unexercised.
3. Options granted under this Stock Incentive Plan may be (a)
options which are intended to qualify under particular provisions of the
Internal Revenue Code, as in effect from time to time, (b) options which are not
intended so to qualify under the Internal Revenue Code, or (c) combinations of
the foregoing. No option shall run for more than ten years from the date
<PAGE> 2
2
granted. No option shall be transferable by the optionee otherwise than by will
or the laws of descent and distribution. Options exercised during the optionee's
lifetime shall be exercisable only by him or by his guardian or legal
representative.
4. The option prices for options may be more than, equal to or
less than the fair market value of the shares covered by the option, as the
Board of Directors shall determine at the time of grant. The option price for
any shares shall be payable (a) in cash or by check, (b) if authorized by the
Board of Directors (either in the Stock Option Agreement for the options or
thereafter) by delivery to the Company of a promissory note or notes of the
optionee for up to 80% of the option price and with such other terms as the
Board of Directors may determine from time to time, (c) by the transfer to the
Company by the optionee of shares or vested options for the purchase of shares
of Class A Common Stock having a value (net of the exercise price, in the case
of options) at the time of exercise equal to the portion of the option price for
which such transfer is made, or (d) by a combination of such methods of payment.
5. The Board of Directors may make or provide for such
adjustments in the option price and in the number or kind of shares of the
Company's Class A Common Stock or other securities covered by outstanding
options as such Board may determine is equitably required to prevent dilution or
enlargement of the rights of optionees that would otherwise result from (a) any
increase or decrease in the number or change in the kind of
<PAGE> 3
3
shares of capital stock of the Company by reason of a stock dividend, stock
split, reverse stock split, recapitalization, or other such increase or decrease
or change effected without the receipt of consideration by the Company, or (b)
any consolidation or merger or other reorganization, or (c) any distribution of
rights or warrants to purchase stock to all holders of the Company's common
stock, or (d) any other corporate transaction or event having an effect similar
to any of the foregoing. Moreover, in the event of any such transaction or
event, the Board of Directors, in its discretion, may provide in substitution
for any or all outstanding awards under this Stock Incentive Plan such
alternative consideration as it, in good faith, may determine to be equitable in
the circumstances and may require in connection therewith the surrender of all
awards so replaced. The Board of Directors may also make or provide for such
adjustments in the number or kind of shares of the Company's Class A Common
Stock or other securities which may be sold under this Stock Incentive Plan as
such Board may determine is appropriate to reflect any transaction or event
described in the preceding sentence.
6. The form of any Stock Option Agreements shall be prescribed
by the Board of Directors, and any Stock Option Agreement evidencing an
outstanding option may, with the concurrence of the affected optionee, be
amended by the Board of Directors, provided that the terms and conditions of
each such Stock Option Agreement and amendment are not inconsistent with this
Stock Incentive Plan.
<PAGE> 4
4
7. The Board of Directors may, with the concurrence of the
affected optionee, cancel any option granted under this Stock Incentive Plan. In
the event of any such cancellation, the Board of Directors may authorize the
granting of new options (which may or may not cover the same number of shares
which had been the subject of any prior option) in such manner, at such option
price and subject to the same terms, conditions and discretions as, under this
Stock Incentive Plan, would have been applicable had the cancelled options not
been granted.
8. This Stock Incentive Plan may be amended from time to time
by the Board of Directors but without further approval by the stockholders of
the Company no such amendment shall increase the aggregate number of shares of
Class A Common Stock that may be issued and sold under this Stock Incentive Plan
(except that adjustments authorized by Paragraph 5 shall not be limited by this
provision) or change the designation in Paragraph 2 of the class of employees
eligible to receive options or, to the extent Rule 16b-3 under the Securities
Exchange Act of 1934 (or any successor rule to the same effect) is then
applicable to this Stock Incentive Plan, cause such Rule to no longer be
applicable to this Stock Incentive Plan.
9. This Stock Incentive Plan shall be administered by the
Board of Directors until the consummation of the initial public offering of the
Class A Common Stock pursuant to a registration statement that shall have become
effective under the Securities Act of 1933 (the "IPO"). Upon the consummation of
the IPO, the authority of the Board of Directors under the Stock
<PAGE> 5
5
Incentive Plan shall be delegated to the Compensation Committee of the Board of
Directors, provided that it is a committee of not less than three members of the
Board, each of whom shall be a "disinterested person" within the meaning of Rule
16b-3, and this Stock Incentive Plan shall thereafter be administered by the
Committee.
10. No option shall be granted under this Stock Incentive Plan
after December 31, 2004.
11. This Stock Incentive Plan shall become effective upon the
filing of the Company's Restated Certificate of Incorporation with the Secretary
of State of the State of Delaware creating the Class A Common Stock.
<PAGE> 1
Exhibit 10.2
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement") dated as of the
1st day of January, 1992, by and between PENNSYLVANIA PRESSED METALS, INC., a
Pennsylvania Corporation (the "Company"), and DONALD L. LEVAULT ("Executive");
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the Company desires to continue to employ Executive,
and Executive desires to continue to serve the Company, pursuant to the terms
and provisions of this Agreement;
NOW, THEREFORE, the Company and Executive, in consideration of
the premises, agreements and covenants contained herein and other good and
valuable consideration had and received, the receipt and sufficiency of which
are hereby confirmed, hereby agree as follows:
Section 1. EMPLOYMENT.
1.1 TERM OF EMPLOYMENT. The Company shall employ Executive,
and Executive shall serve the Company, for a period commencing on the date of
this Agreement and continuing for one year from such commencement date unless
sooner terminated pursuant to the provisions of Section 4 of this Agreement.
Commencing on the first anniversary of the commencement date, and on each
anniversary date thereafter, the term of employment shall be extended
automatically for an additional one-year period unless sooner terminated
pursuant to the provisions of Section 4 of this Agreement or unless the Company
or Executive, not less than 60 days prior to any such anniversary date, elects
that such automatic extension no longer be effective and so notifies the other
<PAGE> 2
party. The period described in this Section 1.1, including such extensions and
renewals, shall be defined as the "Term of Employment."
1.2 POSITION, DUTIES, RESPONSIBILITIES AND AUTHORITY. (a)
During the Term of Employment, Executive shall be employed in an executive
capacity, with the title of "President and Chief Executive Officer" or such
other title as may be specified by the Board of Directors of the Company (the
"Board") (but such office and position shall be consistent with the title set
forth above), and shall report to the Board of Directors of the Company.
(b) During the Term of Employment, Executive shall assume and
perform all reasonable executive and managerial responsibilities and duties as
the Board shall assign, which duties and responsibilities shall be consistent
with the position of President and Chief Executive Officer.
(c) During the Term of Employment, Executive shall devote
substantially all of his time during normal business hours to the business and
affairs of the Company.
1.3 COMPENSATION. During the Term of Employment, as
compensation for the services to be rendered during such period and the other
obligations undertaken by Executive under this Agreement, Executive shall be
entitled to the following compensation:
(a) BASE SALARY. During the Term of Employment, Executive
shall receive a base salary at an annual rate equal to $150,000 ("Base Salary").
Executive's Base Salary shall be payable in accordance with the Company's normal
procedures for compensating its employees.
2
<PAGE> 3
(b) INCENTIVE COMPENSATION.
(i) In addition to his Base Salary, for each fiscal year
during the Term of Employment, Executive shall be eligible to receive
a bonus in an amount up to 50 percent of his Base Salary for such
fiscal year based upon his achievement of certain performance
objectives set by the Board in January of such fiscal year relating
principally to the generation of earnings and the reduction of debt of
the Company (the "Incentive Compensation").
(ii) The Incentive Compensation for each fiscal year shall
be payable on or before the 30th day subsequent to the receipt of the
Company's audited financial statements relating to such fiscal year.
(c) BENEFITS AND PERQUISITES. During the Term of Employment,
the Company shall provide Executive with the following employee benefits and
perquisites:
(i) Executive shall be entitled to participate in all
Company employee health, accident and other benefit plans or programs
from time to time in effect for senior executives of the Company and
shall be entitled to such holidays, sick leave and other time off as
meet the policies of the Company;
(ii) Executive shall be entitled to an executive life
insurance benefit;
(iii) Executive shall be entitled to three weeks of
vacation during each fiscal year of the Company. In scheduling his
vacation, Executive shall give due regard to the reasonable needs of
the Company;
(iv) The Company shall provide Executive with a new leased
automobile similar to the automobile currently provided by the Company
to
3
<PAGE> 4
Executive and shall cover all reasonable expenses relating to such
automobile, including insurance and maintenance; and
(v) all other reasonable and documented out-of-pocket
expenses incurred by Executive on behalf of the Company in the
ordinary and normal course of business shall be reimbursed by the
Company in accordance with the Company's normal procedures for expense
reimbursement.
(d) SEVERANCE PAY. Executive shall be paid severance pay in
the following circumstances and amounts:
(i) In the event that the employment of Executive is
terminated pursuant to Sections 4.1(d) of this Agreement during the
first three years of the Term of Employment, Executive shall be paid
the following severance pay: (A) 18 months' Base Salary from the date
of such termination, payable in accordance with the Company's normal
procedures for compensating its employees; and (B) accrued Incentive
Compensation earned up to the date of such termination, payable on or
before the 60th day subsequent to such termination.
(ii) In the event that the employment of Executive is
terminated pursuant to Section 4.1(d) of this Agreement after the
first three years of the Term of Employment, Executive shall be paid
the following severance pay: (A) the number of months' Base Salary
from the date of such termination through the end of December in the
year in which the employment of Executive is terminated (a partial
month shall be considered to be a full month for purposes of this
Section 1.3(d)(ii), payable in accordance with the
4
<PAGE> 5
Company's personnel procedures for compensating its employees; and (B)
accrued Incentive Compensation earned up to the date of such
termination, payable on or before the 60th day subsequent to such
termination.
(iii) Notwithstanding the foregoing, Executive's right to
receive any severance pay under this Section 1.3(d) shall terminate
upon a breach by Executive of Sections 2 or 3 of this Agreement.
Section 2. CONFIDENTIALITY.
Executive acknowledges that by reason of the nature of
Executive's duties, Executive will or may have access to and become informed of
confidential and secret information which is a competitive asset of the Company
("Confidential Information"), including, without limitation, (a) customer
information such as names, addresses, sales histories, purchasing habits, credit
status, pricing levels, etc.; (b) certain prospective customer information,
mailing lists, etc.; (c) product and systems specifications, schematics,
designs, concepts for new or improved products and other product or systems
data; (d) product and material costs; (e) product and parts suppliers' and
prospective suppliers' names, addresses and contracts; (f) new and future
product and systems development and planning data; (g) future corporate planning
data; (h) production and packaging methods and equipment; (i) marketing
strategies; (j) the Company's financial results and business condition; and (k)
any of the foregoing which belong to any other person or company but to which
Executive has had access by reason of his employment with the Company
(including, without limitation, information which is delivered to the Company in
confidence by persons or companies for whom the Company is performing services).
Executive agrees faithfully to keep in strict confidence,
5
<PAGE> 6
and not, either directly or indirectly, to make known, divulge, reveal, furnish,
make available or use (except for use in the regular course of Executive's
duties hereunder and as may be required under law) any such Confidential
Information. Executive acknowledges that all sales manuals, instruction books,
catalogs, price lists, information and records, technical manuals and
documentation, drafts of instructions, guides and manuals, maintenance manuals,
schematics, engineering and technical notes and drafts, mechanical drawings,
blueprints and other engineering, mechanical or technical documentation (whether
in draft or final form), and other sales or technical information and aids
relating to the Company's business, and any and all other documents containing
Confidential Information furnished to Executive by the Company or otherwise
acquired or developed by Executive shall at all times be the property of the
Company. Upon termination of Executive's employment, Executive shall return to
the Company any such property or documents which are in Executive's possession,
custody or control, but Executive's obligation of confidentiality shall survive
such termination of employment until and unless any such Confidential
Information shall have become, through no fault of Executive, generally known to
the trade. Executive's obligations under this Section 2 are in addition to, and
not in limitation or preemption of, all other obligations of confidentiality
which Executive may have to the Company under general legal or equitable
principles.
Section 3. NON-COMPETITION.
3.1 COVENANT NOT TO COMPETE. Executive acknowledges that
during the Term of Employment, Executive's access to the Confidential
Information will enable Executive to benefit from the Company's goodwill and
know-how. Executive further acknowledges that it would be inherent in the
performance of Executive's duties as a
6
<PAGE> 7
shareholder, director, officer, employee, agent or consultant of any company
which competes with the company, or which intends to or may compete with the
Company, to disclose or use the Confidential Information, and the Company's
goodwill and know-how, to or for the benefit of such other company. To protect
these vital interests of the Company, Executive agrees that during the Term of
Employment and for a period of one year following the termination of such
employment, regardless of whether such termination is voluntary or involuntary,
Executive will not, without the prior written consent of the Company as set
forth in Section 3.2(b) of this Agreement, directly or indirectly, as a
shareholder, director, officer, employee, agent or consultant, (a) invest or
engage in any business which is competitive with that of the Company or accept
employment with or render services to a competitor of the Company or take any
action inconsistent with the fiduciary relationship of an employee to the
Company; (b) solicit sales of, or sell or deliver, any product or system of the
kind and character manufactured, sold or distributed by the Company to any
person, firm or corporation called upon or served by Executive on behalf of the
Company during the period of Executive's employment with the Company; (c)
solicit or attempt to solicit in competition with the business of the Company or
seek to divert from the Company the business or patronage of any person, firm or
corporation with whom Executive has had business relations on the Company's
behalf; or (d) engage, suggest or assist in or influence the engagement or
hiring by any competing organization of any salesman, distributor, contractor,
employee or source of the Company, or otherwise cause or encourage any person,
firm or corporation having a business relationship with the Company to sever
such relationship with the Company. Executive further agrees that this covenant
not to compete applies whether Executive acts as an
7
<PAGE> 8
individual for his own account, or as a partner, employee, agent, salesman,
distributor, consultant or representative of any person, firm or corporation.
The restriction contained in this Section 3 as it relates to the period
following the Term of Employment shall be limited to the United States, and no
business shall be considered competitive with the Company unless the Company was
actually and actively engaged in such business or had definitive plans known to
Executive to enter such business at the time of Executive's termination of
employment.
3.2 EXCEPTIONS. Nothing herein shall be interpreted to
prohibit Executive from acquiring, for investment purposes, securities of a
corporation that may compete with the Company, provided such securities are
listed on a national securities exchange or are regularly quoted in an
over-the-counter market by one or more members of the National Association of
Securities Dealers or similar organization, and provided further that the
securities acquired by Executive comprise less than five percent of the total
outstanding voting securities of such corporation.
Section 4. TERMINATION; OBLIGATIONS.
4.1 TERMINATION. Notwithstanding anything to the contrary
contained in Section 1.1 of this Agreement, the employment of Executive under
this Agreement shall terminate upon the occurrence of any of the following
events:
(a) the death of Executive;
(b) the disability of Executive, which in the judgment of the
Company, after having had consultation with medical experts in the applicable
field, will render Executive incapable of performing his duties under this
Agreement for a period of six months. For purposes of determining the disability
of Executive under this Section 4.1(b),
8
<PAGE> 9
Executive hereby consents to be examined by physicians chosen by the Company and
agrees to provide such physicians access to Executive's prior medical records
relevant to such determination;
(c) the delivery of written notice at any time by the
Company to the Executive stating that Executive is being terminated for "Cause",
with such written notice setting forth such "Cause" in reasonable detail. For
purposes of this Agreement, the term "Cause" shall mean:
(i) intentional theft or embezzlement from the Company or
committing fraud against the Company;
(ii) attempting to obtain personal gain, profit or
enrichment at the expense of the Company or from any transaction in
which Executive has an interest which is adverse to the interest of
the Company, unless expressly permitted by this Agreement or unless
Executive shall have obtained the prior written consent of the Board;
(iii) intentionally damaging a material item or portion of
the property of the Company;
(iv) becoming an alcoholic or drug addict, being convicted
of a felony or being adjudicated a bankrupt; or
(v) committing (for reasons other than disability or death)
any material breach of this Agreement, provided such material breach
continues for a period of 30 days after the Company shall have
notified Executive in writing of such material breach; or
(d) the delivery of written notice by the Company to the
Executive.
9
<PAGE> 10
4.2 CONTINUANCE OF OBLIGATIONS.
(a) In the event that Executive is terminated pursuant to
paragraphs (a), (b) or (c) of Section 4.1 of this Agreement, the Company shall
have no further obligation to Executive except to pay Executive (or his estate
in the case of death) his Base Salary and accrued Incentive Compensation and
other benefits provided herein as he may be entitled to receive up to the time
of termination (or in the case of death through the end of the month in which
death occurs), including payment for any accrued but unused vacation. The amount
of the accrued Incentive Compensation shall be calculated in accordance with
Section 1.3(b) of this Agreement and shall be payable on or before the 60th day
subsequent to the death of Executive.
(b) In the event that the employment of Executive is
terminated pursuant to paragraph (d) of Section 4.1 of this Agreement, the
Company shall pay Executive severance pay as set forth in Section 1.3(d) of this
Agreement.
(c) Upon expiration of the Term of Employment, Executive
shall have no further obligation to the Company except that:
(i) Executive shall continue to be bound by the provisions
of Sections 2 and 3 of this Agreement, and
(ii) following termination pursuant to Section 4.1(c) of the
Agreement, Executive shall remain liable to the Company for any
damages caused by the conduct described therein, except with respect
to damages for which Executive would not be liable to the Company
under applicable provisions of the Pennsylvania 1988 Business
Corporation Law or the Certificate of Incorporation or Bylaws of the
Company, and shall continue to cooperate
10
<PAGE> 11
with the Company without charge to the Company (but subject to
reimbursement by the Company of any out-of-pocket costs incurred by
Executive in the course of such cooperation) as to matters within
Executive's personal knowledge.
Section 5. REMEDY.
In the event of any violation of the provisions of Sections
2 and 3 of this Agreement by Executive, the parties hereby recognize and
acknowledge that a remedy at law will be inadequate and the Company may suffer
irreparable injury. Accordingly, Executive consents to injunctive and other
appropriate equitable relief upon the institution of proceedings therefor by the
Company in order to protect the Company's rights under such Sections. Such
relief shall be in addition to any other relief to which the Company may be
entitled at law or in equity.
Section 6. MISCELLANEOUS.
6.1 AMENDMENT. This Agreement may be amended only by a
writing executed by the parties to this Agreement.
6.2 ENTIRE AGREEMENT. This Agreement and the other
agreements expressly referred to herein set forth the entire understanding of
the parties to this Agreement regarding the subject matter hereof and supersede
all prior contracts, agreements, arrangements, communications, discussions,
representations and warranties, whether oral or written, between the parties
regarding the subject matter hereof.
6.3 NOTICES. Any notice, request, consent and other
communication required or permitted under this Agreement shall be in writing and
shall be deemed to have been duly given (a) when received if personally
delivered, (b) within one day after
11
<PAGE> 12
being sent by recognized overnight delivery service, or (c) within 5 days after
being sent by registered or certified mail, return receipt requested, postage
prepaid, to the parties (and to the persons to whom copies shall be sent) at
their respective addresses set forth below.
If to the Company:
Pennsylvania Pressed Metals, Inc.
Cameron Road
Emporium, Pennsylvania 15834
If to Executive:
Donald L. LeVault
943 Bille Road
St. Mary's, Pennsylvania 15857
Any party by written notice to the other party may change the address or the
persons to whom notices or copies thereof shall be directed.
6.4 ASSIGNMENT. This Agreement shall be binding upon and
inure to the benefit of the heirs, successors, representatives and assigns of
each party to this Agreement, but no rights, obligations or liabilities of
Executive under this Agreement shall be assignable without the prior written
consent of the Company.
6.5 GOVERNING LAW. This Agreement shall in all respects be
governed by, and construed in accordance with, the laws of the State of
Pennsylvania, without regard to principles of conflicts of law.
6.6 SEVERABILITY. Each section and subsection of this
Agreement constitutes a separate and distinct provision hereof. It is the intent
of the parties to this Agreement that the provisions of this Agreement be
enforced to the fullest extent permissible under the laws and public policies
applicable in each jurisdiction in which
12
<PAGE> 13
enforcement is sought. Accordingly, if any provision of this Agreement shall be
adjudicated to be invalid, ineffective or unenforceable, the remaining
provisions shall not be affected thereby. The invalid, ineffective or
unenforceable provision shall, without further action by the parties, be
automatically amended to effect the original purpose and intent of the invalid,
ineffective and unenforceable provision; PROVIDED, HOWEVER, that such amendment
shall apply only with respect to the operation of such provision in the
particular jurisdiction with respect to which such adjudication is made.
6.7 WAIVERS. Any waiver by any party or any violation of,
breach of or default under any provision of this Agreement by the other party
shall not be construed as, or constitute, a continuing waiver of such provision,
or waiver of any other violation of, breach of or default under any other
provision of this Agreement.
6.8 HEADINGS. The headings in this Agreement are solely for
convenience and shall not be given any effect in the construction or
interpretation of this Agreement.
6.9 COUNTERPARTS. This Agreement may be executed in any
number of counterparts, each of which shall be deemed to be an original, and all
of which together will constitute one and the same instrument.
6.10 THIRD PARTIES. Nothing expressed or implied in this
Agreement is intended, or shall be construed, to confer upon or give any person
or entity other than the Company and Executive any rights or remedies under, or
by reason of, this Agreement.
6.11 WITHHOLDING OF TAXES. The Company may withhold from any
amounts payable under this Agreement all federal, state, city or other taxes as
shall be required to be withheld pursuant to any law or government regulation or
ruling.
13
<PAGE> 14
IN WITNESS WHEREOF, the Company has caused this Agreement to
be duly executed and delivered by its duly authorized officer, and Executive has
duly executed and delivered this Agreement, as of the date first written above.
PENNSYLVANIA PRESSED METALS, INC.
By /s/ Greg Heitzenrater
--------------------------------------
Greg Heitzenrater
Assistant Secretary
"COMPANY"
/s/ Donald L. Levault
--------------------------------------
Donald L. LeVault
"EXECUTIVE"
14
<PAGE> 15
February 16, 1994
Mr. Donald LeVault CONFIDENTIAL
Pennsylvania Pressed Metals, Inc.
P. O. Box 271 Cameron Road
Emporium, PA 15834
Dear Don:
It is with pleasure that I am confirming the actions approved
by the Board of Directors today regarding your compensation and employment
contract.
We have approved the increase in your base salary from
$157,000 to $167,000 per annum. In addition, we approved the payment of a
$100,000 bonus for your 1993 performance and unanimously voted to extend your
employment contract to April 30, 1997.
The above is a good representation of how favorably you are
viewed by the Board. Congratulations on a great '93, and let's go after an even
stronger '94.
Sincerely,
Joseph W. Carreras
Chairman
JWC:gs
<PAGE> 1
Exhibit 10.3
------------
SINTER METALS, INC.
Nonqualified Stock Option Agreement
This Nonqualified Stock Option Agreement (the "Option
Agreement") is entered into as of the date set forth on the signature page
hereof by and between the individual named on the signature page hereof (the
"Optionee") and Sinter Metals, Inc., a Delaware corporation (the "Company").
WHEREAS, the Optionee is employed by the corporation
identified as the employer on the signature page hereof in the position shown
thereon;
WHEREAS, the execution of a Stock Option Agreement in the form
hereof was duly authorized by resolutions of the Board of Directors of the
Company (the "Board") adopted on the date shown on the signature page hereof
(the "Date of Grant"); and
WHEREAS, the option granted by this Option Agreement is
intended as a nonqualified stock option and shall not be treated as an
"incentive stock option" within the meaning of that term under Section 422 of
the Internal Revenue Code of 1986.
NOW, THEREFORE, the Company hereby grants to the Optionee an
option (the or this "Option") pursuant to the Company's 1994 Key Employee Stock
Incentive Plan (the "Plan") to purchase the number of shares of Class A Common
Stock, par value $.001 per share ("Class A Common Stock"), of the Company shown
on the signature page hereof (the "Option Shares"), and agrees to cause
certificates for any shares purchased hereunder to be delivered to the Optionee
<PAGE> 2
upon payment of the purchase price in full, all subject, however, to the terms
and conditions of the Plan and the terms and conditions hereinafter set forth.
Certain terms used herein are defined in Paragraph 8.
1. EXERCISE. (a) This Option (until terminated as hereinafter
provided) shall become exercisable to the extent of one-third of the Option
Shares on each of the first three anniversaries of the Date of Grant for so long
as the Optionee remains in the continuous employ of the Company or any
Subsidiary. For the purposes of this Section 1(a), leaves of absence approved by
the Board shall be regarded as employment. To the extent exercisable, this
Option may be exercised in whole or in part from time to time.
(b) Notwithstanding Section 1(a) hereof, this
Option shall become immediately exercisable in full (i) if the Optionee dies or
becomes permanently and totally disabled prior to the third anniversary of the
Date of Grant while in the continuous employ of the Company or a Subsidiary,
(ii) upon the retirement of the Optionee under a retirement plan of the Company
or a Subsidiary at or after the earliest voluntary retirement age provided for
therein or retirement of the Optionee at an earlier age with the consent of the
Board or (iii) upon the occurrence of a Change in Control of the Company.
2. EXERCISE PRICE AND PAYMENT. (a) This Option shall
be exercisable for Option Shares at an exercise price of $10.00 per
share (the "Exercise Price").
-2-
<PAGE> 3
(b) The exercise price for any shares shall be
payable (i) in cash or by currently dated check, (ii) by delivery to the Company
of a promissory note or notes of the Optionee in an amount not to exceed 80% of
the aggregate Exercise Price for the Option Shares and a stock pledge agreement
in substantially the forms and bearing the terms provided in EXHIBIT A and
EXHIBIT B, respectively, to this Option Agreement, (iii) by transfer to the
Company of shares or vested options (including options under this Option
Agreement) for the purchase of shares of Class A Common Stock having a Fair
Market Value (net of the exercise price, in the case of options) at the time of
exercise equal to the portion of the option price for which such transfer is
made, or (iv) by a combination of such methods of payment.
3. TERMINATION. This Option shall terminate and all
unexercised Options then outstanding shall be forfeited on the earliest of the
following dates:
(a) On the date on which the Optionee voluntarily
resigns (unless otherwise provided in a written agreement relating to
employment) or ceases to be an employee of the Company or a Subsidiary by reason
of termination of employment for Cause;
(b) One year after the date on which the Optionee
ceases to be an employee of the Company or a Subsidiary by reason of retirement
under a retirement plan of the Company or a Subsidiary at or after the earliest
voluntary retirement age provided for in such retirement plan or retirement at
an earlier age with the consent of the Board;
-3-
<PAGE> 4
(c) One year after the date of the death or
permanent disability of the Optionee if the Optionee dies or becomes permanently
disabled (i) while an employee of the Company or a Subsidiary or (ii) within the
one year period referred to in (b) above; or
(d) Ten years from the Date of Grant.
4. TRANSFERABILITY. This Option is not transferable by the
Optionee otherwise than by will or the laws of descent and distribution, and if
exercised, during the lifetime of the Optionee, is exercisable only by him or by
his guardian or legal representative.
5. SECURITIES LAWS. This Option shall not be exercisable if
such exercise would involve a violation of any applicable federal or state
securities law, and the Company hereby agrees to make reasonable efforts to
comply with such securities laws. This Option shall not be exercisable unless
under said laws at the time of exercise the shares of Class A Common Stock or
other securities purchasable hereunder are exempt, are the subject matter of an
exempt transaction, or are registered in accordance with such laws.
6. ADJUSTMENTS. (a) The Board shall make such adjustments in
the option price and in the number or kind of shares of Class A Common Stock or
other securities covered by this Option as such Board may in good faith
determine is equitably required to prevent dilution or enlargement of the rights
of the Optionee that otherwise would result from (i) any increase or decrease in
the number or change in the kind of shares of capital stock of the
-4-
<PAGE> 5
Company be reason of a stock dividend, stock split, reverse stock split,
recapitalization, or other such increase or decrease or change effected without
the receipt of consideration by the Company, or (ii) any consolidation or merger
or other reorganization, or (iii) any distribution of rights or warrants to
purchase stock to all holders of the Company's common stock, or (iv) any other
corporate transaction or event having an effect similar to any of the foregoing.
Moreover, in the event of any such transaction or event, the Board, in its
discretion, may provide in substitution for any or all outstanding awards under
this Option such alternative consideration as it, in good faith, may determine
to be equitable in the circumstances and may require in connection therewith the
surrender of all awards so replaced.
(b) In the event that any provision hereof would result in the
vesting of shares in amounts other than a whole number, the number of shares
that are vested under the applicable formula shall be reduced or increased to
the nearest whole number (rounding 0.50 up), with the effect of any such
rounding deemed to attach to the last group of shares eligible for vesting
pursuant to this Option Agreement.
7. WITHHOLDING. If the Company shall be required to withhold
any federal, state, local or foreign tax in connection with the exercise of this
Option, it shall be a condition to such exercise that the Optionee pay or make
provision satisfactory to the Company for payment of all such taxes.
8. DEFINITIONS. The following terms shall have meanings set
forth below.
-5-
<PAGE> 6
"Cause" means gross neglect of duty, dishonesty, conviction of
a felony, disloyalty, intoxication, drug addiction, or other similar misconduct
adverse to the best interests of the Company; provided that if the Optionee is
party to an employment agreement with the Company or any of its subsidiaries
which contains a more restrictive definition of "Cause" or "for cause", such
more restrictive definition shall apply for purposes of this Option Agreement.
"Change in Control" shall be deemed to occur when:
(a) the individuals who constitute the Board at the
beginning of any period of two consecutive years cease for any reason during
that period to constitute a majority of the members of the Board (unless the
election, or the nomination for election by the stockholders of the Company, of
each nonincumbent nominee for the Board who is elected to the Board during that
period is approved by the votes of at least two-thirds of the members of the
Board who were members of the Board at the beginning of that period and are
still serving as members of the Board at the time of any such election or
nomination for election); or
(b) The Board adopts a resolution declaring that in
its opinion the transactions contemplated by any event or series of events
(including, without limitation, any tender offer, except a tender offer by the
Company or a subsidiary, for shares of stock in the Company or the execution of
an agreement that provides for the merger or consolidation of the Company with
another corporation or the sale of all or substantially all of the assets of the
Company) that in the opinion of the Board will, or is likely to, result in
-6-
<PAGE> 7
a change in control of the Company are certain to be consummated. If any
transaction, event or series of events referred to in this Section 1(c)(ii)
shall be abandoned, the Board may nullify the effect thereof and reinstate the
provisions of Section 1(a) hereof by giving written notice thereof to the
Optionee; PROVIDED, HOWEVER, that no such nullification and reinstatement shall
prejudice any exercise of this option that may have occurred prior to any such
nullification and reinstatement.
"Fair Market Value" means (a) in the event that the
any class of the Common Stock of the Company is then listed on any securities
exchange or quoted on any over-the-counter trading system, the per share average
of the high and low prices reported in the consolidated reporting system (for
exchange traded securities and last sale reported over-the-counter securities)
or the average of the bid and ask price (for other over-the-counter securities)
for the 5 trading days next preceding the applicable valuation date; (b) in the
event that no class of the Common Stock of the Company is then listed on any
securities exchange or quoted on any over-the-counter trading system, but the
Company is a party to a firm commitment underwriting agreement for a public
offering of the Common Stock, then, during the five business day period
following the execution and delivery by the Company of such agreement, the price
per share established as the purchase price for shares pursuant to such
underwriting agreement; and (c) in the event that neither clause (a) or (b) of
this definition are applicable, an amount determined in good faith by the Board
or by a committee of the Board.
-7-
<PAGE> 8
"Option Year" refers to the period commencing on either the
Date of Grant of this option or an annual anniversary of such date and ending on
the next ensuing annual anniversary of such date.
"Person" or "person" means any corporation, partnership,
association, firm, entity or individual(s).
"Subsidiary" means any corporation (other than the Company) in
an unbroken chain of corporations beginning with the Company if each of the
corporations other than the last corporation in the unbroken chain owns stock
possessing fifty percent or more of the total combined voting power of all
classes of stock in one of the other corporations in such chain. For purposes of
this Option Agreement, the continuous employ of the Optionee with the Company or
a Subsidiary shall not be deemed interrupted, and the Optionee shall not be
deemed to have ceased to be an employee of the Company or any Subsidiary, by
reason of the transfer of his employment among the Company and its Subsidiaries.
9. ACKNOWLEDGEMENT. (a) The undersigned Optionee hereby
acknowledges receipt of an executed original of this Option Agreement and
accepts the option granted hereunder.
(b) The Optionee acknowledges that he/she has been
advised that the shares of Class A Common Stock covered by this Option Agreement
have not been registered under the Securities Act of 1933 or any state
securities laws and agrees that he/she will not make any disposition of such
shares unless either (i) such shares have been registered under said Act or such
other laws or (ii) an exemption from the registration provisions of said Act and
-8-
<PAGE> 9
such other laws is applicable to the Optionee's proposed disposition of such
shares. The Optionee understands that the certificates for such shares may bear
a legend substantially as follows:
"The shares evidenced by this Certificate have not been
registered under the Securities Act of 1933 or any state
securities laws. Such shares may not be sold or otherwise
transferred until the same have been registered under said Act
or any applicable state securities laws or until the Company
shall have received an opinion of legal counsel or a copy of a
letter from the staff of the Division of Corporation Finance
of the Securities and Exchange Commission and the applicable
state regulatory agency, in either case satisfactory to the
Company, that such shares may legally be sold or otherwise
transferred without such registration."
(c) The Optionee acknowledges and agrees that certain Option
Shares may be subject to transfer restrictions and that certificates for certain
Option Shares shall bear restrictive legends referring to such restrictions and
be subject to stop-transfer instructions.
-9-
<PAGE> 10
EXECUTED effective this 16th day of December, 1994.
SINTER METALS, INC.
By:
-------------------------------------
Name: Joseph W. Carreras
Title: Chairman of the Board
OPTIONEE
-------------------------------------
Name of Optionee:
--------------------------------------------------------------
Name of Employer:
---------------------------------------------------------------
Position:
------------------------------------------------------------
Date of Grant:
------------------------------------------------------------
Number of Option Shares:
Class A Common Stock:
------------------------------------------------
Effective Date:
----------------------------------------------------------------
-10-
<PAGE> 11
Exhibit A to Nonqualified
Stock Option Agreement
----------------------
SECURED PROMISSORY NOTE
-----------------------
$ , 19
-------------- ----------- -- --
FOR VALUE RECEIVED, the undersigned, _____________
("Borrower"), hereby unconditionally promises to pay to the order of Sinter
Metals, Inc., a Delaware corporation (the "Company"), the principal sum of
______________________________ Dollars ($_______) in lawful money of the United
States of America and in immediately available funds, on [the fifth anniversary
of the Note] and to pay simple interest (computed on the basis of a 365 day
year) on the unpaid principal amount hereof from and after the date of this
Secured Promissory Note until the entire principal amount hereof has been paid
in full, at the rate of [the rate per annum equal to the lowest rate required
under applicable provisions of the Internal Revenue Code of 1986, as amended (or
any successor thereto), to avoid imputation of interest, calculated as of the
date of this Secured Promissory Note] plus .01%.)1 Subject to the provisions of
Section 2 and 3 hereof, the principal hereof is payable in full on the fifth
(5th) anniversary of the date of this Secured Promissory Note. Interest is
payable on each anniversary of the date of this Secured Promissory Note with
respect to the period ending on such anniversary. Not later than five business
days prior to the date on which payment of interest is due, the Company shall
give written notice to the Borrower of the amount of the payment due on such
date.
For purposes of this Promissory Note, a "business day" shall
mean any day other than a Saturday, Sunday or federal holiday and shall consist
of the time period from 12:01 a.m. through 12:00 Midnight Eastern time.
This Secured Promissory Note has been delivered in
consideration of a loan by the Company to the Borrower in connection with the
exercise by Borrower of options to purchase shares of Class A Common Stock, par
value $.01 per share (the "Class A Common Stock"), of the Company in accordance
with the terms of a certain nonqualified Stock Option Agreement (collectively,
the "Option") dated as of ______________, 19__. Payment of the principal of and
interest on this Secured Promissory Note is secured pursuant to the terms of a
Stock Pledge Agreement of even date herewith between Borrower and the Company.
This Secured Promissory Note is subject to the following further terms and
conditions:
- --------
1 Need to determine interest rate; the formula stated is the lowest rate
permitted by the law to avoid imputed interest.
<PAGE> 12
1. Payment and Prepayment
----------------------
(a) if the borrower of any of his Permitted
Transferees shall sell any shares of Class A Common Stock,
such sale shall be made only for cash, and Borrower agrees to
promptly deliver to the Company the consideration received by
the Borrower on such sale of shares of Stock as partial
payment of the unpaid principal and accrued and unpaid
interest on this Secured Promissory Note until this Secured
Promissory Note is paid in full.
(b) All payments of principal and interest on this
Secured Promissory Note shall be made to the Company or its
order in lawful money of the United States of America and in
immediately available funds at the offices of the Company at
its then principal place of business (or at such other place
as the holder hereof shall notify Borrower in writing).
Borrower may, at his option, prepay this Secured Promissory
Note in whole or in part at any time or from time to time
without penalty or premium. Any prepayments of any portion of
the principal amount of this Secured Promissory Note shall be
accompanied by payment of all interest accrued but unpaid
hereunder.
(c) Concurrently with any payment of any portion of
this Secured Promissory Note pursuant to paragraph 1(a) hereof
or any prepayment of any portion of the principal amount of
this Secured Promissory Note pursuant to paragraph 1(b)
hereof, the Company shall make a notation of such application
or payment on this Secured Promissory Note. If full payment of
all unpaid principal of and accrued and unpaid interest on
this Secured Promissory Note is made, this Secured Promissory
Note shall be cancelled. Any partial payment or prepayment
shall be applied first to accrued and unpaid interest hereon
and then to the unpaid installments of principal hereof in the
inverse order of their maturity.
2. CONVERSION DEMAND NOTE. In the event that the borrower
shall cease to be employed by the Company or any of its subsidiaries as a result
of his death or permanent disability or his retirement under a retirement plan
of the Company or a subsidiary of the Company ("Retirement"), or through
termination without Cause (as defined in the Option), which term shall include
the Borrower's ceasing to be an employee of the Company or any of its
subsidiaries by reason of a sale or other disposition of the subsidiary by which
such Borrower is employed, then the unpaid principal of and accrued and unpaid
interest on this Secured Promissory Note shall, upon demand by the Company given
in writing to the Borrower, become immediately due and payable.
-2-
<PAGE> 13
3. EVENTS OF DEFAULT. Upon the occurrence of any of the
following events ("Events of Default"):
(a) Failure to pay any principal of this Promissory
Note, including any prepayments required hereunder, when due
which shall remain unremedied for thirty (30) days; or
(b) Provided that the notice required to be given
pursuant to the last sentence of the first paragraph of this
Secured Promissory Note has been given in accordance with the
terms thereof, failure to pay any interest due under this
Secured Promissory Note which shall remain unremedied for
thirty (30) days following the date when such installment was
originally due hereunder; or
(c) Borrower shall cease to be employed by the
Company or any of its subsidiaries by reason of voluntary
resignation or termination for Cause (as defined in the
Option); or
(d) A petition is filed by or against the Borrower
seeking the entry of an order for relief under the bankruptcy
laws of the United States, as now or hereafter amended or
supplemented, or there is an appointment of a permanent
receiver or a permanent trustee of all or substantially all
the property of the Borrower or an assignment is made by the
Borrower for the benefit of creditors;
then, and in any such event, the holder of this Secured Promissory Note may
declare, by notice of default given to Borrower, the entire principal amount of
this Secured Promissory Note to be forthwith due and payable, whereupon the
entire principal amount of this Secured Promissory Note outstanding shall become
due and payable without presentment, demand, protest and notices of any kind or
of dishonor, all of which are hereby expressly waived. Upon the occurrence of an
Event of Default, the accrued and unpaid interest hereunder shall thereafter
bear the same rate of interest as the principal hereunder, but in no event shall
such interest be charged which would violate any applicable usury law. If an
Event of Default shall occur hereunder, Borrower shall pay costs of collection,
including reasonable attorneys' fees, incurred by the holder in the enforcement
hereof.
No delay or failure by the holder of this Secured Promissory
Note in the exercise of any right or remedy shall preclude other or future
exercise thereof or the exercise of any other right or remedy.
4. ADDITIONAL RESTRICTIONS UPON OCCURRENCE OF AN EVENT OF
DEFAULT. In case an Event of Default shall occur and be continuing, the Borrower
agrees that he will not, without the prior written consent of the Company (which
consent shall not be unreasonably
-3-
<PAGE> 14
withheld), sell, assign, transfer, exchange, or otherwise dispose of, or grant
any option with respect to, any shares of Class A Common Stock then beneficially
owned or thereafter acquired by the Borrower, nor will he create, incur or
permit to exist any pledge, lien, mortgage, hypothecation, security interest,
charge, option or any other encumbrances with respect to any shares of Class A
Common Stock, or any interest therein, or any proceeds thereof.
5. Miscellaneous.
-------------
(a) The provisions of this Secured Promissory Note
shall be governed by and construed in accordance with the laws
of the State of Delaware, without regard to the conflicts of
laws rules thereof.
(b) All notices and other communication hereunder
shall be in writing and will be deemed to have been duly given
if delivered in person or mailed by certified mail or
guaranteed overnight delivery service to the Company at its
principal executive offices and to the Borrower at the last
address reflected in the Company's records.
(c) The paragraph headings contained in this
Promissory Note are for reference purposes only and shall not
affect in any way the meaning or interpretations of the
provisions thereof.
IN WITNESS WHEREOF, this Secured Promissory Note has been duly
executed and delivered by Borrower on the date first written above.
------------------------------
Borrower:
Witness:
- ----------------------------
-4-
<PAGE> 15
Exhibit B to Nonqualified
Stock Option Agreement
----------------------
STOCK PLEDGE AGREEMENT
THIS STOCK PLEDGE AGREEMENT (this "Agreement") is made by the
individual pledgor identified on the signature page hereof, (the "Pledgor") to
Sinter Metals, Inc., a Delaware corporation (the "Company") as of the date set
forth on the signature page hereof.
RECITALS
--------
A. Pledgor has entered into one or more Stock Option
Agreements pursuant to the Company's 1994 Key Employee Stock Incentive Plan (the
"Option"), pursuant to which the Pledgor has exercised his option to purchase
the number of shares of Class A Common Stock, par value $.01 per share, shown on
the signature page hereof (such shares being the "Class A Common Stock" or the
"Shares").
B. In connection with the payment of the purchase price for
the Shares, the Pledgor has borrowed from the Company the principal amount shown
on the signature page hereof, and in consideration therefor, is delivering to
the Company the secured promissory note of the Pledgor, dated the date hereof,
for such principal amount (the "Promissory Note").
C. The Pledgor wishes to grant security and assurance
to the Company in order to secure the payment of the principal of
and interest on the Promissory Note and to that effect to pledge to
the Company the Shares.
AGREEMENT
---------
NOW, THEREFORE, in consideration of the foregoing and for
other good and valuable consideration, the receipt and adequacy of which is
hereby acknowledged, the parties hereto agree as follows:
l. PLEDGE. The Pledgor hereby pledges, assigns, hypothecates,
transfers, and delivers to the Company, all the Shares (the "Pledged Stock") and
hereby grants to the Company, a first lien on, and security interest in, the
Pledged Stock and in all proceeds thereof, together with appropriate undated
stock powers duly executed in blank, as collateral security for the prompt and
complete payment when due (whether at the stated
-1-
<PAGE> 16
maturity, by acceleration or otherwise) of the unpaid principal of and interest
on the Promissory Note.
2. ADMINISTRATION SECURITY. The following provisions shall
govern the administration of the Pledged Stock:
(a) So long as no Event of Default has occurred and
is continuing (as used herein, "Event of Default" shall mean
the occurrence of any Event of Default under the Promissory
Note), the Pledgor shall be entitled to act with respect to
the Pledged Stock in any manner not inconsistent with the
provisions of this Agreement, the Promissory Note or any
document or instrument delivered or to be delivered pursuant
to or in connection with the Promissory Note.
(b) If, while this Agreement is in effect, the
Pledgor shall become entitled to receive or shall receive any
stock certificate (including, without limitation, any
certificate representing a stock dividend or a distribution in
connection with any reclassification, increase or reduction of
capital, or issued in connection with any reorganization),
option or rights, in substitution of, in exchange for, or in
respect of, any shares of any Pledged Stock, the Pledgor
agrees to accept the same as the Company's agent and to hold
the same in trust on behalf of and for the benefit of the
Company and to deliver the same forthwith to the Company in
the exact form received, with the endorsement of the Pledgor
when necessary and/or appropriate undated stock powers duly
executed in blank, to be held by the Company subject to the
terms hereof, as additional collateral security for the
payment of the principal of and interest on the Promissory
Note. In case any distribution of capital shall be made on or
in respect of the Pledged Stock or any property shall be
distributed upon or with respect to the Pledged Stock pursuant
to the recapitalization or reclassification of the capital of
the Company or pursuant to the reorganization of the Company,
the property so distributed shall be delivered to the Company
to be held by it as additional collateral security for the
payment of the principal of and interest on the Promissory
Note. All sums of money and property so paid or distributed in
respect of the Pledged Stock which are received by the Pledgor
shall, until paid or delivered to the Company, be held by the
Pledgor in trust as additional collateral security for the
payment of the principal of and interest on the Promissory
Note. All property at any time pledged with the Company
hereunder (whether or not described herein) and all income
therefrom and proceeds thereof, are herein collectively
sometimes called the "Collateral."
-2-
<PAGE> 17
(c) Notwithstanding paragraphs l and 2(b) hereof,
unless an Event of Default shall have occurred and be
continuing, the Pledgor shall be entitled to receive all cash
or stock dividends paid in respect of the Pledged Stock and,
unless the Company shall have given notice pursuant to
paragraph 3 of its intention to exercise all voting and
stockholder rights with respect to the Pledged Stock and any
stock dividends thereof, to vote the Pledged Stock and any
stock dividends thereof and to give consents, waivers and
ratifications in respect of the Pledged Stock and any stock
dividends thereof; PROVIDED, HOWEVER, that no vote shall be
cast or consent, waiver or ratification given or action taken
which would impair the Collateral or be inconsistent with or
violate any provision of this Agreement, the Promissory Note,
or any document or instrument delivered or to be delivered
pursuant to or in connection with the Promissory Note.
(d) Notwithstanding any payment or payments made by
the Pledgor hereunder, or the receipt of any amounts by the
Company with respect to the Collateral, or any set-off or
application of funds of the Pledgor by the Company, the
Pledgor shall not be entitled to be subrogated to any of the
rights of the Company against any Collateral held by the
Company for the payment of the principal of and interest on
the Promissory Note until the principal of and interest on the
Promissory Note are paid in full.
(e) The Pledgor shall immediately upon request by the
Company and in confirmation of the security interests hereby
created, execute and deliver to the Company such further
instruments, deeds, transfers, assurances and agreements, in
form and substance satisfactory to the Company, as the Company
shall request, including any financing statement and
amendments thereto, or any other documents, as required under
Delaware law and any other applicable law to protect the
security interests created hereunder.
(f) Subject to any sale by the Company or other
disposition by the Company of the Pledged Stock or any stock
dividends thereon or other property pursuant to this Agreement
and subject to Section 6 below, the Pledged Stock and any
other Collateral shall be returned to the Pledgor upon full
payment of the principal of and interest on the Promissory
Note.
3. RIGHTS OF HOLDING. The Company shall not be liable for
failure to collect or realize upon the principal of and interest on the
Promissory Note or any collateral security therefor, or any part thereof, or for
any delay in so doing nor shall the Company be under any obligation to take any
action
-3-
<PAGE> 18
whatsoever with regard thereto. Any or all shares of the Pledged Stock and any
stock dividends thereon held by the Company hereunder may, if an Event of
Default has occurred and is continuing, provided that the Company shall have
given prior written notice of its intention to do so to the Pledgor, be
registered in the name of the Company or its nominee, and the Company or its
nominee may thereafter exercise all voting and stockholder rights at any meeting
of the Company and exercise any and all rights of conversion, exchange,
subscription or any other rights, privileges or options pertaining to any shares
of the Pledged Stock and any stock dividends thereon as if it were the absolute
owner thereof, including without limitation, the right to exchange at its
discretion, any and all of the Pledged Stock and any stock dividends thereon
upon the merger, consolidation, reorganization, recapitalization or other
readjustment of the Company or upon the exercise by the Company of any right,
privilege or option pertaining to any shares of the Pledged Stock and any stock
dividends thereon, and in connection therewith, to deposit and deliver any and
all of the Pledged Stock and any stock dividends thereon with any committee,
depositary, transfer agent, registrar or other designated agency upon such terms
and conditions as it may determine, all without liability except to account for
property actually received by it, but the Company shall have no duty to exercise
any of the aforesaid rights, privileges or options and shall not be responsible
for any failure to do so or delay in so doing.
4. Remedies in Case of an Event of Default.
---------------------------------------
(a) In case an Event of Default shall have occurred
and be continuing, the Company shall have all of the remedies
of a secured party under the Delaware Uniform Commercial Code,
and, without limiting the foregoing, shall have the right,
subject to any necessary regulatory approvals, to sell, assign
and deliver the whole or, from time to time, any part of the
Collateral or any interest in any part thereof, at any private
sale or at public auction, with or without demand of
performance or other demand, advertisement or notice of the
time or place of sale or adjournment thereof or otherwise,
each of which demands, advertisements and/or notices are
hereby expressly waived (except the Company shall give 10
days' notice to the Pledgor of the time and place of any sale
pursuant to this Section 4), for cash, on credit or for other
property, for immediate or future delivery, and for such price
or prices and on such terms as the Company shall, in its sole
discretion, determine, the Pledgor hereby waiving and
releasing any and all right or equity of redemption whether
before or after sale hereunder. At any such sale the Company
may bid for and purchase the whole or any part of the
Collateral so sold free from any such right or equity of
redemption. The Company shall apply the net proceeds of any
such sale, after deducting
-4-
<PAGE> 19
all reasonable costs and expenses of every kind incurred
therein or incidental to the care, safekeeping or otherwise of
any and all of the Collateral or in any way relating to its
rights hereunder, including reasonable attorney's fees and
legal expenses, to the payment in whole or in part of the
principal of and interest on the Promissory Note, in such
order as the Company may elect, the Pledgor remaining liable
for any deficiency remaining unpaid after such application,
and only after so applying such net proceeds and after the
payment by the Company of any other amount required by any
provision of law, including, without limitation, Section
9-504(l)(c) of the Uniform Commercial Code, need the Company
account for the surplus, if any, to the Pledgor. The Pledgor
agrees that the Company need not give more than ten days'
notice of the time and place of any public sale or of the time
after which a private sale or other intended disposition is to
take place and that such notice is reasonable notification of
such matters. No notification need be given to the Pledgor if
it has signed after default a statement renouncing or
modifying any right to notification of sale or other intended
disposition.
(b) The Pledgor recognizes that the Company may be
unable to effect a public sale of all or a part of the Pledged
Stock or other securities held as part of the Collateral by
reason of certain prohibitions contained in the Securities Act
of 1933 (the "Act"), or in the rules and regulations
promulgated thereunder, but may be compelled to resort to one
or more private sales to a restricted group of purchasers who
will be obliged to agree, among other things, to acquire the
Pledged Stock or such other securities for their own account,
for investment and not with a view to the distribution or
resale thereof. The Pledgor agrees that private sales so made
may be at prices and on other terms less favorable to the
seller than if the Pledged Stock or such other securities were
sold at public sale, and that the Company has no obligation to
delay the sale of the Pledged Stock or such other securities
for the period of time necessary to permit the registration of
the Pledged Stock or such other securities for public sale
under the Act. The Pledgor agrees that a private sale or sales
made under the foregoing circumstances shall be deemed to have
been made in a commercially reasonable manner.
(c) If any consent, approval or authorization of any
state, municipal or other governmental department, agency or
authority should be necessary to effectuate any sale or
disposition by the Company pursuant to this Section 4 of the
Pledged Stock or other securities held as part of the
Collateral, the Pledgor will execute all such applications and
other instruments as may be
-5-
<PAGE> 20
required in connection with securing any such consent,
approval or authorization, and will otherwise use his best
effort to secure the same.
(d) Neither failure nor delay on the part of the
Company to exercise any right, remedy, power or privilege
provided for herein or by statute or at law or in equity shall
operate as a waiver thereof, nor shall any single or partial
exercise of any such right, remedy, power or privilege
preclude any other or further exercise thereof or the exercise
of any other right, remedy, power or privilege.
5. PLEDGOR'S OBLIGATIONS NOT AFFECTED. The obligations of the
Pledgor under this Agreement shall remain in full force and effect with regard
to, and shall not be impaired or affected by: (a) any subordination, amendment
or modification of or addition or supplement to the Promissory Note, or any
assignment or transfer thereof: (b) any exercise or non-exercise by the Company
of any right, remedy, power or privilege under or in respect of this Agreement,
the Promissory Note, or any waiver of any such right, remedy, power or
privilege; (c) any waiver, consent, extension, indulgence or other action or
inaction in respect of this Agreement or the Promissory Note, or any assignment
or transfer of any thereof; or (d) any bankruptcy, insolvency, reorganization,
arrangement, readjustment, composition, liquidation or the like, of the Company
or its successors, whether or not the Pledgor shall have notice or knowledge of
any of the foregoing.
6. TRANSFER BY PLEDGOR. Without the prior written consent of
the Company, the Pledgor agrees that he will not sell, assign, transfer,
exchange, or otherwise dispose of, or grant any option with respect to, the
collateral, nor will he create, incur or permit to exist any pledge, lien,
mortgage, hypothecation, security interest, charge, option or any other
encumbrance with respect to any of the collateral, or any interest therein, or
any proceeds thereof, except for the lien and security interest provided for by
this Agreement.
7. REPRESENTATION, WARRANTIES AND COVENANTS OF THE PLEDGOR.
The Pledgor represents and warrants that (a) he is the legal, record and
beneficial owner of, and has good and marketable title to, the Pledged Stock,
subject to no pledge, lien, mortgage, hypothecation, security interest, charge,
option or other encumbrance whatsoever, except the lien and security interest
created by this Agreement; (b) he has the authority and legal right to pledge
all the Pledged Stock pursuant to this Agreement; and (c) the pledge, assignment
and delivery of such Pledged Stock pursuant to this Agreement creates a valid
first lien on and a first perfected security interest in such shares of the
Pledged Stock, and the proceeds thereof, subject to no prior pledge, lien,
mortgage, hypothecation, security interest, charge, option or encumbrance or to
any agreement purporting to grant to any third
-6-
<PAGE> 21
party a security interest in the property or assets of the Pledgor which would
include the Pledged Stock. The Pledgor covenants and agrees that he will defend
the Company's right, title and security interest in and to the Pledged Stock and
the proceeds thereof against the claims and demands of all persons whomsoever;
and covenants and agrees that he will have like title to and right to pledge any
other property at any time hereafter pledged to the Company as Collateral
hereunder and will likewise defend the Company's right thereto and security
interest therein.
8. ATTORNEY-IN-FACT. The Company or its successor is hereby
appointed the attorney-in-fact of the Pledgor for the purpose of carrying out
the provisions of this Agreement and taking any action and executing any
instrument which the Company reasonably may deem necessary or advisable to
accomplish the purposes hereof, including without limitation, the execution of
the applications and other instruments described in Section 4(c), which
appointment as attorney-in-fact is irrevocable as one coupled with an interest.
9. TERMINATION. Upon payment in full of the principal of and
interest on the Promissory Note and upon the due performance of and compliance
with all the provisions of the Promissory Note, this Agreement shall terminate
and the Pledgor shall be entitled to the return of such of the Collateral as has
not theretofore been sold, released from this Agreement pursuant to Section 6 or
otherwise applied pursuant to the provisions of this Agreement.
10. NOTICES. All notices or other communications required or
permitted to be given hereunder shall be in writing and will be deemed to have
been duly given if delivered in person or mailed by certified mail or guaranteed
overnight delivery service to the Company at its principal executive offices and
to the Pledgor at the last address reflected in the Company's records.
11. MISCELLANEOUS. The Company and its assigns shall have no
obligation in respect of the Collateral, except to hold and dispose of the same
in accordance with the terms of this Agreement. Neither this Agreement nor any
provisions hereof may be amended, modified, waived, discharged or terminated
orally, but only by an instrument in writing signed by the party against which
enforcement of the amendment, modification, waiver, discharge or termination is
sought. The provisions of this Agreement shall be binding upon the successors
and assigns of the Pledgor. The captions in this Agreement are for convenience
of reference only and shall not define or limit the provisions hereof. This
Agreement shall be governed by and construed and enforced in accordance with the
laws of the State of Delaware, without regard to the rules of conflicts of laws
thereof. This Agreement may be executed in multiple counterparts, each of which
shall be an original, but all of which taken together shall constitute one
instrument.
-7-
<PAGE> 22
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed and delivered on as of _____________ __, _______.
SINTER METALS, INC.
By:
-------------------------------------
Its:
----------------------------------
PLEDGOR
----------------------------------------
Name of Pledgor:
----------------------------------------
Number of Shares of
Class A Common Stock pledged:
-----------------------------
Principal amount of Promissory Note $
------------------
-8-
<PAGE> 23
Schedule to Nonqualified Stock Option Agreement
In accordance with Instruction 2 to Item 601 of Regulation
S-K, the Registrant has omitted the following Nonqualified Stock Option
Agreements, which are identical in all respects to the filed Nonqualified Stock
Option Agreement, except with respect to the following:
<TABLE>
<CAPTION>
OPTIONEE DATE OF GRANT NUMBER OF OPTIONS EXERCISE
-------- ------------- ----------------- --------
PRICE
- -----
<S> <C> <C> <C>
Joseph W. Carreras
Donald L. LeVault
Richard A. McLean
Richard T. Kestner
</TABLE>
-1-
<PAGE> 1
EXHIBIT 10.8
------------
================================================================================
CREDIT AGREEMENT
dated as of
December 19, 1996
among
SINTER METALS, INC.,
CERTAIN SUBSIDIARIES OF SINTER METALS, INC.,
THE LENDERS NAMED HEREIN,
NBD BANK,
as Administrative Agent
and
SALOMON BROTHERS INC,
as Syndication Agent
-----------------------------
CITICORP USA, INC.,
as Documentation Agent
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
ARTICLE I
DEFINITIONS
<S> <C> <C>
SECTION 1.01. Defined Terms......................................................... 1
SECTION 1.02. Classification of Loans and Borrowings................................ 36
SECTION 1.03. Terms Generally ...................................................... 36
SECTION 1.04. Accounting Terms; GAAP................................................ 37
SECTION 1.05. Foreign Currency Amounts.............................................. 37
ARTICLE II
THE CREDITS
SECTION 2.01. Commitments........................................................... 38
SECTION 2.02. Loans and Borrowings.................................................. 38
SECTION 2.03. Requests for Borrowings............................................... 39
SECTION 2.04. Swingline Loans....................................................... 41
SECTION 2.05. Letters of Credit..................................................... 43
SECTION 2.06. Funding of Borrowings................................................. 49
SECTION 2.07. Interest Elections.................................................... 50
SECTION 2.08. Termination and Reduction of Commitments.............................. 52
SECTION 2.09. Repayment of Loans; Evidence of Debt.................................. 53
SECTION 2.10. Amortization of Term Loans............................................ 54
SECTION 2.11. Prepayment of Loans................................................... 55
SECTION 2.12. Fees.................................................................. 59
SECTION 2.13. Interest.............................................................. 60
SECTION 2.14. Alternate Rate of Interest............................................ 61
SECTION 2.15. Increased Costs....................................................... 62
SECTION 2.16. Break Funding Payments................................................ 64
SECTION 2.17. Taxes................................................................. 65
SECTION 2.18. Payments Generally; Pro Rata Treatment; Sharing of
Set-Offs..................................................... 68
SECTION 2.19. Mitigation Obligations; Replacement of Lenders........................ 71
</TABLE>
<PAGE> 3
ii
ARTICLE III
REPRESENTATIONS AND WARRANTIES
------------------------------
<TABLE>
<S> <C> <C>
SECTION 3.01. Organization; Powers.................................................. 72
SECTION 3.02. Authorization; Enforceability......................................... 72
SECTION 3.03. Governmental Approvals; No Conflicts.................................. 73
SECTION 3.04. Financial Condition; No Material Adverse Change....................... 73
SECTION 3.05. Properties............................................................ 74
SECTION 3.06. Litigation and Environmental Matters.................................. 74
SECTION 3.07. Compliance with Laws and Agreements................................... 75
SECTION 3.08. Investment and Holding Company Status................................. 75
SECTION 3.09. Taxes................................................................. 75
SECTION 3.10. ERISA................................................................. 76
SECTION 3.11. Disclosure............................................................ 76
SECTION 3.12. Subsidiaries.......................................................... 76
SECTION 3.13. Insurance............................................................. 76
SECTION 3.14. Labor Matters......................................................... 76
SECTION 3.15. Solvency.............................................................. 77
ARTICLE IV
CONDITIONS
----------
SECTION 4.01. Effective Date........................................................ 77
SECTION 4.02. Each Credit Event..................................................... 82
ARTICLE V
AFFIRMATIVE COVENANTS
---------------------
SECTION 5.01. Financial Statements and Other Information............................ 83
SECTION 5.02. Notices of Material Events............................................ 84
SECTION 5.03. Information Regarding Collateral...................................... 85
SECTION 5.04. Existence; Conduct of Business........................................ 85
SECTION 5.05. Payment of Obligations................................................ 86
SECTION 5.06. Maintenance of Properties............................................. 86
SECTION 5.07. Insurance............................................................. 86
SECTION 5.08. Books and Records; Inspection and Audit Rights........................ 87
SECTION 5.09. Compliance with Laws.................................................. 88
</TABLE>
<PAGE> 4
iii
<TABLE>
<S> <C> <C>
SECTION 5.10. Use of Proceeds and Letters of Credit................................. 88
SECTION 5.11. Subsidiaries.......................................................... 88
SECTION 5.12. Further Assurances.................................................... 89
SECTION 5.13. Casualty and Condemnation............................................. 89
SECTION 5.14. Rate Protection Arrangements.......................................... 90
SECTION 5.15. Fiscal Year........................................................... 90
ARTICLE VI
NEGATIVE COVENANTS
------------------
SECTION 6.01. Indebtedness.......................................................... 91
SECTION 6.02. Liens; Sale and Lease-Back Transactions............................... 92
SECTION 6.03. Fundamental Changes................................................... 94
SECTION 6.04. Investments, Loans, Advances, Guarantees and
Acquisitions; Asset Sales.................................... 95
SECTION 6.05. Hedging Agreements.................................................... 97
SECTION 6.06. Restricted Payments; Prepayments of Debt.............................. 97
SECTION 6.07. Transactions with Affiliates.......................................... 98
SECTION 6.08. Restrictive Agreements................................................ 98
SECTION 6.09. Capital Expenditures.................................................. 99
SECTION 6.10. Other Arrangements.................................................... 100
SECTION 6.11. Debt to Consolidated EBITDA........................................... 100
SECTION 6.12. Fixed Charge Coverage Ratio........................................... 101
SECTION 6.13. Interest Coverage Ratio............................................... 101
SECTION 6.14. Net Worth............................................................. 101
SECTION 6.15. EBITDA................................................................ 101
--------
ARTICLE VII
EVENTS OF DEFAULT 102
-----------------
--------
ARTICLE VIII
THE AGENTS 105
----------
</TABLE>
<PAGE> 5
iv
<TABLE>
<CAPTION>
ARTICLE IX
MISCELLANEOUS
-------------
<S> <C> <C>
SECTION 9.01. Notices............................................................... 108
SECTION 9.02. Waivers; Amendments................................................... 109
SECTION 9.03. Expenses; Indemnity; Damage Waiver.................................... 111
SECTION 9.04. Successors and Assigns................................................ 112
SECTION 9.05. Survival.............................................................. 115
SECTION 9.06. Counterparts; Integration; Effectiveness.............................. 115
SECTION 9.07. Severability.......................................................... 116
SECTION 9.08. Rights of Setoff...................................................... 116
SECTION 9.09. Governing Law; Jurisdiction; Consent to Service of
Process...................................................... 116
SECTION 9.10. WAIVER OF JURY TRIAL.................................................. 117
SECTION 9.11. Headings.............................................................. 117
SECTION 9.12. Confidentiality....................................................... 118
SECTION 9.13. Interest Rate Limitation.............................................. 118
SECTION 9.14. Conversion of Currencies.............................................. 119
SECTION 9.15. Release of Liens and Guarantees ...................................... 119
</TABLE>
<TABLE>
<CAPTION>
SCHEDULES:
- ----------
<S> <C>
Schedule 2.01 -- Commitments
Schedule 2.05(a) -- Letter of Credit
Schedule 3.05(a) -- Properties
Schedule 3.06(a) -- Environmental Matters
Schedule 3.06(b) -- Actions, Suits, Proceedings
Schedule 3.09 -- Taxes
Schedule 3.12 -- Subsidiaries
Schedule 3.13 -- Insurance
Schedule 3.14 -- Labor Matters
Schedule 4.01(o) -- Sources and Uses
Schedule 6.01 -- Existing Indebtedness
Schedule 6.02 -- Existing Liens
Schedule 6.07(d) -- Affiliate Transactions
Schedule 6.08 -- Existing Restrictions
</TABLE>
<PAGE> 6
v
<TABLE>
<CAPTION>
EXHIBITS:
- ---------
<S> <C>
Exhibit A -- Form of Assignment and Acceptance
Exhibit B -- Form of Company Guarantee
Exhibit C -- Form of Company Holdings Pledge Agreement
Exhibit D -- Form of Company Pledge Agreement
Exhibit E -- Form of Company Security Agreement
Exhibit F -- Form of Germany Subsidiary Guarantee
Exhibit G -- Form of Holdings Guarantee
Exhibit H-1 -- Form of Holdings Pledge Agreement
Exhibit H-2 -- Form of Holdings Assignment of Claims
Exhibit I -- Form of U.S. Subsidiary Guarantee
Exhibit J -- Form of U.S. Subsidiary Pledge Agreement
Exhibit K -- Form of U.S. Subsidiary Security Agreement
Exhibit L-1 -- Form of Opinion of U.S. Counsel
Exhibit L-2 -- Form of Opinion of Mortgage Counsel
Exhibit L-3 -- Form of Opinion of German Counsel
</TABLE>
<PAGE> 7
CREDIT AGREEMENT dated as of December 19,
1996 (as amended or modified from time to time in
accordance with the terms hereof, this "Agreement"),
among SINTER METALS, INC., a Delaware corporation
(the "Company"); SINTER METALS GMBH, a German limited
liability company and a wholly owned Subsidiary of
the Company ("Holdings"); such of the Eligible
Holdings Subsidiaries (as defined herein) as become
signatories hereto from time to time (the "Subsidiary
Borrowers" and, together with the Company and
Holdings, the "Borrowers"), the LENDERS party hereto,
NBD BANK, as Administrative Agent and Collateral
Agent, and SALOMON BROTHERS INC, as Syndication
Agent.
The parties hereto agree as follows:
ARTICLE I
DEFINITIONS
-----------
SECTION 1.01. DEFINED TERMS. As used in this Agreement, the
following terms have the meanings specified below:
"ABR", when used in reference to any Loan or Borrowing, refers
to whether such Loan, or the Loans comprising such Borrowing, bear interest at a
rate determined by reference to the Alternate Base Rate.
"ACQUIRED ENTITIES" means Powder Metal Holding, Inc., a
Delaware corporation, Krebsoege USA, Inc., a Delaware corporation, Metallwerk
Langensalza GmbH, a German limited liability company, and Krebsoge Sinterholding
GmbH, a German limited liability company.
"ACQUISITIONS" means the acquisitions in accordance with
applicable law of (i) Powder Metal Holding, Inc., a Delaware corporation, and
Krebsoege USA, Inc., a Delaware corporation, by the Company, pursuant to the
Stock Purchase Agreement, dated as of October 7, 1996, between Maag Holding AG,
a Swiss corporation, and the Company, as amended, and (ii) Krebsoege
Sinterholding GmbH, a German limited liability company, and Metallwerk
Langensalza GmbH, a German limited liability company, by Holdings, pursuant to
the Stock Purchase Agreement, dated as of October 11, 1996, between Maag Holding
AG, a Swiss corporation, and the Company, as amended.
<PAGE> 8
2
"ADDITIONAL GUARANTEE" has the meaning set forth in the
definition of "German Borrower Condition".
"ADJUSTED DIBO RATE" means, with respect to any
Eurodeutschemark Borrowing for any Interest Period, an interest rate per annum
(rounded upwards, if necessary, to the next 1/16 of 1%) equal to (a) the DIBO
Rate for such Interest Period multiplied by (b) the Statutory Reserve Rate.
"ADJUSTED LIBO RATE" means, with respect to any Eurodollar
Borrowing for any Interest Period, an interest rate per annum (rounded upwards,
if necessary, to the next 1/16 of 1%) equal to (a) the LIBO Rate for such
Interest Period multiplied by (b) the Statutory Reserve Rate.
"ADMINISTRATIVE AGENT" means NBD Bank, in its capacity as
administrative agent for the Lenders hereunder.
"ADMINISTRATIVE QUESTIONNAIRE" means an Administrative
Questionnaire in a form supplied by the Administrative Agent.
"AFFILIATE" means, with respect to a specified Person, another
Person that directly, or indirectly through one or more intermediaries, Controls
or is Controlled by or is under common Control with the Person specified.
"AGENTS" means the Administrative Agent and the Collateral
Agent.
"AGREEMENT CURRENCY" has the meaning set forth in Section
9.14(b).
"ALTERNATE BASE RATE" means, for any day, a rate per annum
equal to the greatest of (a) the Prime Rate in effect on such day, (b) the Base
CD Rate in effect on such day plus 1% and (c) the Federal Funds Effective Rate
in effect on such day plus 1/2 of 1%. Any change in the Alternate Base Rate due
to a change in the Prime Rate, the Base CD Rate or the Federal Funds Effective
Rate shall be effective from and including the effective date of such change in
the Prime Rate, the Base CD Rate or the Federal Funds Effective Rate,
respectively.
"APPLICABLE CREDITOR" has the meaning set forth in Section
9.14(b).
"APPLICABLE PERCENTAGE" means, with respect to any Revolving
Lender, the percentage of the total Revolving Commitments represented by such
Lender's Revolving Commitment or, as the context may require, the percentage of
the total U.S. Revolving Commitments or German Revolving Commitments represented
by such Lender's U.S. Revolving Commitment or German Revolving Commitment,
<PAGE> 9
3
respectively. If the Revolving Commitments have terminated or expired, the
Applicable Percentages shall be determined based upon the Revolving Commitments
most recently in effect, giving effect to any assignments.
"APPLICABLE RATE" means, for any day the applicable rate per
annum set forth in the table below (i) under the caption "ABR Revolving Spread",
in the case of ABR Revolving Loans, (ii) under the caption "Tranche A ABR
Spread", in the case of ABR Loans that are Tranche A Term Loans, (iii) under the
caption "Tranche B ABR Spread", in the case of ABR Loans that are Tranche B Term
Loans, (iv) under the caption "FNBC Prime Rate Spread", in the case of German
Swingline Loans, (v) under the caption "Eurocurrency Term Loan Spread", in the
case of Eurocurrency Term Loans other than Tranche B Term Loans, (vi) under the
caption, "Eurocurrency Revolving Loan Spread" in the case of Eurocurrency
Revolving Loans and (vii) under the caption "Tranche B Eurodollar Spread", in
the case of Eurodollar Loans that are Tranche B Term Loans, in each case based
upon the Leverage Ratio as of the most recent determination date; PROVIDED that
from the date hereof until the earlier of August 19, 1997 and the date of
delivery of consolidated financial statements of the Company in respect of the
fiscal quarter ended June 30, 1997 (the "INITIAL PERIOD"), the "Applicable Rate"
shall be as set forth in the following provisions of this definition:
<TABLE>
<CAPTION>
===================================================================================================================
ABR TRANCHE A EUROCURRENCY EUROCURRENCY TRANCHE B
--- --------- ------------ ------------ ---------
LEVERAGE RATIO: Revolving ABR TRANCHE B FNBC PRIME TERM LOAN REVOLVING EURODOLLAR
--------------- --------- --- --------- ---------- --------- --------- ----------
SPREAD SPREAD ABR SPREAD RATE SPREAD SPREAD LOAN SPREAD SPREAD
------ ------ ---------- ----------- ------ ----------- ------
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
CATEGORY 1
----------
greater than or 1.00% 1.50% 2.00% 1.00% 2.50% 2.00% 3.00%
equal to 3.5
- -------------------------------------------------------------------------------------------------------------------
CATEGORY 2
----------
greater than or .50% 1.00% 1.50% .50% 2.00% 1.50% 2.50%
equal to 3.25 and
less than 3.5
- -------------------------------------------------------------------------------------------------------------------
CATEGORY 3
----------
greater than or .25% .75% 1.25% .25% 1.75% 1.25% 2.25%
equal to 3.0 and
less than 3.25
- -------------------------------------------------------------------------------------------------------------------
CATEGORY 4
----------
greater than or equal .0% .50% 1.00% .0% 1.50% 1.00% 2.00%
to 2.75 and less than
3.0
- -------------------------------------------------------------------------------------------------------------------
CATEGORY 5
----------
greater than or equal .0% .25% .75% .0% 1.25% .75% 1.75%
to 2.50 and less than
2.75
- -------------------------------------------------------------------------------------------------------------------
CATEGORY 6
----------
less than 2.50 .0% .0% .75% .0% 1.00% .50% 1.75%
===================================================================================================================
</TABLE>
<PAGE> 10
4
For purposes of the foregoing, (i) the Leverage Ratio shall be
determined as of the end of each fiscal quarter of the Company's fiscal year
based upon the Company's consolidated financial statements delivered pursuant to
Section 5.01(a) or (b) and (ii) each change in the Applicable Rate resulting
from a change in the Leverage Ratio shall be effective during the period
commencing on and including the date of delivery to the Administrative Agent of
such consolidated financial statements indicating such change and ending on the
date immediately preceding the effective date of the next such change; PROVIDED
that the Leverage Ratio shall be deemed to be in Category 1 (A) on any date that
an Event of Default has occurred and is continuing or (B) if the Company fails
to deliver the consolidated financial statements required to be delivered by it
pursuant to Section 5.01(a) or (b), within the period for delivery specified in
such Section, during the period from the expiration of the time for delivery
thereof until the date of delivery of such consolidated financial statements
and, PROVIDED, FURTHER, that (solely for the purposes of determining the
Applicable Rate hereunder) the Leverage Ratio as of the last day of the fiscal
quarters ended June 30, 1997 and September 30, 1997, shall be based on an
annualized calculation of Consolidated EBITDA equal to (i) in the case of the
Leverage Ratio at June 30, 1997, 200% of Consolidated EBITDA for the period of
two fiscal quarters ended June 30, 1997 and (ii) in the case of the Leverage
Ratio at September 30, 1997, 133 1/3% of Consolidated EBITDA for the period of
three fiscal quarters ended September 30, 1997.
Notwithstanding the foregoing, the Applicable Rate during the
Initial Period shall be the applicable rate per annum set forth above in
Category 1; provided that the Applicable Rate in effect for that portion, if
any, of the Initial Period commencing on the date (the "Reset Date") on which
the Reset Condition (as defined below) shall have been satisfied shall be based
on the Reset Date Leverage Ratio (as defined below) and the Category in the
above table applicable to a Leverage Ratio equal thereto. For purposes hereof,
the "RESET CONDITION" shall mean (i) the consummation of an Equity Issuance of
common stock of the Company pursuant to a public offering registered with the
Securities Exchange Commission pursuant to a registration statement declared
effective under the Securities Act of 1933, as amended, which contains (at the
time of effectiveness) a pro forma consolidated statement of income for the
Company and its Subsidiaries for the fiscal year ending December 31, 1996,
giving effect to the Transactions and the Equity Issuance (the "SEC PRO FORMA
INCOME STATEMENT") and (ii) the provision by the Company to the Lenders and the
Administrative Agent of copies of the final prospectus included in such
registration statement containing the SEC Pro Forma Income Statement and a
statement of Total Debt as of the Reset Date, Adjusted Pro Forma 1996 EBITDA and
the Reset Date Leverage Ratio, in form and detail reasonably satisfactory to the
Administrative Agent, prepared and certified by a Financial Officer of the
Company, which sets forth how such statement was derived from the SEC Pro Forma
Income
<PAGE> 11
5
Statement. "ADJUSTED PRO FORMA 1996 EBITDA" shall mean the pro forma
Consolidated EBITDA of the Company and the Subsidiaries for the fiscal year
ended December 31, 1996, calculated on the basis of the SEC Pro Forma Income
Statement after adjusting the SEC Pro Forma Income Statement by (i) adding
thereto, to the extent not already reflected therein, the amount of projected
1997 cost savings (approximately $[6,000,000]) attributable to the Acquisitions,
as reflected in the Confidential Information Memorandum and (ii) making such
other adjustments, if any, as may be necessary to reflect any difference in the
actual amount of Net Proceeds received in connection with such Equity Issuance
from the amount of Net Proceeds utilized in preparing the SEC Pro Forma Income
Statement. "RESET DATE LEVERAGE RATIO" shall mean the ratio of (i) Total Debt as
of the Reset Date to (ii) Adjusted Pro Forma 1996 EBITDA.
"ASSESSMENT RATE" means, for any day, the annual assessment
rate in effect on such day that is payable by a member of the Bank Insurance
Fund classified as "well-capitalized" and within supervisory subgroup "B" (or a
comparable successor risk classification) within the meaning of 12 C.F.R. Part
327 (or any successor provision) to the Federal Deposit Insurance Corporation
for insurance by such Corporation of time deposits made in dollars at the
offices of such member in the United States; PROVIDED that if, as a result of
any change in any law, rule or regulation, it is no longer possible to determine
the Assessment Rate as aforesaid, then the Assessment Rate shall be such annual
rate as shall be determined by the Administrative Agent to be representative of
the cost of such insurance to the Lenders.
"ASSIGNMENT AND ACCEPTANCE" means an assignment and acceptance
entered into by a Lender and an assignee (with the consent of any party whose
consent is required by Section 9.04), and accepted by the Administrative Agent,
in the form of Exhibit A or any other form approved by the Administrative Agent.
"BASE CD RATE" means the sum of (a) the Three-Month Secondary
CD Rate multiplied by the Statutory Reserve Rate plus (b) the Assessment Rate.
"BASKET INDEBTEDNESS" means all Indebtedness of the Company
and its Subsidiaries created, incurred, assumed or otherwise permitted to exist
pursuant to clause (v), (vi) or (ix) of Section 6.01.
"BOARD" means the Board of Governors of the Federal Reserve
System of the United States of America.
"BORROWERS" has the meaning set forth in the preamble to this
Agreement.
<PAGE> 12
6
"BORROWING" means (a) Loans of the same Class and Type, made,
converted or continued on the same date and, in the case of Eurocurrency Loans,
as to which a single Interest Period is in effect, or (b) a Swingline Loan.
"BORROWING REQUEST" means a request by a Borrower for a
Borrowing in accordance with Section 2.03 (or Section 2.04).
"BUSINESS DAY" means any day that is not a Saturday, Sunday or
other day on which commercial banks in Detroit, Michigan or New York City are
authorized or required by law to remain closed; PROVIDED that, when used in
connection with a Eurocurrency Loan, the term "BUSINESS DAY" shall also exclude
any day on which banks are not open for dealings in deposits in the relevant
Eurocurrency in the London interbank market.
"CANADIAN LETTER OF CREDIT" means the letter of credit dated
February 16, 1990, issued by Heller Financial, Inc., for the account of a
Subsidiary in favor of the Public Utilities Commission of St. Thomas, in the
amount of $180,000 Canadian dollars, and any amendments, renewals, replacements
and extensions thereof. For purposes of this Agreement, the U.S. LC Exposure
attributable to the full amount of the Canadian Letter of Credit shall be deemed
to be $150,000 (and any U.S. LC Exposure attributable to any portion thereof
shall be the equivalent proportion of $150,000), except as otherwise set forth
in Section 2.05(e).
"CAPITAL EXPENDITURES" of any Person means, for any period,
(a) the additions to property, plant and equipment and other capital
expenditures of such Person and its consolidated subsidiaries that are (or would
be) set forth as expenditures for property, plant and equipment in a
consolidated statement of cash flows of the Company for such period prepared in
accordance with GAAP and (b) Capital Lease Obligations incurred by such Person
and its consolidated subsidiaries during such period; provided, however, that
"Capital Expenditures" of the Company shall not include (x) payments of the
purchase price for (i) acquisitions of, or Investments in, additional
Subsidiaries, or (ii) for Investments in, or for purchases or other acquisitions
from any Person of assets constituting, going concerns or business units, or
(iii) for Investments in Joint Ventures or other Invested Entities, in each case
made in accordance with the provisions of Section 6.04(a) or (y) Investments
made pursuant to Section 6.04(a)(ix).
"CAPITAL LEASE OBLIGATIONS" of any Person means the
obligations of such Person to pay rent or other amounts under any lease of (or
other arrangement conveying the right to use) real or personal property, or a
combination thereof, which obligations are required to be classified and
accounted for as capital leases on a
<PAGE> 13
7
balance sheet of such Person under GAAP, and the amount of such obligations
shall be the capitalized amount thereof determined in accordance with GAAP.
"CASH INTEREST EXPENSE" means, for any period, Consolidated
Interest Expense for such period less pay-in-kind Consolidated Interest Expense
and all other non-cash items that would be included in Consolidated Interest
Expense, including, as applicable, the items referred to in subclauses (i) and
(ii) of the definition of Consolidated Interest Expense.
"CHANGE IN CONTROL" means (a) the acquisition of ownership,
directly or indirectly, beneficially or of record, by any Person or group
(within the meaning of the Securities Exchange Act of 1934 and the rules of the
Securities and Exchange Commission thereunder as in effect on the date hereof)
other than Citicorp Venture Capital or its Affiliates (collectively, "CVC"), of
shares representing more than 20% of the aggregate ordinary voting power
represented by the issued and outstanding capital stock of the Company; (b)
occupation of a majority of the seats (other than vacant seats) on the board of
directors of the Company by Persons who were neither nominated nor elected by a
majority of (i) the members of the board of directors of the Company on the date
hereof and (ii) other directors so elected or nominated, taken together; or (c)
the acquisition of direct or indirect Control of the Company by any Person or
group other than CVC.
"CHANGE IN LAW" means (a) the adoption of any law, rule or
regulation after the date of this Agreement, (b) any change in any law, rule or
regulation or in the interpretation or application thereof by any Governmental
Authority after the date of this Agreement or (c) compliance by any Lender or
Issuing Bank (or, for purposes of Section 2.15(b), by any lending office of such
Lender or by such Lender's or such Issuing Bank's holding company, if any) with
any request, guideline or directive (whether or not having the force of law) of
any Governmental Authority made or issued after the date of this Agreement.
"CLASS", when used in reference to any Loan or Borrowing,
refers to whether such Loan, or the Loans comprising such Borrowing, are U.S.
Revolving Loans, German Revolving Loans, Tranche A Term Loans, Tranche B Term
Loans, German Term Loans, German Swingline Loans or U.S. Swingline Loans and,
when used in reference to any Commitment, refers to whether such Commitment is a
U.S. Revolving Commitment, German Revolving Commitment, Tranche A Commitment,
Tranche B Commitment or German Term Commitment.
"CODE" means the Internal Revenue Code of 1986, as amended
from time to time.
<PAGE> 14
8
"COLLATERAL" means any and all "Collateral", as defined in any
applicable Security Document.
"COLLATERAL AGENT" means NBD Bank, in its capacity as
collateral agent for the Secured Parties (as defined in the Security Documents)
under the Security Documents.
"COMMITMENT" means a German Revolving Commitment, U.S.
Revolving Commitment, Tranche A Commitment, Tranche B Commitment, German
Term Commitment or any combination thereof, as the context may require.
"COMPANY" has the meaning set forth in the preamble to this
Agreement.
"COMPANY GUARANTEE" means the guarantee of the Company with
respect to the Obligations of Holdings, substantially in the form of Exhibit B,
as amended and supplemented from time to time in accordance with the terms
thereof and hereof.
"COMPANY HOLDINGS PLEDGE AGREEMENT" means the pledge agreement
among the Company and the Lenders with respect to the pledge of 65% of the
outstanding shares of common stock of Holdings, substantially in the form of
Exhibit C, as amended and supplemented from time to time in accordance with the
terms thereof and hereof.
"COMPANY PLEDGE AGREEMENT" means the pledge agreement between
the Company and the Collateral Agent, substantially in the form of Exhibit D, as
amended and supplemented from time to time in accordance with the terms thereof
and hereof.
"COMPANY SECURITY AGREEMENT" means the security agreement
between the Company and the Collateral Agent, substantially in the form of
Exhibit E, as amended and supplemented from time to time in accordance with the
terms thereof and hereof.
"CONFIDENTIAL INFORMATION MEMORANDUM" means the Confidential
Information Memorandum dated October 1996 relating to the credit facilities
contemplated by this Agreement, as supplemented by a revised term sheet dated
November 22, 1996, in each case in the form approved by the Company provided by
the Syndication Agent to potential Lenders.
<PAGE> 15
9
"CONSOLIDATED EBITDA" means for any Person, without
duplication, for any period for which such amount is being determined, the sum
for such period of (i) Consolidated Net Income, (ii) provision for taxes based
on income, (iii) Consolidated Interest Expense and (iv) other noncash items
(including depreciation expense and amortization expense) reducing Consolidated
Net Income, all as determined on a consolidated basis for such Person and its
consolidated subsidiaries in accordance with GAAP.
"CONSOLIDATED INTEREST EXPENSE" means for any Person, for any
period for which such amount is being determined, the interest expense of such
Person and its consolidated subsidiaries for such period determined on a
consolidated basis in accordance with GAAP, including (i) the amortization of
debt discounts to the extent included in interest expense in accordance with
GAAP, (ii) the amortization of all fees (including fees with respect to interest
rate protection agreements or other interest rate hedging arrangements) payable
in connection with the incurrence of Indebtedness to the extent included in
interest expense in accordance with GAAP and (iii) the portion of any rents
payable under capital leases allocable to interest expense in accordance with
GAAP.
"CONSOLIDATED NET INCOME" shall mean, for any Person for any
period for which such amount is being determined, the net income (loss) of such
Person and its consolidated subsidiaries during such period determined on a
consolidated basis for such period taken as a single accounting period in
accordance with GAAP; PROVIDED that there shall be excluded (i) income (or loss)
of any Person (other than a consolidated subsidiary of the Person in respect of
which Consolidated Net Income is being determined) in which any other Person
(other than such Person or any of its consolidated subsidiaries) has an equity
interest, except to the extent of the amount of dividends or other distributions
actually paid to such Person or any of its consolidated subsidiaries by such
other Person during such period, (ii) the income (or loss) of any Person accrued
prior to the date it becomes a consolidated subsidiary of such Person or is
merged into or consolidated with such Person or any of its consolidated
subsidiaries or the Person's assets are acquired by such Person or any of its
consolidated subsidiaries and (iii) any after-tax gains (but not pretax losses)
attributable to sales of assets out of the ordinary course of business.
"CONSOLIDATED NET WORTH" means, with respect to any Person, at
any date, all amounts which, in conformity with GAAP, would be included under
stock-holders' equity on a consolidated balance sheet of such Person and its
subsidiaries on such date.
"CONTROL" means the possession, directly or indirectly, of the
power to direct or cause the direction of the management or policies of a
Person, whether
<PAGE> 16
10
through the ability to exercise voting power, by contract or otherwise.
"CONTROLLING" and "CONTROLLED" have meanings correlative thereto.
"CONVERSION EVENT" has the meaning assigned to such term in
Section 2.18(f).
"CONVERSION PERCENTAGE" has the meaning assigned to such
term in Section 2.18(f).
"CONVERTED LOANS" has the meaning assigned to such term in
Section 2.18(f).
"CONVERTED OBLIGATION" has the meaning assigned to such term
in Section 2.18(f).
"CREDIT EVENT" has the meaning assigned to such term in
Section 4.02.
"DEFAULT" means any event or condition which constitutes an
Event of Default or which upon notice, lapse of time or both would, unless cured
or waived, become an Event of Default.
"DEUTSCHE BANK TERMINATION DATE" means the earlier of (i) the
date on which the liquidity facilities provided by Deutsche Bank to Holdings and
its subsidiaries are terminated and (ii) June 30, 1997.
"DEUTSCHEMARKS" or "DM" refers to lawful money of the Federal
Republic of Germany.
"DIBO RATE" means, with respect to any Eurodeutschemark
Borrowing for any Interest Period, the rate appearing on Page 3750 of the
Telerate Service (or on any successor or substitute page of such Service, or any
successor to or substitute for such Service, providing rate quotations
comparable to those currently provided on such page of such Service, as
determined by the Administrative Agent from time to time for purposes of
providing quotations of interest rates applicable to DM deposits in the London
interbank market) at approximately 11:00 a.m., London time, two Business Days
prior to the commencement of such Interest Period, as the rate for DM deposits
with a maturity comparable to such Interest Period. In the event that such rate
is not available at such time for any reason, then the "DIBO RATE" with respect
to such Eurodeutschemark Borrowing for such Interest Period shall be the rate at
which Deutschemark deposits of DM 5,000,000 for a maturity comparable to such
Interest Period are offered by the principal London office of the Administrative
Agent in immediately available funds in the London interbank market at
approximately
<PAGE> 17
11
11:00 a.m., London time, two Business Days prior to the commencement of such
Interest Period.
"DISCLOSED MATTERS" means the environmental matters disclosed
in Schedule 3.06(a) and the actions, suits and proceedings disclosed in Schedule
3.06(b).
"DOLLAR EQUIVALENT" means, on any date of determination, with
respect to any amount in Deutschemarks, the equivalent in dollars of such
amount, and with respect to any amount in dollars, the Deutschemark equivalent
of such amount, determined in each case by the Administrative Agent using the
Exchange Rate with respect to Deutschemarks then in effect.
"DOLLARS" or "$" refers to lawful money of the United States
of America.
"EFFECTIVE DATE" means the date on which the conditions
specified in Section 4.01 are satisfied (or waived in accordance with Section
9.02).
"EFFECTIVE PERIOD" means the period beginning on the Effective
Date and ending on and including the fifth Business Day following the Effective
Date.
"ELIGIBLE HOLDINGS SUBSIDIARIES" means Krebsoege Sinterholding
GmbH, Sintermetallwerk Krebsoege GmbH, Metallwerk Unterfranken GmbH and
Pressmetall Krebsoege GmbH and such other wholly owned subsidiaries of Holdings
as are included from time to time in the "organschaft" of Holdings.
"ENVIRONMENTAL LAWS" means all laws, rules, regulations,
codes, ordinances, orders, decrees, judgments, injunctions, notices or binding
agreements issued, promulgated or entered into by any Governmental Authority,
relating in any way to the environment, preservation or reclamation of natural
resources, the management, investigation, remediation, release or threatened
release of any Hazardous Material or to health and safety matters.
"ENVIRONMENTAL LIABILITY" means any liability, contingent or
otherwise (including any liability for damages, costs of environmental
remediation, fines, penalties or indemnities), of the Company or any Subsidiary
directly or indirectly resulting from or based upon (a) violation of any
Environmental Law, (b) the generation, use, handling, transportation, storage,
treatment or disposal of any Hazardous Materials, (c) exposure to any Hazardous
Materials, (d) the release or threatened release of any Hazardous Materials into
the environment or (e) any contract, agreement or other consensual arrangement
pursuant to which liability is assumed or imposed with respect to any of the
foregoing.
<PAGE> 18
12
"EQUITY ISSUANCE" means the issuance by the Company or any
Subsidiary of any equity securities, or the receipt by the Company or any
Subsidiary of any capital contribution, other than any such issuance of equity
securities to, or receipt of any such capital contribution from, the Company or
a Subsidiary.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended from time to time.
"ERISA AFFILIATE" means any trade or business (whether or not
incorporated) that, together with the Company, is treated as a single employer
under Section 414(b) or (c) of the Code or, solely for purposes of Section 302
of ERISA and Section 412 of the Code, is treated as a single employer under
Section 414 of the Code.
"ERISA EVENT" means (a) any "reportable event", as defined in
Section 4043 of ERISA or the regulations issued thereunder with respect to a
Plan (other than an event for which the 30-day notice period is waived); (b) the
existence with respect to any Plan of an "accumulated funding deficiency" (as
defined in Section 412 of the Code or Section 302 of ERISA), whether or not
waived; (c) the filing pursuant to Section 412(d) of the Code or Section 303(d)
of ERISA of an application for a waiver of the minimum funding standard with
respect to any Plan; (d) the incurrence by the Company or any of its ERISA
Affiliates of any liability under Title IV of ERISA with respect to the
termination of any Plan; (e) the receipt by the Company or any ERISA Affiliate
from the PBGC or a plan administrator of any notice relating to an intention to
terminate any Plan or Plans or to appoint a trustee to administer any Plan; (f)
the incurrence by the Company or any of its ERISA Affiliates of any liability
with respect to the withdrawal or partial withdrawal from any Plan or
Multiemployer Plan; or (g) the receipt by the Company or any ERISA Affiliate of
any notice, or the receipt by any Multiemployer Plan from the Company or any
ERISA Affiliate of any notice, concerning the imposition of Withdrawal Liability
or a determination that a Multiemployer Plan is, or is expected to be, insolvent
or in reorganization, within the meaning of Title IV of ERISA.
"EUROCURRENCY" means dollars or Deutschemarks and, when used
with reference to any Loan or Borrowing, refers to whether such Loan, or the
Loans comprising such Borrowing, are either Eurodollar or Eurodeutschemark
Loans.
"EURODEUTSCHEMARK", when used in reference to any Loan or
Borrowing, refers to whether such Loan, or the Loans comprising such Borrowing,
(i) bear interest at a rate determined by reference to the Adjusted DIBO Rate
and (ii) are denominated in Deutschemarks.
<PAGE> 19
13
"EURODOLLAR", when used in reference to any Loan or Borrowing,
refers to whether such Loan, or the Loans comprising such Borrowing, (i) bear
interest at a rate determined by reference to the Adjusted LIBO Rate and (ii)
are denominated in dollars.
"EVENT OF DEFAULT" has the meaning assigned to such term in
Article VII.
"EXCESS CASH FLOW" means, for any period, the sum (without
duplication) of:
(a) the Consolidated Net Income (or loss) of the Company for
such period, adjusted to exclude any gains or losses attributable to
Prepayment Events; PLUS
(b) depreciation, amortization and other non-cash charges or
losses deducted in determining such Consolidated Net Income (or loss)
for such period; PLUS
(c) the sum of (i) the amount, if any, by which Net Working
Capital of the Company decreased during such period plus (ii) aggregate
cash proceeds received by the Company or its consolidated Subsidiaries
during such period from Capital Lease Obligations or from other
Indebtedness (in each case, other than CapEx Refinancing Indebtedness)
incurred by the Company or its consolidated Subsidiaries during such
period to finance Capital Expenditures, PROVIDED that such proceeds are
not expended or to be expended in the fiscal quarter when received or
the immediately following fiscal quarter to make Capital Expenditures;
MINUS
(d) the sum of (i) any non-cash gains included in determining
such consolidated net income (or loss) for such period plus (ii) the
amount, if any, by which Net Working Capital of the Company increased
during such period; MINUS
(e) Capital Expenditures of the Company paid in cash during
such period, other than amounts paid from proceeds excluded as an
addition to Excess Cash Flow by the proviso to clause (c)(ii) above;
MINUS
(f) amounts paid in cash during such period on account of
items that were accounted for as noncash reductions of Consolidated Net
Income of the Company in such period or in a prior period; MINUS
<PAGE> 20
14
(g) the aggregate principal amount of Indebtedness repaid or
prepaid by the Company and its consolidated Subsidiaries during such
period, excluding (i) Indebtedness in respect of Revolving Loans,
Swingline Loans and Letters of Credit, (ii) Term Loans prepaid pursuant
to Section 2.11(b) or (c), (iii) repayments or prepayments of
Indebtedness to the extent financed by incurring other Indebtedness,
including CapEx Refinancing Indebtedness, and (iv) repayments of
Indebtedness incurred under Section 6.01(iii), (v) and (ix) hereof that
permanently reduce (by an equivalent amount) the amount of Indebtedness
that the Company or its Subsidiaries may incur under the documentation
governing such Indebtedness.
For purposes of this definition, "CAPEX REFINANCING INDEBTEDNESS" means Capital
Lease Obligations or other Indebtedness to the extent the proceeds thereof are
used to refinance or repay Capital Lease Obligations or other Indebtedness the
cash proceeds of which (or of predecessor Indebtedness refinanced thereby) have
previously been included as a positive component of Excess Cash Flow in any
period or were excluded as an addition to Excess Cash Flow by the proviso to
clauses (c)(ii).
"EXCHANGE RATE" means, on any day, with respect to any
Deutschemarks, the rate at which Deutschemarks may be exchanged into dollars, as
set forth at approximately 11:00 a.m., Frankfurt time, on such date on the
Reuters World Currency Page for Deutschemarks. In the event that such rate does
not appear on any Reuters World Currency Page, the Exchange Rate shall be
determined by reference to such other publicly available service for displaying
exchange rates as may be agreed upon by the Administrative Agent and the
Company, or, in the absence of such agreement, such Exchange Rate shall instead
be the arithmetic average of the spot rates of exchange of the Administrative
Agent in the market where its foreign currency exchange operations in respect of
Deutschemarks are then being conducted, at or about 10:00 a.m., local time, on
such date for the purchase of dollars for delivery two Business Days later;
PROVIDED that if at the time of any such determination, for any reason, no such
spot rate is being quoted, the Administrative Agent may use any reasonable
method it deems appropriate to determine such rate, and such determination shall
be conclusive absent manifest error.
"EXCLUDED TAXES" means, with respect to either Agent, any
Lender, either Issuing Bank or any other recipient of any payment to be made by
or on account of any obligation of any Borrower hereunder, and except as
otherwise provided in Section 2.17, (a) income or franchise taxes imposed on (or
measured by) its net income (including branch profits or similar taxes) imposed
as a result of a present or former connection between such Lender or any Agent
or Issuing Bank and the Governmental Authority imposing such tax (other than any
such connection arising solely from such Lender or any Agent or Issuing Bank
having executed, delivered or
<PAGE> 21
15
performed its obligations or received a payment under, or enforced, this
Agreement) and (b) in the case of a Foreign Lender (other than an assignee
pursuant to a request by a Borrower under Section 2.19(b)), any withholding tax
that is imposed on amounts payable to such Foreign Lender (i) to the extent they
are in effect and would apply as of the date such Foreign Lender becomes a party
to this Agreement or (ii) to the extent they relate to payments received by a
new lending office designated by such Foreign Lender and are in effect and would
apply at the time such lending office is designated (other than any withholding
tax imposed on payments by any Borrower from a Payment Location other than one
identified in this Agreement or any schedule hereto as of the date hereof as a
Payment Location from which payments would be made), except to the extent that
such Foreign Lender (or its assignor, if any) was entitled, at the time of
designation of a new lending office (or assignment), to receive additional
amounts from the applicable Borrower with respect to such withholding tax
pursuant to Section 2.17(a).
"FEDERAL FUNDS EFFECTIVE RATE" means, for any day, the
weighted average (rounded upwards, if necessary, to the next 1/100 of 1%) of the
rates on overnight Federal funds transactions with members of the Federal
Reserve System arranged by Federal funds brokers, as published on the next
succeeding Business Day by the Federal Reserve Bank of New York, or, if such
rate is not so published for any day that is a Business Day, the average
(rounded upwards, if necessary, to the next 1/100 of 1%) of the quotations for
such day for such transactions received by the Administrative Agent from three
Federal funds brokers of recognized standing selected by it.
"FINANCIAL OFFICER" means, with respect to the Company or any
Subsidiary, as the case may be, the chief financial officer, principal
accounting officer, treasurer, assistant treasurer or controller of the Company
or such Subsidiary.
"FIXED CHARGE COVERAGE RATIO" means, for any period for which
such ratio is being determined, the ratio for such period of (a) Consolidated
EBITDA of the Company minus Capital Expenditures referred to in clause (a) of
the definition thereof paid during such period to (b) the sum of (i) Cash
Interest Expense, (ii) cash tax expense, (iii) the amount of Restricted Payments
(other than those referred to in Section 6.06(a)(i) and Restricted Payments
received by the Company or a Subsidiary), and (iv) required principal payments
(whether at maturity or pursuant to any amortization, sinking fund or mandatory
scheduled prepayment, redemption or repurchase provisions) of Indebtedness for
borrowed money and payments in respect of the capitalized portion of Capital
Lease Obligations, in each case of the Company and its consolidated
Subsidiaries.
<PAGE> 22
16
"FNBC PRIME RATE" means the rate of interest per annum
publicly announced from time to time by The First National Bank of Chicago,
Frankfurt Branch, as its prime rate in effect at its office in Frankfurt,
Germany. Each change in the FNBC Prime Rate shall be effective from and
including the date such change is publicly announced as being effective.
"FOREIGN LENDER" means any Lender that is organized under the
laws of a jurisdiction other than the Relevant Jurisdiction.
"FOREIGN SUBSIDIARY" means any Subsidiary that is organized
under the laws of a jurisdiction other than the United States of America or any
State thereof or the District of Columbia.
"GAAP" means generally accepted accounting principles in the
United States of America.
"GERMAN AUTHORIZED PERSON" means, with respect to any German
Borrower, (i) any Financial Officer, (ii) the chief financial officer of
Holdings and (iii) the controller of Holdings.
"GERMAN BORROWER CONDITION" means the following conditions
which must be satisfied with respect to any Subsidiary Borrower prior to such
Subsidiary Borrower making any Borrowing of German Revolving Loans or German
Swingline Loans:
(i) the Company shall have executed and delivered a new
guarantee agreement or an amendment to the Company Guarantee, in form
and substance satisfactory to the Administrative Agent and the Required
Lenders (the "ADDITIONAL GUARANTEE"), pursuant to which the Company (in
addition to its obligations under the Company Guarantee) irrevocably
and unconditionally guarantees all the obligations of Holdings under
the Holdings Guarantee or all the obligations of such Subsidiary
Borrower under this Agreement;
(ii) Holdings shall have executed and delivered the Holdings
Guarantee in respect of such Subsidiary Borrower;
(iii) the Company Pledge Agreement, the Company Security
Agreement and the U.S. Subsidiary Guarantee Agreement shall have been
amended in a manner satisfactory in form and substance to the
Collateral Agent and the Required Lenders in order to provide or
confirm that such agreements secure or guarantee, as applicable, the
Company's obligations under the Additional Guarantee;
<PAGE> 23
17
(iv) such Subsidiary Borrower shall become party hereto by duly
executing and delivering a counterpart of this Agreement; and
(v) the Lenders shall have received opinions of U.S. and German
counsel for the Borrowers, addressed to the Lenders and in form and
substance satisfactory to the Administrative Agent and the Required
Lenders, as to the due authorization, execution, delivery, validity,
binding nature and enforceability of the agreements referred to in
clauses (i), (ii), (iii) and (iv) above, as to the continued validity
and enforceability of this Agreement in respect of the German Loan
Parties other than Holdings, as to noncontravention of documents, laws
and agreements and the absence of required governmental approvals, in
each case in connection with the execution, delivery and performance of
this Agreement and the other Loan Documents referred to above, and as
to such other matters relating to the foregoing as any Lender may
reasonably request.
"GERMAN BORROWERS" means Holdings and each Subsidiary Borrower
that has become party to this Agreement.
"GERMAN GROUP MEMBER" means at any time Holdings and each
Eligible Holdings Subsidiary at such time.
"GERMAN ISSUING BANK" means The First National Bank of
Chicago, in its capacity as the issuer of German Letters of Credit hereunder,
and any other Lender that may hereafter be designated as a German Issuing Bank
hereunder pursuant to a written instrument executed by the Company and such
Lender and approved by the Administrative Agent (such approval not to be
unreasonably withheld). A German Issuing Bank may, in its discretion, arrange
for one or more Letters of Credit to be issued by Affiliates of such German
Issuing Bank, in which case the term "German Issuing Bank" shall include any
such Affiliate with respect to Letters of Credit issued by such Affiliate.
"GERMAN LC DISBURSEMENT" means a payment made by the German
Issuing Bank pursuant to a Letter of Credit.
"GERMAN LC EXPOSURE" means, at any time, the sum of (a) the
aggregate undrawn amount of all outstanding German Letters of Credit at such
time plus (b) the aggregate amount of all German LC Disbursements that have not
yet been reimbursed by or on behalf of the German Borrowers at such time. The
German LC Exposure of any German Revolving Lender at any time shall be its
Applicable Percentage (based on its German Revolving Commitment) of the total
German LC Exposure at such time.
<PAGE> 24
18
"GERMAN LETTER OF CREDIT" means any Letter of Credit issued by
the German Issuing Bank pursuant to this Agreement.
"GERMAN LOAN PARTY" means any Loan Party that is organized
under the laws of the Federal Republic of Germany or any political subdivision
thereof.
"GERMAN REVOLVING COMMITMENT" means, with respect to each
Lender, the commitment, if any, of such Lender to make German Revolving Loans in
DM and to acquire participations in German Letters of Credit hereunder,
expressed in Deutschemarks as an amount representing the maximum aggregate
amount of such Lender's German Revolving Exposure hereunder, as such commitment
may be (a) reduced from time to time pursuant to Section 2.08 and (b) reduced or
increased from time to time pursuant to assignments by or to such Lender
pursuant to Section 9.04. The initial amount of each Lender's German Revolving
Commitment is set forth on Schedule 2.01, or in the Assignment and Acceptance
pursuant to which such Lender shall have assumed its German Revolving
Commitment, as applicable. The initial aggregate amount of the Lenders' German
Revolving Commitments is DM 30,000,000.
"GERMAN REVOLVING EXPOSURE" means, with respect to any Lender
at any time, the sum at such time of (i) the outstanding principal amount of
such Lender's German Revolving Loans, (ii) such Lender's German LC Exposure and
(iii) such Lender's German Swingline Exposure.
"GERMAN REVOLVING LENDER" means a Lender with a German
Revolving Commitment or, if the German Revolving Commitments have terminated or
expired, a Lender with German Revolving Exposure.
"GERMAN REVOLVING LOAN" means a Loan made pursuant to clause
(e) of Section 2.01.
"GERMAN SUBSIDIARY GUARANTEE" means the guarantee of the
German Group Members other than Holdings with respect to the Obligations of
Holdings, substantially in the form of Exhibit F, as amended and supplemented
from time to time in accordance with the terms thereof and hereof.
"GERMAN SWINGLINE EXPOSURE" means, at any time, the aggregate
principal amount of all German Swingline Loans outstanding at such time. The
German Swingline Exposure of any Lender at any time shall be its Applicable
Percentage (based on its German Revolving Commitment) of the total German
Swingline Exposure at such time.
<PAGE> 25
19
"GERMAN SWINGLINE LENDER" means The First National Bank of
Chicago (or an Affiliate thereof), in its capacity as lender of German Swingline
Loans hereunder, or any other Lender that may from time to time be designated to
replace the then-current German Swingline Lender in such capacity pursuant to a
written instrument signed by the Company and such Lender and approved by the
Administrative Agent (such approval not to be unreasonably withheld).
"GERMAN SWINGLINE LOAN" means a Loan made to a German Borrower
pursuant to Section 2.04(a).
"GERMAN TERM COMMITMENT" means, with respect to each Lender,
the commitment, if any, of such Lender to make a German Term Loan in DM
hereunder on the Effective Date, expressed in Deutschemarks as an amount
representing the maximum principal amount of the German Term Loan to be made by
such Lender hereunder, as such commitment may be (a) reduced from time to time
pursuant to Section 2.08 and (b) reduced or increased from time to time pursuant
to assignments by or to such Lender pursuant to Section 9.04. The initial amount
of each Lender's German Term Commitment is set forth on Schedule 2.01, or in the
Assignment and Acceptance pursuant to which such Lender shall have assumed its
German Term Commitment, as applicable. The initial aggregate amount of the
Lenders' German Term Commitments is DM 124,500,000.
"GERMAN TERM LENDER" means a Lender with a German Term
Commitment or an outstanding German Term Loan.
"GERMAN TERM LOAN" means a Loan made pursuant to clause (c) of
Section 2.01.
"GERMAN TERM LOAN MATURITY DATE" means June 30, 2003.
"GOVERNMENTAL AUTHORITY" means the government of the United
States of America, any other nation or any political subdivision thereof,
whether state or local, and any agency, authority, instrumentality, regulatory
body, court, central bank or other entity exercising executive, legislative,
judicial, taxing, regulatory or administrative powers or functions of or
pertaining to government.
"GUARANTEE" of or by any Person (the "GUARANTOR") means any
obligation, contingent or otherwise, of the guarantor guaranteeing or having the
economic effect of guaranteeing any Indebtedness or other obligation of any
other Person (the "PRIMARY OBLIGOR") in any manner, whether directly or
indirectly, and including any obligation of the guarantor, direct or indirect,
(a) to purchase or pay (or advance or supply funds for the purchase or payment
of) such Indebtedness or other
<PAGE> 26
20
obligation or to purchase (or to advance or supply funds for the purchase of)
any security for the payment thereof, (b) to purchase or lease property,
securities or services for the purpose of assuring the owner of such
Indebtedness or other obligation of the payment thereof, (c) to maintain working
capital, equity capital or any other financial statement condition or liquidity
of the primary obligor so as to enable the primary obligor to pay such
Indebtedness or other obligation or (d) as an account party in respect of any
letter of credit or letter of guaranty issued to support such Indebtedness or
obligation; PROVIDED, that the term Guarantee shall not include endorsements for
collection or deposit in the ordinary course of business.
"GUARANTEE AGREEMENTS" means the German Subsidiary Guarantee,
the Holdings Guarantee, the Company Guarantee, the U.S. Subsidiary Guarantee and
any Additional Guarantee.
"HAZARDOUS MATERIALS" means all explosive or radioactive
substances or wastes and all hazardous or toxic materials, substances, wastes or
other pollutants, including petroleum or petroleum distillates, asbestos or
asbestos containing materials, polychlorinated biphenyls, radon gas, infectious
or medical wastes and all other substances or wastes of any nature, in each case
above to the extent regulated pursuant to any Environmental Law.
"HEDGING AGREEMENT" means any interest rate protection
agreement, foreign currency exchange agreement, commodity price protection
agreement or other interest or currency exchange rate or commodity price hedging
arrangement.
"HISTORICAL STATEMENTS" has the meaning given to such term in
Section 3.04(a).
"HOLDINGS" has the meaning set forth in the preamble to this
Agreement.
"HOLDINGS ASSIGNMENT OF CLAIMS" means the collective reference
to the assignments of claims by Holdings in favor of the Lenders substantially
in the form of Exhibit H-2, as amended and supplemented from time to time in
accordance with the terms thereof and hereof.
"HOLDINGS GUARANTEE" means the guarantee of Holdings with
respect to the Obligations of each of the Subsidiary Borrowers, substantially in
the form of Exhibit G, as amended and supplemented from time to time in
accordance with the terms thereof and hereof.
<PAGE> 27
21
"HOLDINGS PLEDGE AGREEMENT" means the pledge agreement among
Holdings and the Lenders with respect to the pledge by Holdings of all the
outstanding shares of common stock of Krebsoge Sinterholding GmbH and Metallwerk
Langensalza GmbH owned by Holdings, substantially in the form of Exhibit H-1, as
amended and supplemented from time to time in accordance with the terms thereof
and hereof.
"INDEBTEDNESS" of any Person means, without duplication, (a)
all obligations of such Person for borrowed money or with respect to deposits or
advances of any kind made to such Person, (b) all obligations of such Person
evidenced by bonds, debentures, notes or similar instruments, (c) all
obligations of such Person upon which interest charges are customarily paid
(other than leases and accounts payable not otherwise constituting
Indebtedness), (d) all obligations of such Person under conditional sale or
other title retention agreements relating to property acquired by such Person,
(e) all obligations of such Person in respect of the deferred purchase price of
property or services (excluding accounts payable incurred in the ordinary course
of business and that are either (i) not overdue by more than 120 days or (ii)
subject to a bona fide dispute), (f) all Indebtedness of others secured by (or
for which the holder of such Indebtedness has an existing right, contingent or
otherwise, to be secured by) any Lien on property owned or acquired by such
Person, whether or not the Indebtedness secured thereby has been assumed, (g)
all Guarantees by such Person of Indebtedness of others, (h) all Capital Lease
Obligations of such Person, (i) all obligations, contingent or otherwise, of
such Person as an account party in respect of letters of credit and letters of
guaranty and (j) all obligations, contingent or otherwise, of such Person in
respect of bankers' acceptances. The Indebtedness of any Person shall include
the Indebtedness of any other entity (including any partnership in which such
Person is a general partner) to the extent such Person is liable therefor as a
result of such Person's ownership interest in or other relationship with such
entity, except to the extent the terms of such Indebtedness provide that such
Person is not liable therefor.
"INDEMNIFIED TAXES" means Taxes other than Excluded Taxes and
Other Taxes.
"INTEREST ELECTION REQUEST" means a request by a Borrower to
convert or continue a Revolving Borrowing or Term Borrowing in accordance with
Section 2.07.
"INTEREST PAYMENT DATE" means (a) with respect to any ABR
Loan, the last day of each March, June, September and December, (b) with respect
to any Eurocurrency Loan, the last day of the Interest Period applicable to the
Borrowing of which such Loan is a part and, in the case of a Eurodollar
Borrowing with an Interest
<PAGE> 28
22
Period of more than three months' duration, each day prior to the last day of
such Interest Period that occurs at intervals of three months' duration after
the first day of such Interest Period, and (c) with respect to any Swingline
Loan, monthly in arrears on the last day of each month.
"INTEREST PERIOD" means with respect to any Eurocurrency
Borrowing, the period commencing on the date of such Borrowing and ending on the
numerically corresponding day in the calendar month that is one, two, three or
six months thereafter, as the relevant Borrower may elect; PROVIDED, that (i) if
any Interest Period would end on a day other than a Business Day, such Interest
Period shall be extended to the next succeeding Business Day unless such next
succeeding Business Day would fall in the next calendar month, in which case
such Interest Period shall end on the next preceding Business Day and (ii) any
Interest Period that commences on the last Business Day of a calendar month (or
on a day for which there is no numerically corresponding day in the last
calendar month of such Interest Period) shall end on the last Business Day of
the last calendar month of such Interest Period. For purposes hereof, the date
of a Borrowing initially shall be the date on which such Borrowing is made and
thereafter shall be the effective date of the most recent conversion or
continuation of such Borrowing.
"INVESTED ENTITY" means any Person, other than a Subsidiary
but including, without limitation, any Joint Venture in which the Company or any
Subsidiary, as the case may be, holds an equity interest.
"INVESTED ENTITY EXPENSES" means the costs or expenses (i)
incurred by any Invested Entity and (ii) the payment of which by the Company or
any Subsidiary, as the case may be, on behalf of such Person would be
appropriately attributable to an investment by the Company or such Subsidiary,
as the case may be, in such Person.
"INVESTMENTS" shall have the meaning assigned to such term in
Section 6.04(a). For purposes hereof, the amount of an Investment at any time
shall mean the initial amount thereof less any return of capital, principal or
other investment amount (by way of redemption, capital distribution, repayment
or otherwise) in respect thereof, or repayment or reimbursement of Invested
Entity Expenses, or payment of any amount thereof by a Joint Venture or any
other Person other than the Company or a Subsidiary, but not less any interest,
dividends or other investment returns in respect thereof.
"ISSUING BANKS" means the German Issuing Bank and the U.S.
Issuing Bank.
<PAGE> 29
23
"JOINT VENTURE" means a limited purpose corporation,
partnership, joint venture or other similar legal entity now or hereafter formed
by the Company or any Subsidiary with another Person or Persons (other than
Affiliates of the Company) in order to conduct a common venture or enterprise
with such Person or Persons and in which the equity interests are owned by such
Person or Persons and the Company or such Subsidiary, as the case may be;
PROVIDED that no entity within the definition of German Group Member or
Subsidiary shall be deemed a Joint Venture and no Joint Venture shall be deemed
to result from the ownership by any Person of directors' qualifying shares or
other shares or equity interests owned to satisfy applicable statutory or
regulatory requirements.
"JUDGMENT CURRENCY" has the meaning assigned to such term in
Section 9.14.
"LC BORROWER" has the meaning assigned to such term in
Section 2.05(a).
"LC DISBURSEMENT" means any German LC Disbursement or U.S.
LC Disbursement.
"LC EXPOSURE" means, at any time, the sum of (a) the U.S. LC
Exposure and (b) the German LC Exposure. The LC Exposure of any Revolving Lender
at any time shall be the sum of its Applicable Percentages of the U.S.
LC Exposure and the German LC Exposure.
"LENDERS" means the Persons listed on Schedule 2.01 and any
other Person that shall have become a party hereto pursuant to an Assignment and
Acceptance, other than any such Person that ceases to be a party hereto pursuant
to an Assignment and Acceptance. Unless the context otherwise requires, the term
"Lenders" includes the Swingline Lenders.
"LETTER OF CREDIT" means any German Letter of Credit or U.S.
Letter of Credit.
"LEVERAGE RATIO" means, on any date, the ratio of (a) Total
Debt on such date to (b) Consolidated EBITDA of the Company for the most recent
period of four consecutive fiscal quarters ended on or prior to such date.
"LIBO RATE" means, with respect to any Eurodollar Borrowing
for any Interest Period, the rate appearing on Page 3750 of the Telerate Service
(or on any successor or substitute page of such Service, or any successor to or
substitute for such Service, providing rate quotations comparable to those
currently provided on such
<PAGE> 30
24
page of such Service, as determined by the Administrative Agent from time to
time for purposes of providing quotations of interest rates applicable to dollar
deposits in the London interbank market) at approximately 11:00 a.m., London
time, two Business Days prior to the commencement of such Interest Period, as
the rate for dollar deposits with a maturity comparable to such Interest Period.
In the event that such rate is not available at such time for any reason, then
the "LIBO RATE" with respect to such Eurodollar Borrowing for such Interest
Period shall be the rate at which dollar deposits of $5,000,000 for a maturity
comparable to such Interest Period are offered by the principal London office of
the Administrative Agent in immediately available funds in the London interbank
market at approximately 11:00 a.m., London time, two Business Days prior to the
commencement of such Interest Period.
"LIEN" means, with respect to any asset, (a) any mortgage,
deed of trust, lien, pledge, hypothecation, encumbrance, charge or security
interest in, on or of such asset, (b) the interest of a vendor or a lessor under
any conditional sale agreement, capital lease or title retention agreement (or
any financing lease having substantially the same economic effect as any of the
foregoing) relating to such asset and (c) in the case of securities, any
purchase option, call or similar right of a third party with respect to such
securities.
"LOAN DOCUMENTS" means this Agreement, the Guarantee
Agreements, the Security Documents and any Notes.
"LOAN PARTIES" means each Borrower and each Subsidiary that is
party to any Loan Document.
"LOANS" means the loans made by any of the Lenders to the
Borrowers pursuant to this Agreement.
"MATERIAL ADVERSE EFFECT" means a material adverse effect on
(a) the business, assets, operations or condition, financial or otherwise, of
(i) the Company and the Subsidiaries taken as a whole, (ii) the Company and its
U.S. Subsidiaries, taken as a whole, or (iii) Holdings and its subsidiaries,
taken as a whole, (b) the ability of the Company and its U.S. Subsidiaries,
taken as a whole, or of Holdings and its subsidiaries, taken as a whole, to
perform any of their monetary obligations or any other material obligations
under the Loan Documents to which they are party or (c) the material rights of
or material remedies available to the Lenders under the Loan Documents.
"MATERIAL INDEBTEDNESS" means Indebtedness (other than the
Loans and Letters of Credit), or obligations in respect of one or more Hedging
Agreements, of any one or more of the Company and its Subsidiaries in an
aggregate principal
<PAGE> 31
25
amount exceeding $5,000,000. For purposes of determining Material Indebtedness,
the "principal amount" of the obligations of the Company or any Subsidiary in
respect of any Hedging Agreement at any time shall be the maximum aggregate
amount (giving effect to any netting agreements) that the Company or such
Subsidiary would be required to pay if such Hedging Agreement were terminated at
such time.
"MOODY'S" means Moody's Investors Service, Inc.
"MORTGAGE" means a mortgage, deed of trust, assignment of
leases and rents, leasehold mortgage or other security document granting a Lien
on any Mortgaged Property to secure the Obligations. Each Mortgage shall be
satisfactory in form and substance to the Collateral Agent.
"MORTGAGED PROPERTY" means, initially, each parcel of real
property and the improvements thereto owned by a Loan Party and identified on
Schedule 3.05(a) as Mortgaged Properties, and includes each other parcel of real
property and improvements thereto with respect to which a Mortgage is granted
pursuant to Section 5.11 or 5.12.
"MULTIEMPLOYER PLAN" means a multiemployer plan as defined in
Section 4001(a)(3) of ERISA.
"NET PROCEEDS" means, with respect to any event (a) the cash
proceeds received by the Company or any Subsidiary in respect of such event
including (i) any cash received in respect of any non-cash proceeds, but only as
and when received, (ii) in the case of a casualty, the amount of insurance
proceeds in excess of $250,000 (or the equivalent in foreign currency), and
(iii) in the case of a condemnation or similar event, the amount of condemnation
awards and similar payments in excess of $250,000, net of (b) the sum of (i) all
fees and out-of-pocket expenses paid or payable by the Company and the
Subsidiaries to third parties (other than Affiliates) in connection with such
event (which amounts may be reasonably estimated to the extent not then known),
(ii) in the case of a sale or other disposition of an asset (including pursuant
to a casualty or condemnation), the amount of all payments required to be made
by the Company and the Subsidiaries as a result of such event to repay
Indebtedness (other than Loans) secured by such asset or otherwise subject to
mandatory prepayment as a result of such event, and (iii) the amount of all
taxes paid (or reasonably estimated to be payable) by the Company and the
Subsidiaries during the year that such event occurred or the next succeeding
year, and the amount of any reserves established by the Company and the
Subsidiaries to fund contingent liabilities reasonably estimated to be payable,
in each case that are directly attributable to such event (as determined
reasonably and in good faith by the chief financial officer of the Company);
provided, however, that (x) any excess of estimated fees and expenses
<PAGE> 32
26
under clause (b)(i) over the actual amounts thereof shall constitute Net
Proceeds and be deemed to have been received on the date such excess can be
determined and (y) any excess of estimated taxes or contingency reserves under
clause (b)(iii) over the actual amounts of taxes referred to in such clause or
contingent liabilities payable shall constitute Net Proceeds and be deemed to
have been received at the end of the period referred to in such clause, in the
case of taxes, and at the time any such excess portion of the contingency
reserve is reversed (and in the amount of such reversal), in the case of
contingency reserves.
"NET WORKING CAPITAL" of any Person means, at any date, (a)
the consolidated current assets of such Person and its consolidated subsidiaries
as of such date (excluding cash and Permitted Investments) minus (b) the
consolidated current liabilities of such Person and its consolidated
subsidiaries as of such date (excluding current liabilities in respect of
Indebtedness). Net Working Capital at any date may be a positive or negative
number. Net Working Capital increases when it becomes more positive or less
negative and decreases when it becomes less positive or more negative.
"NOTE" means any promissory note delivered by a Borrower
pursuant to Section 2.09.
"OBLIGATIONS" of any Loan Party means the obligations of such
Loan Party under this Agreement or any other Loan Document to which it is party
with respect to the payment (as a Borrower, guarantor or otherwise) of (i) the
principal of and interest on Loans made hereunder when and as due, whether at
maturity, by acceleration, upon one or more dates set for prepayment or
otherwise and (ii) all other monetary obligations of such Loan Party hereunder
and under any other Loan Document.
"OTHER TAXES" means any and all present or future stamp or
documentary taxes or any other excise or property taxes, charges or similar
levies arising from any payment made under any Loan Document or from the
execution, delivery or enforcement of, or otherwise with respect to, any Loan
Document (other than Excluded Taxes and Indemnified Taxes).
"PBGC" means the Pension Benefit Guaranty Corporation referred
to and defined in ERISA and any successor entity performing similar functions.
"PERFECTION CERTIFICATE" means a certificate in the form
attached to the Company Security Agreement, or any other form approved by the
Collateral Agent.
<PAGE> 33
27
"PERMITTED ENCUMBRANCES" means:
(a) Liens imposed by law for taxes, assessments and governmental
charges or levies that are not yet due or are being contested in
compliance with Section 5.04;
(b) carriers', warehousemen's, mechanics', materialmen's,
repairmen's and other like Liens imposed by law, arising in the
ordinary course of business and securing obligations that are not
overdue by more than 30 days or are being contested in compliance with
Section 5.04;
(c) pledges and deposits made in the ordinary course of business
in compliance with workers' compensation, unemployment insurance and
other social security or similar laws or regulations;
(d) deposits to secure the performance of bids, trade contracts,
leases, statutory obligations, surety and appeal bonds, performance
bonds and other obligations of a like nature, in each case in the
ordinary course of business; and
(e) easements, zoning restrictions, rights-of-way and similar
encumbrances on real property imposed by law or arising in the
ordinary course of business that do not secure any monetary
obligations and do not materially detract from the value of the
affected property or interfere with the ordinary conduct of business
of the Company or any Subsidiary;
PROVIDED that the term "Permitted Encumbrances" shall not include any Lien
securing Indebtedness.
"PERMITTED INVESTMENTS" means:
(a) direct obligations of, or obligations the principal of and
interest on which are unconditionally guaranteed by, the United States
of America or the Federal Republic of Germany (or by any agency
thereof to the extent such obligations are backed by the full faith
and credit of the United States of America or the Federal Republic of
Germany, as the case may be), in each case maturing within one year
from the date of acquisition thereof;
(b) investments in commercial paper maturing within 270 days from
the date of acquisition thereof and having, at such date of
acquisition, a credit rating of A-1 or P-1 (or an equivalent rating)
from S&P or from Moody's, as
<PAGE> 34
28
the case may be (or an equivalent rating from a comparable German
rating agency);
(c) investments in certificates of deposit, banker's acceptances
and time deposits maturing within 180 days from the date of
acquisition thereof issued or guaranteed by or placed with, and money
market deposit accounts issued or offered by, any U.S. or German
office of any commercial bank organized under the laws of the United
States of America or any State thereof or of the Federal Republic of
Germany which has (i) a combined capital and surplus and undivided
profits of not less than $500,000,000 and (ii) either (x) issues, or
has a parent company which issues, commercial paper rated at least A-1
(or an equivalent rating) by S&P or P-1 (or an equivalent rating) by
Moody's (or a rating equivalent to the foregoing from a comparable
German rating agency) or (y) has a long-term unsecured debt rating of
at least A- (or an equivalent rating) by S&P or A3 (or an equivalent
rating) by Moody's (or a rating equivalent to the foregoing from a
comparable German rating agency); and
(d) fully collateralized repurchase agreements with a term of not
more than 30 days for securities described in clause (a) above and
entered into with a financial institution satisfying the criteria
described in clause (c) above.
"PERSON" means any natural person, corporation, limited
liability company, trust, mutual fund, joint venture, association, company,
partnership, Governmental Authority or other entity.
"PLAN" means any employee pension benefit plan (other than a
Multiemployer Plan) subject to the provisions of Title IV of ERISA or Section
412 of the Code or Section 302 of ERISA, and in respect of which the Borrower or
any ERISA Affiliate is (or, if such plan were terminated, would under Section
4069 of ERISA be deemed to be) an "employer" as defined in Section 3(5) of
ERISA.
"PLEDGE AGREEMENTS" means the Company Pledge Agreement, the
Company Holdings Pledge Agreement, the Holdings Pledge Agreement and the U.S.
Subsidiary Pledge Agreement.
"PREPAYMENT EVENT" means:
(a) any sale, transfer or other disposition (including pursuant
to a sale and leaseback transaction) of any property or asset of the
Company or any Subsidiary, other than (i) dispositions described in
clauses (i), (ii), and (iii) of Section 6.04(b) and (ii) other
dispositions to the extent such dispositions do not
<PAGE> 35
29
result in aggregate Net Proceeds exceeding $1,000,000 during any
fiscal year of the Company; or
(b) any casualty or other insured damage to, or any taking under
power of eminent domain or by condemnation or similar proceeding of,
any property or asset of the Company or any Subsidiary, but only to
the extent that the Net Proceeds therefrom have not been applied to
repair, restore or functionally replace such property or asset within
270 days after such event; or
(c) any Equity Issuance.
"PRIME RATE" means the rate of interest per annum publicly
announced from time to time by NBD Bank as its prime rate in effect at its
principal office in Detroit; each change in the Prime Rate shall be effective
from and including the date such change is publicly announced as being
effective.
"PRO FORMA FINANCIAL STATEMENTS" has the meaning given to such
term in Section 3.04(b).
"RATE PROTECTION AGREEMENT" means any interest rate swap,
interest rate cap or similar agreement or arrangement (including options)
designed to protect a Borrower against fluctuations in interest rates.
"REGISTER" has the meaning set forth in Section 9.04.
"RELATED PARTIES" means, with respect to any specified Person,
such Person's Affiliates and the respective directors, officers, employees,
agents and advisors of such Person and such Person's Affiliates.
"RELEVANT JURISDICTION" means (i) in the case of any Loan to
the Company, the United States of America, and (ii) in the case of any Loan to
any of the German Borrowers, the Federal Republic of Germany.
"REQUIRED LENDERS" means, at any time, Lenders having
Revolving Exposures, Term Loans and unused Commitments representing at least 51%
of the sum of the total Revolving Exposures, outstanding Term Loans and unused
Commitments at such time.
"RESTRICTED PAYMENT" means any dividend or other distribution
(whether in cash, securities or other property) with respect to any shares of
any class of capital stock of the Company or any Subsidiary, or any payment
(whether in cash, securities or other property), including any sinking fund or
similar deposit, on account of the
<PAGE> 36
30
purchase, redemption, retirement, acquisition, cancellation or termination of
any such shares of capital stock of the Company or any Subsidiary or any option,
warrant or other right to acquire any such shares of capital stock of the
Company or any Subsidiary.
"REVOLVING AVAILABILITY PERIOD" means the period from and
including the Effective Date to but excluding the earlier of the Revolving
Maturity Date and the date of termination of the Revolving Commitments.
"REVOLVING COMMITMENT" means, collectively, the German
Revolving Commitment and the U.S. Revolving Commitment.
"REVOLVING EXPOSURE" means, with respect to any Lender at any
time, the sum of the outstanding principal amount of such Lender's Revolving
Loans and its LC Exposure and Swingline Exposure at such time.
"REVOLVING LENDER" means a Lender with a Revolving Commitment
or, if the Revolving Commitments have terminated or expired, a Lender with
Revolving Exposure.
"REVOLVING LOAN" means a Loan made pursuant to clause (d) or
(e) of Section 2.01.
"REVOLVING MATURITY DATE" means June 30, 2003.
"RICHTON PARK IDB" means the Industrial Development Revenue
Bonds issued by the Village of Richton Park, Cook County, Illinois, pursuant to
the Trust Agreement, dated as of April 1, 1996, between the Company and Mellon
Bank, N.A., as trustee.
"S&P" means Standard & Poor's.
"SECURITY AGREEMENTs" means the Company Security Agreement and
the U.S. Subsidiary Security Agreement.
"SECURITY DOCUMENTS" means the Mortgages, the Holdings
Assignment of Claims, the Pledge Agreements, the Security Agreements and each
other security agreement or other instrument or document executed and delivered
pursuant to Section 5.11 or 5.12 to secure the Obligations, or any portion
thereof, of any Loan Party.
<PAGE> 37
31
"STATUTORY RESERVE RATE" means, with respect to any currency,
a fraction (expressed as a decimal), the numerator of which is the number one
and the denominator of which is the number one minus the aggregate of the
maximum reserve, liquid asset or similar percentages (including any marginal,
special, emergency or supplemental reserves) expressed as a decimal established
by any Governmental Authority of the jurisdiction of such currency to which
banks in such jurisdiction are subject (a) with respect to the Base CD Rate, for
new negotiable time deposits in dollars of over $100,000 with maturities of
approximately three months and (b) with respect to the LIBO Rate for Loans in
dollars and the DIBO Rate for Loans in Deutschemarks, as the case may be, for
any category of deposits or liabilities customarily used to fund loans in such
currency or by reference to which interest rates applicable to Loans in such
currency are determined. Such reserve, liquid asset or similar percentages
shall, in the case of dollars, include those imposed pursuant to Regulation D of
the Board. Eurocurrency Loans shall be deemed to be subject to such reserve
requirements without benefit of or credit for proration, exemptions or offsets
that may be available from time to time to any Lender under Regulation D or any
other applicable law, rule or regulation. The Statutory Reserve Rate shall be
adjusted automatically on and as of the effective date of any change in any
reserve percentage.
"SUBSIDIARY" means, with respect to any Person (the "PARENT")
at any date, any corporation, limited liability company, partnership,
association or other entity the accounts of which would be consolidated with
those of the parent in the parent's consolidated financial statements if such
financial statements were prepared in accordance with GAAP as of such date, as
well as any other corporation, limited liability company, partnership,
association or other entity of which securities or other ownership interests
representing more than 50% of the equity or more than 50% of the ordinary voting
power or, in the case of a partnership, more than 50% of the general partnership
interests are, as of such date, owned, controlled or held by the parent or one
or more subsidiaries of the parent or by the parent and one or more subsidiaries
of the parent.
"SUBSIDIARY" means any subsidiary of the Company; PROVIDED,
HOWEVER, that PEAK Werkstoff GmbH, Krebsoege Feida Danyang Filters, Krebsoege
Excel (Filters) PVT. Ltd., Sintered Metals Components, (Pty) Ltd., Sinter Metals
Foreign Sales Corporation and any Joint Venture or other Invested Entity in
which the Company or any Subsidiary makes an Investment pursuant to and in
accordance with Section 6.04, (i) shall, if a consolidated subsidiary of the
Company for purposes of financial statements prepared in accordance with GAAP,
be deemed a "consolidated Subsidiary" for purposes of references to financial
statements or references to or definitions of financial or accounting terms and
any related financial covenants and (ii) shall not otherwise be deemed a
Subsidiary or subsidiary for purposes of this
<PAGE> 38
32
Agreement. Any non-U.S. Subsidiary, at least 98% of the outstanding shares of
each class of which are owned, controlled or held by the Company and/or other
wholly owned Subsidiaries, shall be deemed to be a "wholly owned Subsidiary" for
purposes of this Agreement.
"SUBSIDIARY BORROWERS" has the meaning set forth in the
preamble to this Agreement.
"SWINGLINE EXPOSURE" means, at any time, (a) the sum of the
U.S. Swingline Exposure and (b) the German Swingline Exposure. The Swingline
Exposure of any Lender at any time shall be the sum of its Applicable
Percentages of the U.S. Swingline Exposure and the German Swingline Exposure.
"SWINGLINE LENDERS" means the German Swingline Lender and the
U.S. Swingline Lender.
"SWINGLINE LOAN" means any German Swingline Loan or U.S.
Swingline Loan.
"SYNDICATION AGENT" means Salomon Brothers Inc, in its
capacity as syndication agent for the Lenders hereunder.
"TAXES" means any and all present or future taxes, levies,
imposts, duties, deductions, charges or withholdings imposed by any Governmental
Authority.
"TERM LOANS" means Tranche A Term Loans, Tranche B Term Loans
and German Term Loans.
"THREE-MONTH SECONDARY CD RATE" means, for any day, the
secondary market rate for three-month certificates of deposit reported as being
in effect on such day (or, if such day is not a Business Day, the next preceding
Business Day) by the Board through the public information telephone line of the
Federal Reserve Bank of New York (which rate will, under the current practices
of the Board, be published in Federal Reserve Statistical Release H.15(519)
during the week following such day) or, if such rate is not so reported on such
day or such next preceding Business Day, the average of the secondary market
quotations for three-month certificates of deposit of major money center banks
in New York City received at approximately 10:00 a.m., New York City time, on
such day (or, if such day is not a Business Day, on the next preceding Business
Day) by the Administrative Agent from three negotiable certificate of deposit
dealers of recognized standing selected by it.
<PAGE> 39
33
"TOTAL DEBT" means, at any date, all Indebtedness of the
Company and its consolidated Subsidiaries at such date to the extent such
Indebtedness should be reflected as a liability on a consolidated balance sheet
of the Company (excluding any such items which appear only in the notes to such
consolidated balance sheet) at such date in accordance with GAAP.
"TRANCHE A COMMITMENT" means, with respect to each Lender, the
commitment, if any, of such Lender to make a Tranche A Term Loan in dollars
hereunder, expressed in dollars as an amount representing the maximum principal
amount of the Tranche A Term Loan to be made by such Lender hereunder, as such
commitment may be (a) reduced from time to time pursuant to Section 2.08 and (b)
reduced or increased from time to time pursuant to assignments by or to such
Lender pursuant to Section 9.04. The initial amount of each Lender's Tranche A
Commitment is set forth on Schedule 2.01, or in the Assignment and Acceptance
pursuant to which such Lender shall have assumed its Tranche A Commitment, as
applicable. The initial aggregate amount of the Lenders' Tranche A Commitments
is $30,000,000.
"TRANCHE A LENDER" means a Lender with a Tranche A Commitment
or an outstanding Tranche A Term Loan.
"TRANCHE A MATURITY DATE" means June 30, 2003.
"TRANCHE A TERM LOAN" means a Loan made pursuant to clause (a)
of Section 2.01.
"TRANCHE B COMMITMENT" means, with respect to each Lender, the
commitment, if any, of such Lender to make a Tranche B Term Loan in dollars
hereunder, expressed in dollars as an amount representing the maximum principal
amount of the Tranche B Term Loan to be made by such Lender hereunder, as such
commitment may be (a) reduced from time to time pursuant to Section 2.08 and (b)
reduced or increased from time to time pursuant to assignments by or to such
Lender pursuant to Section 9.04. The initial amount of each Lender's Tranche B
Commitment is set forth on Schedule 2.01, or in the Assignment and Acceptance
pursuant to which such Lender shall have assumed its Tranche B Commitment, as
applicable. The initial aggregate amount of the Lenders' Tranche B Commitments
is $115,000,000.
"TRANCHE B LENDER" means a Lender with a Tranche B Commitment
or an outstanding Tranche B Term Loan.
"TRANCHE B MATURITY DATE" means June 30, 2005.
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34
"TRANCHE B TERM LOAN" means a Loan made pursuant to clause (b)
of Section 2.01.
"TRANSACTIONS" means the execution, delivery and performance
by each Loan Party of the Loan Documents to which it is to be a party, the
borrowing of Loans, the use of the proceeds thereof, the issuance of Letters of
Credit hereunder and the consummation of the Acquisitions.
"TYPE", when used in reference to any Loan or Borrowing,
refers to whether the rate of interest on such Loan, or on the Loans comprising
such Borrowing, is determined by reference to the Adjusted LIBO Rate, the
Adjusted DIBO Rate, the Alternate Base Rate or the FNBC Prime Rate.
"U.S. ISSUING BANK" means NBD Bank, in its capacity as the
issuer of U.S. Letters of Credit hereunder, and any other Lender that may
hereafter be designated as a U.S. Issuing Bank hereunder pursuant to a written
instrument executed by the Company and such Lender and approved by the
Administrative Agent (such approval not to be unreasonably withheld). A U.S.
Issuing Bank may, in its discretion, arrange for one or more Letters of Credit
to be issued by Affiliates of such U.S. Issuing Bank, in which case the term
"U.S. Issuing Bank" shall include any such Affiliate with respect to Letters of
Credit issued by such Affiliate. In addition, Mellon Bank, N.A., shall be deemed
a U.S. Issuing Bank in respect of the U.S. Letters of Credit listed in Schedule
2.05(a) and any successive renewals thereof.
"U.S. LC DISBURSEMENT" means a payment made by the U.S.
Issuing Bank pursuant to a U.S. Letter of Credit.
"U.S. LC EXPOSURE" means, at any time, the sum of (a) the
aggregate undrawn amount of all outstanding U.S. Letters of Credit at such time
plus (b) the aggregate amount of all U.S. LC Disbursements that have not yet
been reimbursed by or on behalf of the Company at such time. The U.S. LC
Exposure of any U.S. Revolving Lender at any time shall be its Applicable
Percentage (based on its U.S. Revolving Commitment) of the total U.S. LC
Exposure at such time.
"U.S. LETTER OF CREDIT" means any Letter of Credit issued by a
U.S. Issuing Bank pursuant to this Agreement, including the Canadian Letter of
Credit and the Letters of Credit listed in Schedule 2.05(a), and any successive
renewals thereof.
"U.S. REVOLVING COMMITMENT" means, with respect to each
Lender, the commitment, if any, of such Lender to make U.S. Revolving Loans in
dollars and to acquire participations in U.S. Letters of Credit hereunder,
expressed in dollars as an amount representing the maximum aggregate amount of
such Lender's U.S.
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35
Revolving Exposure hereunder, as such commitment may be (a) reduced from time to
time pursuant to Section 2.08 and (b) reduced or increased from time to time
pursuant to assignments by or to such Lender pursuant to Section 9.04. The
initial amount of each Lender's U.S. Revolving Commitment is set forth on
Schedule 2.01, or in the Assignment and Acceptance pursuant to which such Lender
shall have assumed its U.S. Revolving Commitment, as applicable. The initial
aggregate amount of the Lenders' U.S. Revolving Commitments is $30,000,000.
"U.S. REVOLVING EXPOSURE" means, with respect to any Lender at
any time, the sum at such time of (i) the outstanding principal amount of such
Lender's U.S. Revolving Loans, (ii) such Lender's U.S. LC Exposure and (iii)
such Lender's U.S. Swingline Exposure.
"U.S. REVOLVING LENDER" means a Lender with a U.S. Revolving
Commitment or, if the U.S. Revolving Commitments have terminated or expired, a
Lender with U.S. Revolving Exposure.
"U.S. REVOLVING LOAN" means a Loan made pursuant to clause (d)
of Section 2.01.
"U.S. SUBSIDIARY GUARANTEE" means the guarantee of the U.S.
Subsidiary Loan Parties with respect to the Obligations of the Company,
substantially in the form of Exhibit I, as amended and supplemented from time to
time in accordance with the terms thereof and hereof.
"U.S. SUBSIDIARY LOAN PARTY" means any Subsidiary organized
under the laws of the United States of America, any State thereof or the
District of Columbia.
"U.S. SUBSIDIARY PLEDGE AGREEMENT" means the pledge agreement
among the U.S. Subsidiaries and the Collateral Agent, substantially in the form
of Exhibit J, as amended and supplemented from time to time in accordance with
the terms thereof and hereof.
"U.S. SUBSIDIARY SECURITY AGREEMENT" means the security
agreement substantially in the form of Exhibit K, between the Collateral Agent
and the U.S. Subsidiary Loan Parties, as amended, supplemented or otherwise
modified from time to time in accordance with the terms thereof and hereof.
"U.S. SWINGLINE EXPOSURE" means, at any time, the aggregate
principal amount of all U.S. Swingline Loans outstanding at such time. The U.S.
Swingline
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36
Exposure of any Lender at any time shall be its Applicable Percentage (based on
its U.S. Revolving Commitment) of the total U.S. Swingline Exposure at such
time.
"U.S. SWINGLINE LENDER" means NBD Bank, in its capacity as
lender of U.S. Swingline Loans hereunder, or any other Lender that may from time
to time be designated to replace the then-current U.S. Swingline Lender in such
capacity pursuant to a written instrument signed by the Company and such Lender
and approved by the Administrative Agent (such approval not to be unreasonably
withheld).
"U.S. SWINGLINE LOAN" means a Loan made to the Company
pursuant to Section 2.04(c).
"U.S. TERM LOAN" means a Tranche A Term Loan or a Tranche B
Term Loan.
"WITHDRAWAL LIABILITY" means liability to a Multiemployer Plan
as a result of a complete or partial withdrawal from such Multiemployer Plan, as
such terms are defined in Part I of Subtitle E of Title IV of ERISA.
SECTION 1.02. CLASSIFICATION OF LOANS AND BORROWINGS. For
purposes of this Agreement, Loans may be classified and referred to by Class
(E.G., a "Revolving Loan") or by Type (E.G., a "Eurodollar Loan") or by Class
and Type (E.G., a "Eurodollar Revolving Loan"). Borrowings also may be
classified and referred to by Class (E.G., a "Revolving Borrowing") or by Type
(E.G., a "Eurodollar Borrowing") or by Class and Type (E.G., a "Eurodollar
Revolving Borrowing").
SECTION 1.03. TERMS GENERALLY. The definitions of terms herein
shall apply equally to the singular and plural forms of the terms defined.
Whenever the context may require, any pronoun shall include the corresponding
masculine, feminine and neuter forms. The words "include", "includes" and
"including" shall be deemed to be followed by the phrase "without limitation".
The word "will" shall be construed to have the same meaning and effect as the
word "shall". Unless the context requires otherwise (a) any definition of or
reference to any agreement, instrument or other document herein shall be
construed as referring to such agreement, instrument or other document as from
time to time amended, supplemented or otherwise modified (subject to any
restrictions on such amendments, supplements or modifications set forth herein),
(b) any reference herein to any Person shall be construed to include such
Person's successors and assigns, (c) the words "herein", "hereof" and
"hereunder", and words of similar import, shall be construed to refer to this
Agreement in its entirety and not to any particular provision hereof, (d) all
references herein to Articles, Sections, Exhibits and Schedules shall be
construed to
<PAGE> 43
37
refer to Articles and Sections of, and Exhibits and Schedules to, this Agreement
and (e) the words "asset" and "property" shall be construed to have the same
meaning and effect and to refer to any and all tangible and intangible assets
and properties, including cash, securities, accounts and contract rights.
SECTION 1.04. ACCOUNTING TERMS; GAAP. Except as otherwise
expressly provided herein, all terms of an accounting or financial nature shall
be construed in accordance with GAAP, as in effect from time to time; PROVIDED
that, if the Company notifies the Administrative Agent that the Company requests
an amendment to any provision hereof to eliminate the effect of any change
occurring after the date hereof in GAAP or in the application thereof on the
operation of such provision (or if the Administrative Agent notifies the Company
that the Required Lenders request an amendment to any provision hereof for such
purpose), regardless of whether any such notice is given before or after such
change in GAAP or in the application thereof, then such provision shall be
interpreted on the basis of GAAP as in effect and applied immediately before
such change shall have become effective until such notice shall have been
withdrawn or such provision amended in accordance herewith.
SECTION 1.05. FOREIGN CURRENCY AMOUNTS. Except as otherwise
specified herein in connection with the determination of the Dollar Equivalent
of dollars or Deutschemarks pursuant to a provision hereof requiring such a
determination or referring to such Dollar Equivalent, and except in connection
with determining the U.S. LC Exposure attributable to the Canadian Letter of
Credit, (i) the amount of any Indebtedness or Investment incurred or made in a
currency other than dollars, and the amount of any payments subsequently made or
received in respect thereof in such a foreign currency, shall, for purposes of
the provisions of Article VI hereof (including in particular any baskets or
limitations expressed in dollars contained therein), be deemed to be the dollar
equivalent of the foreign currency amount, based on prevailing spot exchange
rates in New York, at or about the close of business on the date which such
Indebtedness or Investment is incurred or made and (ii) the amount of any
Material Indebtedness or other threshold amount denominated in a foreign
currency shall for purposes of Article VI hereof and the definition of "Net
Proceeds", be deemed to be the dollar equivalent thereof (determined as
specified in clause (i) above) as of the date of occurrence of any event
specified in, or of the determination of any matter to be determined under,
Article VI for purposes of determining whether a Default has occurred.
<PAGE> 44
38
ARTICLE II
THE CREDITS
-----------
SECTION 2.01. COMMITMENTS. Subject to the terms and conditions
set forth herein, each Lender agrees (a) to make a Tranche A Term Loan to the
Company during the Effective Period, in dollars, in a principal amount not
exceeding its Tranche A Commitment, (b) to make a Tranche B Term Loan to the
Company during the Effective Period, in dollars, in a principal amount not
exceeding its Tranche B Commitment, (c) to make a German Term Loan to Holdings
during the Effective Period, in Deutschemarks, in a principal amount not
exceeding its German Term Commitment, (d) to make U.S. Revolving Loans to the
Company from time to time during the Revolving Availability Period in an
aggregate principal amount that will not result in such Lender's U.S. Revolving
Exposure exceeding such Lender's U.S. Revolving Commitment or the aggregate
amount of the Lenders' U.S. Revolving Exposures exceeding the aggregate amount
of the U.S. Revolving Commitments and (e) to make German Revolving Loans to
Holdings and, subject to prior satisfaction of the German Borrower Condition
with respect to one or more of the Subsidiary Borrowers, to each such Subsidiary
Borrower from time to time during the Revolving Availability Period in an
aggregate principal amount that will not result in such Lender's German
Revolving Exposure exceeding such Lender's German Revolving Commitment or the
aggregate amount of the Lenders' German Revolving Exposures exceeding the
aggregate amount of the German Revolving Commitments. Notwithstanding any other
provision hereof, the Tranche A Term Loans, the Tranche B Term Loans and the
German Term Loans shall be available only in a single drawing on a single date
of Borrowing on or prior to the last day of the Effective Period, and no other
Borrowing (or issuance of a Letter of Credit) may be effected hereunder prior to
the making of the Term Loans. Within the foregoing limits and subject to the
terms and conditions set forth herein, the Company and the German Borrowers as
applicable, may borrow, prepay and reborrow Revolving Loans. Amounts repaid in
respect of Term Loans may not be reborrowed.
SECTION 2.02. LOANS AND BORROWINGS. (a) Each Loan (other than
a Swingline Loan) shall be made as part of a Borrowing consisting of Loans of
the same Class and Type made by the Lenders ratably in accordance with their
respective Commitments of the applicable Class. The failure of any Lender to
make any Loan required to be made by it shall not relieve any other Lender of
its obligations hereunder; PROVIDED that the Commitments of the Lenders are
several and no Lender shall be responsible for any other Lender's failure to
make Loans as required.
(b) Subject to Section 2.14, (i) each Borrowing of U.S.
Revolving Loans or U.S. Term Loans shall be comprised entirely of ABR Loans or
Eurodollar
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39
Loans as the Company may request in accordance herewith and (ii) each Borrowing
of German Revolving Loans or German Term Loans shall be comprised entirely of
Eurodeutschemark Loans. Each Swingline Loan shall bear interest as set forth in
Section 2.13(a) or (c), as applicable. Each Lender at its option may make any
Eurocurrency Loan by causing any domestic or foreign branch or Affiliate of such
Lender to make such Loan; PROVIDED that any exercise of such option shall not
affect the obligation of any Borrower to repay such Loan in accordance with the
terms of this Agreement.
(c) At the commencement of each Interest Period for any
Eurodollar Borrowing, such Borrowing shall be in an aggregate amount that is an
integral multiple of $1,000,000 and not less than $5,000,000. At the
commencement of each Interest Period for any Eurodeutschemark Borrowing, such
Borrowing shall be in an aggregate amount that is an integral multiple of DM
1,000,000 and not less than DM 5,000,000. At the time that each ABR Revolving
Borrowing is made, such Borrowing shall be in an aggregate amount that is an
integral multiple of $1,000,000; PROVIDED that an ABR Revolving Borrowing may be
in an aggregate amount that is equal to the entire unused balance of the total
U.S. Revolving Commitments or that is required to finance the reimbursement of a
U.S. LC Disbursement as contemplated by Section 2.05(e). At the time that each
Borrowing of German Revolving Loans is made, such Borrowing shall be in an
aggregate amount that is an integral multiple of DM 1,000,000; PROVIDED that a
Borrowing of German Revolving Loans may be in an aggregate amount (i) that is
equal to the entire unused balance of the total German Revolving Commitments, or
(ii) that is required to finance the reimbursement of a German LC Disbursement
as contemplated by Section 2.05(e). Each German Swingline Loan shall be in an
amount that is an integral multiple of DM 250,000, and each U.S. Swingline Loan
shall be an amount that is an integral multiple of $250,000. Borrowings of more
than one Type and Class may be outstanding at the same time; PROVIDED that there
shall not at any time be more than a total of 20 Eurodollar Borrowings and
Eurodeutschemark Borrowings in the aggregate outstanding.
(d) Notwithstanding any other provision of this Agreement, no
Borrower shall be entitled to request, or to elect to convert or continue, any
Borrowing if the Interest Period requested with respect thereto would end after
the Revolving Maturity Date, in the case of Revolving Loans, Tranche A Maturity
Date, in the case of Tranche A Term Loans, Tranche B Maturity Date, in the case
of Tranche B Term Loans, or German Term Loan Maturity Date, in the case of
German Term Loans.
SECTION 2.03. REQUESTS FOR BORROWINGS. To request a Revolving
Borrowing or Term Borrowing, a Borrower shall notify the Administrative Agent of
such request by telephone or telecopy (a) in the case of a Eurodollar Borrowing,
not
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40
later than 11:00 a.m., Detroit time, three Business Days before the date of the
proposed Borrowing, (b) in the case of an ABR Borrowing, not later than 11:00
a.m., Detroit time, one Business Day before the date of the proposed Borrowing,
or (c) in the case of a Eurodeutschemark Borrowing, not later than 11:00 a.m.,
London time, three Business Days before the date of the proposed Borrowing;
PROVIDED that any such notice of an ABR Revolving Borrowing to finance the
reimbursement of a U.S. LC Disbursement as contemplated by Section 2.05(e) may
be given not later than 10:00 a.m., Detroit time, on the date of the proposed
Borrowing. Each such telephonic Borrowing Request shall be irrevocable and shall
be confirmed promptly by hand delivery or telecopy to the Administrative Agent
of a written Borrowing Request in a form approved by the Administrative Agent
and signed by the applicable Borrower. Each such telephonic and written
Borrowing Request shall specify the following information in compliance with
Section 2.02:
(i) the identity of the Borrower and whether the requested
Borrowing is to be a U.S. Revolving Borrowing, German Revolving
Borrowing, Tranche A Term Borrowing, Tranche B Term Borrowing or
German Term Borrowing;
(ii) the aggregate amount of such Borrowing expressed in dollars
or, in the case of a German Revolving Borrowing or German Term
Borrowing, in Deutschemarks;
(iii) the date of such Borrowing, which shall be a Business Day;
(iv) whether such Borrowing is to be an ABR Borrowing, a
Eurodollar Borrowing or a Eurodeutschemark Borrowing;
(v) in the case of a Eurocurrency Borrowing, the initial Interest
Period to be applicable thereto, which shall be a period contemplated
by the definition of the term "Interest Period", and the currency of
such Borrowing, which shall be dollars in the case of a Eurodollar
Borrowing or Deutschemarks in the case of a Eurodeutschemark
Borrowing; and
(vi) the location and number of the relevant Borrower's account
to which funds are to be disbursed, which shall comply with the
requirements of Section 2.06.
If no election as to the Type of Borrowing is specified, then the requested
Borrowing shall be an ABR Borrowing if denominated in dollars or a
Eurodeutschemark Borrowing if denominated in Deutschemarks. If no Interest
Period is specified with respect to any requested Eurocurrency Borrowing, then
the relevant Borrower shall be deemed to have selected an Interest Period of one
month's duration. Promptly
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41
following receipt of a Borrowing Request in accordance with this Section, the
Administrative Agent shall advise each Lender of the details thereof and of the
amount of such Lender's Loan to be made as part of the requested Borrowing.
SECTION 2.04. SWINGLINE LOANS. (a) GERMAN SWINGLINE LOANS.
Subject to the terms and conditions set forth herein, the German Swingline
Lender agrees to make German Swingline Loans to Holdings or, subject to the
prior satisfaction of the German Borrower Condition with respect to one or more
Subsidiary Borrowers, to each of such Subsidiary Borrowers from time to time
during the Revolving Availability Period, in an aggregate principal amount at
any time outstanding that will not result in (i) the aggregate principal amount
of outstanding German Swingline Loans exceeding DM 15,000,000 or (ii) the sum of
the total German Revolving Exposures exceeding the total German Revolving
Commitments. Within the foregoing limits and subject to the terms and conditions
set forth herein, each German Borrower may borrow, prepay and reborrow German
Swingline Loans.
(b) REQUESTS FOR GERMAN SWINGLINE LOANS. To request a German
Swingline Loan, a German Authorized Person of a German Borrower shall notify the
German Swingline Lender of such request by telephone or telecopy, not later than
11:00 a.m., Frankfurt time (which telephonic request shall be confirmed promptly
thereafter by such German Borrower by telecopy), on the day of a proposed German
Swingline Loan. Each such notice shall be irrevocable and shall specify the
requested date (which shall be a Business Day) and amount of the requested
German Swingline Loan. The German Swingline Lender will promptly advise the
Administrative Agent of any such notice received from a German Borrower. The
German Swingline Lender shall make each German Swingline Loan available to the
relevant German Borrower by means of a credit to the general deposit account of
such Borrower with the German Swingline Lender (or, in the case of a German
Swingline Loan made to finance the reimbursement of a German LC Disbursement as
provided in Section 2.05(e), by remittance to the German Issuing Bank) by
3:00 p.m., Frankfurt time, on the requested date of such German Swingline Loan.
(c) U.S. SWINGLINE LOANS. Subject to the terms and conditions
set forth herein, the U.S. Swingline Lender agrees to make U.S. Swingline Loans
to the Company from time to time during the Revolving Availability Period, in an
aggregate principal amount at any time outstanding that will not result in (i)
the aggregate principal amount of outstanding U.S. Swingline Loans exceeding
$10,000,000 or (ii) the sum of the total U.S. Revolving Exposures exceeding the
total U.S. Revolving Commitments. Within the foregoing limits and subject to the
terms and conditions set forth herein, the Company may borrow, prepay and
reborrow U.S. Swingline Loans.
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42
(d) REQUESTS FOR U.S. SWINGLINE LOANS. To request a U.S.
Swingline Loan, a Financial Officer of the Company shall notify the
Administrative Agent of such request by telephone or telecopy, not later than
11:00 a.m., Detroit time (which telephonic request shall be confirmed promptly
thereafter by the Company by telecopy), on the day of a proposed U.S. Swingline
Loan. Each such notice shall be irrevocable and shall specify the requested date
(which shall be a Business Day) and amount of the requested U.S. Swingline Loan.
The Administrative Agent will promptly advise the U.S. Swingline Lender of any
such notice received from the Company. The U.S. Swingline Lender shall make each
U.S. Swingline Loan available to the Company by means of a credit to the general
deposit account of the Company with the U.S. Swingline Lender (or, in the case
of a U.S. Swingline Loan made to finance the reimbursement of a U.S. LC
Disbursement as provided in Section 2.05(e), by remittance to the relevant U.S.
Issuing Bank) by 3:00 p.m., Detroit time, on the requested date of such U.S.
Swingline Loan.
(e) SWINGLINE PARTICIPATIONS. The U.S. Swingline Lender or the
German Swingline Lender, as the case may be, may by written notice given to the
Administrative Agent (i) not later than 10:00 a.m., Detroit time, on any
Business Day, in the case of U.S. Swingline Loans, or (ii) 10:00 a.m., Frankfurt
time, on any Business Day in Frankfurt, in the case of German Swingline Loans,
require the U.S. Revolving Lenders or the German Revolving Lenders, as
applicable, to acquire participations on such Business Day in all or a portion
of the outstanding U.S. Swingline Loans or German Swingline Loans, as
applicable. Such notice shall specify the aggregate amount of Swingline Loans in
which Revolving Lenders will participate. Promptly upon receipt of such notice,
the Administrative Agent will give notice thereof to each affected Revolving
Lender, specifying in such notice such Lender's Applicable Percentage of such
Swingline Loan or Loans (based on such Lender's U.S. Revolving Commitment or
German Revolving Commitment, as the case may be). Each Revolving Lender hereby
absolutely and unconditionally agrees, upon receipt of notice as provided above,
to pay to the Administrative Agent, for the account of the relevant Swingline
Lender, such Lender's Applicable Percentage of such Swingline Loan or Loans.
Each Revolving Lender acknowledges and agrees that its obligation to acquire
participations in Swingline Loans pursuant to this paragraph is absolute and
unconditional and shall not be affected by any circumstance whatsoever,
including the occurrence and continuance of a Default or reduction or
termination of the Commitments, and that each such payment shall be made without
any offset, abatement, withholding or reduction whatsoever. Each Revolving
Lender shall comply with its obligation under this paragraph by wire transfer of
immediately available funds of the appropriate currency, in the same manner as
provided in Section 2.06 with respect to Loans made by such Lender (and Section
2.06 shall apply, MUTATIS MUTANDIS, to the payment obligations of the Revolving
Lenders), and the Administrative Agent shall promptly pay to the relevant
Swingline Lender the
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43
amounts so received by it from the relevant Revolving Lenders. The
Administrative Agent shall notify the Company and the relevant German Borrower,
if applicable, of any participations in any Swingline Loan acquired pursuant to
this paragraph, and thereafter payments in respect of such Swingline Loan shall
be made to the Administrative Agent and not to the relevant Swingline Lender.
Any amounts received by a Swingline Lender from a Borrower (or other party on
behalf of such Borrower) in respect of a Swingline Loan after receipt by such
Swingline Lender of the proceeds of a sale of participations therein shall be
promptly remitted to the Administrative Agent; any such amounts received by the
Administrative Agent shall be promptly remitted by the Administrative Agent to
the Revolving Lenders that shall have made their payments pursuant to this
paragraph and to the relevant Swingline Lender, as their interests may appear.
The purchase of participations in a Swingline Loan pursuant to this paragraph
shall not relieve the relevant Borrower of any default in the payment thereof.
(f) CONDITIONS. Notwithstanding anything herein to the
contrary, a Swingline Lender shall not make any Swingline Loans at any time such
Swingline Lender is aware that the conditions to the making of such Swingline
Loan set forth in Section 4.02 have not been satisfied unless such conditions
shall have been waived in accordance with this Agreement.
(g) In the event the U.S. Swingline Lender or the German
Swingline Lender is at any time replaced by another Lender hereunder as
contemplated by the definitions of such terms herein, the Company or Holdings,
as the case may be, will on the effective date of such replacement, repay in
full all outstanding Swingline Loans of the replaced Swingline Lender, and all
accrued and unpaid interest thereon.
SECTION 2.05. LETTERS OF CREDIT. (a) GENERAL. Subject to the
terms and conditions set forth herein, each of the Company and Holdings (each,
an "LC Borrower") may request the issuance of Letters of Credit for its own
account, in a form reasonably acceptable to the Administrative Agent and the
U.S. Issuing Bank or German Issuing Bank, as applicable, at any time and from
time to time during the Revolving Availability Period. The Letters of Credit
heretofore issued by Mellon Bank, N.A., for the account of the Company which are
listed in Schedule 2.05(a) (and any successive renewals from time to time
thereof) shall, from and after the date of the initial Borrowing hereunder, be
deemed to be U.S. Letters of Credit issued pursuant to this Agreement in respect
of which Mellon Bank, N.A., will be a U.S. Issuing Bank hereunder. The Canadian
Letter of Credit (and any successive renewals from time to time thereof) shall,
from and after the date of the initial Borrowing hereunder, be deemed to be U.S.
Letters issued pursuant to this Agreement by the U.S. Issuing Bank. In the event
of any inconsistency between the terms and conditions of this Agreement and the
terms and conditions of any form of letter of
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44
credit application or other agreement submitted by an LC Borrower to, or entered
into by an LC Borrower with, the Issuing Bank relating to any Letter of Credit,
the terms and conditions of this Agreement shall control.
(b) NOTICE OF ISSUANCE, AMENDMENT, RENEWAL, EXTENSION; CERTAIN
CONDITIONS. To request the issuance of a Letter of Credit (or the amendment,
renewal or extension of an outstanding Letter of Credit), an LC Borrower shall
hand deliver or telecopy (or transmit by electronic communication, if
arrangements for doing so have been approved by the relevant Issuing Bank) to
the U.S. Issuing Bank, in the case of the Company, or the German Issuing Bank,
in the case of Holdings, and the Administrative Agent (reasonably in advance of
the requested date of issuance, amendment, renewal or extension) a notice
requesting the issuance of a Letter of Credit, or identifying the Letter of
Credit to be amended, renewed or extended, the date of issuance, amendment,
renewal or extension, the date on which such Letter of Credit is to expire
(which shall comply with paragraph (c) of this Section), the amount of such
Letter of Credit (which shall be payable in dollars, in the case of a U.S.
Letter of Credit, and be payable in Deutschemarks, in the case of a German
Letter of Credit), the name and address of the beneficiary thereof and such
other information as shall be necessary to prepare, amend, renew or extend such
Letter of Credit. An LC Borrower shall submit a letter of credit application on
such Issuing Bank's standard form in connection with any request for a Letter of
Credit. A Letter of Credit shall be issued, amended, renewed or extended only if
(and upon issuance, amendment, renewal or extension of each Letter of Credit the
relevant LC Borrower shall be deemed to represent and warrant that), after
giving effect to such issuance, amendment, renewal or extension (i) in the case
of U.S. Letters of Credit, (A) the U.S. LC Exposure shall not exceed $20,000,000
and (B) the total U.S. Revolving Exposures shall not exceed the total U.S.
Revolving Commitments and (ii) in the case of German Letters of Credit, (X) the
German LC Exposure shall not exceed DM 30,000,000 until the Deutsche Bank
Termination Date and DM 10,000,000 thereafter and (Y) the total German Revolving
Exposures shall not exceed the total German Revolving Commitments. The relevant
Issuing Bank shall notify the Administrative Agent of any issuance or amendment
of any Letter of Credit within five Business Days of such event.
(c) EXPIRATION DATE. Each Letter of Credit shall expire at or
prior to the close of business on the earlier of (i) the date one year after the
date of the issuance of such Letter of Credit (or, in the case of any renewal or
extension thereof, one year after such renewal or extension) and (ii) the date
that is five Business Days prior to the Revolving Maturity Date.
(d) PARTICIPATIONS. By the issuance of a Letter of Credit (and
any amendment to a Letter of Credit increasing the amount thereof) and without
any
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45
further action on the part of the Issuing Bank or the Lenders, each Issuing Bank
hereby grants to each U.S. Revolving Lender, in the case of a U.S. Letter of
Credit, and each German Revolving Lender, in the case of a German Letter of
Credit, and each U.S. Revolving Lender or German Revolving Lender, as the case
may be, hereby acquires from each Issuing Bank, a participation in such Letter
of Credit equal to such Lender's Applicable Percentage (based on its U.S.
Revolving Commitment or its German Revolving Commitment, as appropriate) of the
aggregate amount available to be drawn under such Letter of Credit. In
consideration and in furtherance of the foregoing, each such U.S. Revolving
Lender or German Revolving Lender, as the case may be, hereby absolutely and
unconditionally agrees to pay to the Administrative Agent, for the account of
the relevant Issuing Bank, such Lender's Applicable Percentage of each LC
Disbursement in respect of such U.S. Letter of Credit or German Letter of
Credit, as applicable, made by such Issuing Bank and not reimbursed by an LC
Borrower on the date due as provided in paragraph (e) of this Section, or of any
reimbursement payment required to be refunded to an LC Borrower for any reason.
Each Lender acknowledges and agrees that its obligation to acquire
participations pursuant to this paragraph in respect of Letters of Credit is
absolute and unconditional and shall not be affected by any circumstance
whatsoever, including any amendment, renewal or extension of any Letter of
Credit or the occurrence and continuance of a Default or reduction or
termination of the Commitments, and that each such payment shall be made without
any offset, abatement, withholding or reduction whatsoever.
(e) REIMBURSEMENT. If an Issuing Bank shall make any LC
Disbursement in respect of a Letter of Credit, the relevant LC Borrower shall
reimburse such LC Disbursement by paying to the Administrative Agent an amount
equal to such LC Disbursement not later than 11:00 a.m. (in Detroit, Michigan or
Frankfurt, Germany, as applicable), on the date that such LC Disbursement is
made, if such LC Borrower shall have received notice of such LC Disbursement
prior to 10:00 a.m., in Detroit, Michigan or Frankfurt, Germany, as the case may
be, on such date, or, if such notice has not been received by such LC Borrower
prior to such time on such date, then not later than 11:00 a.m., Detroit time,
or Frankfurt time, as applicable, on (i) the Business Day that such LC Borrower
actually receives such notice, if such notice is received prior to 10:00 a.m. on
the day of receipt, or (ii) the Business Day immediately following the day that
such LC Borrower receives such notice, if such notice is not received prior to
such time on the day of receipt; PROVIDED that the Company or Holdings may,
subject to the conditions to borrowing set forth herein, request in accordance
with Section 2.03 or Section 2.04, as the case may be, that such payment be
financed with an ABR Revolving Borrowing, a U.S. Swingline Borrowing or a German
Swingline Borrowing, as the case may be, in an equivalent amount and, to the
extent so financed, the obligation to make such payment shall be discharged and
replaced by the resulting ABR Revolving Loans, U.S.
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46
Swingline Loan or German Swingline Loan. Notwithstanding the foregoing, any LC
Disbursement in respect of the Canadian LC shall be repaid in Canadian dollars,
PROVIDED, that upon any failure to make such repayment in Canadian dollars when
due, such repayment obligation shall be converted into a dollar obligation at
the prevailing dollar spot exchange rates at the close of business in New York
City on the date reimbursement is due. If an LC Borrower fails to make such
payment when due, the Administrative Agent shall notify each U.S. Revolving
Lender, in the case of a U.S. Letter of Credit, and each German Revolving
Lender, in the case of a German Letter of Credit, of the applicable LC
Disbursement, the payment then due from such LC Borrower in respect thereof and
such Lender's Applicable Percentage thereof. Promptly following receipt of such
notice, each such Revolving Lender shall pay to the Administrative Agent its
Applicable Percentage of the payment then due from the relevant LC Borrower, in
the same currency payable by such LC Borrower (giving effect to any conversion
of a reimbursement obligation in respect of the Canadian Letter of Credit to a
dollar obligation) and in the same manner as provided in Section 2.06 with
respect to Loans made by such Lender (and Section 2.06 shall apply, MUTATIS
MUTANDIS, to the payment obligations of the Revolving Lenders), and the
Administrative Agent shall promptly pay to the relevant Issuing Bank the amounts
so received by it from the relevant Revolving Lenders. Promptly following
receipt by the Administrative Agent of any payment from an LC Borrower pursuant
to this paragraph, the Administrative Agent shall distribute such payment to the
relevant Issuing Bank or, to the extent that Revolving Lenders have made
payments pursuant to this paragraph to reimburse such Issuing Bank, then to such
Lenders and such Issuing Bank as their interests may appear. Any payment made by
a Revolving Lender pursuant to this paragraph to reimburse an Issuing Bank for
any LC Disbursement (other than the funding of ABR Revolving Loans or a
Swingline Loan as contemplated above) shall not constitute a Loan and shall not
relieve any LC Borrower of its obligation to reimburse such LC Disbursement.
(f) OBLIGATIONS ABSOLUTE. An LC Borrower's obligation to
reimburse LC Disbursements as provided in paragraph (e) of this Section shall be
absolute, unconditional and irrevocable, and shall be performed strictly in
accordance with the terms of this Agreement under any and all circumstances
whatsoever and irrespective of (i) any lack of validity or enforceability of any
Letter of Credit or this Agreement, or any term or provision therein, (ii) any
draft or other document presented under a Letter of Credit proving to be forged,
fraudulent or invalid in any respect or any statement therein being untrue or
inaccurate in any respect, (iii) payment by an Issuing Bank under a Letter of
Credit against presentation of a draft or other document that does not comply
with the terms of such Letter of Credit, or (iv) any other event or circumstance
whatsoever, whether or not similar to any of the foregoing, that might, but for
the provisions of this Section, constitute a legal or equitable discharge of, or
provide a right of setoff against, any LC Borrower's obligations hereunder.
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47
Neither the Administrative Agent, the Lenders nor the Issuing Banks, nor any of
their Related Parties, shall have any liability or responsibility by reason of
or in connection with the issuance or transfer of any Letter of Credit or any
payment or failure to make any payment thereunder (irrespective of any of the
circumstances referred to in the preceding sentence), or any error, omission,
interruption, loss or delay in transmission or delivery of any draft, notice or
other communication under or relating to any Letter of Credit (including any
document required to make a drawing thereunder), any error in interpretation of
technical terms or any consequence arising from causes beyond the control of an
Issuing Bank; PROVIDED that nothing in this paragraph (f) shall be construed to
excuse an Issuing Bank from liability to any LC Borrower to the extent of any
direct damages (as opposed to consequential damages, claims in respect of which
are hereby waived by the LC Borrowers to the extent permitted by applicable law)
suffered by such LC Borrower that are caused by an Issuing Bank's failure to
exercise care when determining whether drafts and other documents presented
under a Letter of Credit comply with the terms thereof. The parties hereto
expressly agree that, in the absence of gross negligence or wilful misconduct on
the part of an Issuing Bank (as finally determined by a court of competent
jurisdiction), such Issuing Bank shall be deemed to have exercised care in each
such determination. In furtherance of the foregoing and without limiting the
generality thereof, the parties agree that, with respect to documents presented
which appear on their face to be in substantial compliance with the terms of a
Letter of Credit, an Issuing Bank may, in its sole discretion, either accept and
make payment upon such documents without responsibility for further
investigation, regardless of any notice or information to the contrary, or
refuse to accept and make payment upon such documents if such documents are not
in strict compliance with the terms of such Letter of Credit.
(g) DISBURSEMENT PROCEDURES. An Issuing Bank shall, promptly
following its receipt thereof, examine all documents purporting to represent a
demand for payment under a Letter of Credit. An Issuing Bank shall promptly
notify the Administrative Agent and the relevant LC Borrower by telephone
(confirmed by telecopy) of such demand for payment and whether such Issuing
Bank has made or will make an LC Disbursement thereunder; PROVIDED that any
failure to give or delay in giving such notice shall not relieve such LC
Borrower of its obligation to reimburse such Issuing Bank and the Revolving
Lenders with respect to any such LC Disbursement.
(h) INTERIM INTEREST. If an Issuing Bank shall make any LC
Disbursement, then, unless the relevant LC Borrower shall reimburse such LC
Disbursement in full on the date such LC Disbursement is made, the unpaid amount
thereof shall bear interest, for each day from and including the date such LC
Disbursement is made to but excluding the date that such LC Borrower reimburses
such LC Disbursement, at (i) the rate per annum then applicable to ABR
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Revolving Loans, in the case of U.S. LC Disbursements and (ii) the rate per
annum then applicable to German Swingline Loans, in the case of German LC
Disbursements; PROVIDED that, if an LC Borrower fails to reimburse such LC
Disbursement when due pursuant to paragraph (e) of this Section, then Section
2.13(d) shall apply. Interest accrued pursuant to this paragraph shall be for
the account of the relevant Issuing Bank, except that interest accrued on and
after the date of payment by any Revolving Lender pursuant to paragraph (e) of
this Section to reimburse an Issuing Bank shall be for the account of such
Lender to the extent of such payment.
(i) REPLACEMENT OF AN ISSUING BANK. An Issuing Bank may be
replaced at any time by written agreement among the relevant LC Borrower, the
Administrative Agent, the replaced Issuing Bank and the successor Issuing Bank.
The Administrative Agent shall notify the Lenders of any such replacement of an
Issuing Bank, or of the appointment of any additional Issuing Bank as
contemplated hereby (which shall not require the consent of any other Issuing
Bank). At the time any such replacement of an Issuing Bank shall become
effective, the relevant LC Borrower shall pay all unpaid fees accrued for the
account of the replaced Issuing Bank pursuant to Section 2.12(b). From and after
the effective date of any such replacement, (i) the successor Issuing Bank shall
have all the rights and obligations of an Issuing Bank under this Agreement with
respect to Letters of Credit to be issued thereafter and (ii) references herein
to the term "Issuing Bank" shall be deemed to refer to such successor or to any
previous Issuing Bank, or to such successor and all previous Issuing Banks, as
the context shall require. After the replacement of an Issuing Bank hereunder,
the replaced Issuing Bank shall remain a party hereto and shall continue to have
all the rights and obligations of an Issuing Bank under this Agreement with
respect to Letters of Credit issued by it prior to such replacement, but shall
not be required to issue additional Letters of Credit.
(j) CASH COLLATERALIZATION. If any Event of Default shall
occur and be continuing, on the Business Day that an LC Borrower receives notice
from the Administrative Agent or the Required Lenders (or, if the maturity of
the Loans has been accelerated, Revolving Lenders with U.S. LC Exposure or
German LC Exposure, as applicable, representing greater than 50% of the total
U.S. LC Exposure or German LC Exposure, as applicable) demanding the deposit of
cash collateral pursuant to this paragraph, such LC Borrower shall deposit in an
account with the Administrative Agent, in the name of the Administrative Agent
and for the benefit of the Lenders, an amount in cash equal to 105% of the U.S.
LC Exposure or German LC Exposure, as applicable, (in dollars or Deutschemarks,
as applicable) as of such date plus any accrued and unpaid interest thereon;
PROVIDED that the obligation to deposit such cash collateral shall become
effective immediately, and such deposits shall become immediately due and
payable, without demand or other notice of any
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kind, upon the occurrence of any Event of Default with respect to either LC
Borrower described in clause (h) or (i) of Article VII. Each such deposit shall
be held by the Administrative Agent as collateral for the payment and
performance of the obligations of LC Borrowers under this Agreement. The
Administrative Agent shall have exclusive dominion and control, including the
exclusive right of withdrawal, over such account. Other than any interest earned
on the investment of such deposits, which investments shall be made at the
option and sole discretion of the Administrative Agent and at the risk and
expense of the relevant LC Borrower, such deposits shall not bear interest;
PROVIDED that the Administrative Agent shall invest such deposits solely in
Permitted Investments. Interest or profits, if any, on such investments shall
accumulate in such account. Moneys in the applicable account shall be applied by
the Administrative Agent to reimburse the relevant Issuing Bank for LC
Disbursements for which it has not been reimbursed and, to the extent not so
applied, shall be held for the satisfaction of the reimbursement obligations of
the relevant LC Borrower for the LC Exposure at such time or, if the maturity of
the Loans has been accelerated (but subject to the consent of Revolving Lenders
with LC Exposure representing greater than 50% of the total LC Exposure), be
applied to satisfy other obligations of the LC Borrowers under this Agreement.
If an LC Borrower is required to provide an amount of cash collateral hereunder
as a result of the occurrence of an Event of Default, such amount (to the extent
not applied as aforesaid) shall be returned to such LC Borrower within three
Business Days after all Events of Default have been cured or waived.
SECTION 2.06. FUNDING OF BORROWINGS. (a) Each Lender shall
make each Loan to be made by it hereunder on the proposed date thereof by wire
transfer of immediately available funds (i) by 11:00 a.m., Detroit time, in the
case of U.S. Term Loans or U.S. Revolving Loans, to the account of the
Administrative Agent most recently designated by it for such purpose by notice
to the Lenders, and (ii) by 11:00 a.m., Frankfurt time, in the case of German
Term Loans or German Revolving Loans, to the account of the Administrative Agent
most recently designated by it for such purpose by notice to the Lenders;
PROVIDED that Swingline Loans shall be made as provided in Section 2.04. The
Administrative Agent will make such Loans available to the relevant Borrower by
promptly crediting the amounts so received, in like funds, to an account of such
Borrower maintained with the Administrative Agent in Detroit, Michigan (in the
case of dollar Loans) or in Frankfurt, Germany (in the case of Deutschemark
Loans), in each case designated by such Borrower in the applicable Borrowing
Request; PROVIDED that Loans made to finance the reimbursement of an LC
Disbursement as provided in Section 2.05(e) shall be remitted by the
Administrative Agent directly to the relevant Issuing Bank.
(b) Unless the Administrative Agent shall have received notice
from a Lender prior to the proposed date of any Borrowing that such Lender will
not make
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50
available to the Administrative Agent such Lender's share of such Borrowing, the
Administrative Agent may assume that such Lender has made such share available
on such date in accordance with paragraph (a) of this Section and may, in
reliance upon such assumption, make available to the relevant Borrower a
corresponding amount. In such event, if a Lender has not in fact made its share
of the applicable Borrowing available to the Administrative Agent, then the
applicable Lender and each Borrower severally agree to pay to the Administrative
Agent forthwith on demand such corresponding amount with interest thereon, for
each day from and including the date such amount is made available to the
Borrower to but excluding the date of payment to the Administrative Agent, at
(i) in the case of such Lender, (x) the Federal Funds Effective Rate (in the
case of a Borrowing in dollars) and (y) the rate determined by the
Administrative Agent to be the cost of funding such amount (in the case of a
Borrowing in Deutschemarks) or (ii) in the case of such Borrower, the interest
rate applicable to the subject Loan. If such Lender pays such amount to the
Administrative Agent, then such amount shall constitute such Lender's Loan
included in such Borrowing.
SECTION 2.07. INTEREST ELECTIONS. (a) Each Revolving Borrowing
and Term Borrowing initially shall be of the Type specified in the applicable
Borrowing Request and, in the case of a Eurocurrency Borrowing, shall have an
initial Interest Period as specified in such Borrowing Request. Thereafter, (i)
the Company may elect to convert an ABR Borrowing or a Eurodollar Borrowing to a
Borrowing of the other Type or to continue such Borrowing as a Borrowing of the
same Type, and (ii) in the case of a Eurocurrency Borrowing, the relevant
Borrower may elect Interest Periods therefor, all as provided in this Section. A
Borrower may elect different options with respect to different portions of the
affected Borrowing, in which case each such portion shall be allocated ratably
among the Lenders holding the Loans comprising such Borrowing, and the Loans
comprising each such portion shall be considered a separate Borrowing. This
Section shall not apply to Swingline Borrowings, which may not be converted or
continued. Notwithstanding any contrary provision herein, this Section shall not
be construed to permit any Borrower to (i) change the currency of any Borrowing
or (ii) convert any Deutschemark Borrowing to an ABR Borrowing or a Eurodollar
Borrowing.
(b) To make an election pursuant to this Section, a Borrower
shall notify the Administrative Agent of such election by telephone by the time
that a Borrowing Request would be required under Section 2.03 if such Borrower
were requesting a Revolving Borrowing of the Type resulting from such election
to be made on the effective date of such election. Each such telephonic Interest
Election Request shall be irrevocable and shall be confirmed promptly by hand
delivery or telecopy to the Administrative Agent of a written Interest Election
Request in a form approved by the Administrative Agent and signed by the
relevant Borrower.
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51
(c) Each telephonic and written Interest Election Request
shall specify the following information in compliance with Section 2.02 and
paragraph (f) of this Section:
(i) the Borrowing to which such Interest Election Request applies
and, if different options are being elected with respect to different
portions thereof, the portions thereof to be allocated to each
resulting Borrowing (in which case the information to be specified
pursuant to clauses (iii) and (iv) below shall be specified for each
resulting Borrowing);
(ii) the effective date of the election made pursuant to such
Interest Election Request, which shall be a Business Day;
(iii) in the case of ABR Borrowings or Eurodollar Borrowings,
whether the resulting Borrowing is to be an ABR Borrowing or a
Eurodollar Borrowing; and
(iv) if the resulting Borrowing is a Eurocurrency Borrowing, the
Interest Period to be applicable thereto after giving effect to such
election, which shall be a period contemplated by the definition of
the term "Interest Period".
If any such Interest Election Request requests a Eurocurrency Borrowing but does
not specify an Interest Period, then the Borrower shall be deemed to have
selected an Interest Period of one month's duration.
(d) Promptly following receipt of an Interest Election
Request, the Administrative Agent shall advise each Lender of the details
thereof and of such Lender's portion of each resulting Borrowing.
(e) If a Borrower fails to deliver a timely Interest Election
Request with respect to a Eurocurrency Borrowing prior to the end of the
Interest Period applicable thereto, then, unless such Borrowing is repaid as
provided herein, at the end of such Interest Period such Borrowing, if a
Eurodollar Borrowing, shall be converted to an ABR Borrowing and if a
Eurodeutschemark Borrowing shall become due and payable on the last day of the
then-current Interest Period. Notwithstanding any contrary provision hereof, if
an Event of Default has occurred and is continuing and the Administrative Agent,
at the request of the Required Lenders, so notifies the Company, then, so long
as an Event of Default is continuing (i) no outstanding Borrowing may be
converted to or continued as a Eurodollar Borrowing and (ii) unless repaid, each
Eurodollar Borrowing shall be converted to an ABR Borrowing at the end of the
Interest Period applicable thereto.
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52
(f) A Borrowing of any Class may not be converted to or
continued as a Eurodollar Borrowing if after giving effect thereto (i) the
Interest Period therefor would commence before and end after a date on which any
principal of the Loans of such Class is scheduled to be repaid and (ii) the sum
of the aggregate principal amount of outstanding Eurodollar Borrowings of such
Class with Interest Periods ending on or prior to such scheduled repayment date
plus the aggregate principal amount of outstanding ABR Borrowings of such Class
would be less than the aggregate principal amount of Loans of such Class
required to be repaid on such scheduled repayment date.
SECTION 2.08. TERMINATION AND REDUCTION OF COMMITMENTS. (a)
Unless previously terminated, (i) the Tranche A Commitments, Tranche B
Commitments and German Term Commitments shall terminate at 5:00 p.m., Detroit
time, on the last day of the Effective Period and (ii) the Revolving Commitments
shall terminate on the Revolving Maturity Date.
(b) The Company may at any time terminate, or from time to
time reduce, the Commitments of any Class; PROVIDED that (i) each reduction of
the Commitments of any Class shall be in an amount that is (x) an integral
multiple of $1,000,000 and not less than $5,000,000, in the case of Tranche A
Commitments, Tranche B Commitments or U.S. Revolving Commitments, or (y) an
integral multiple of DM 1,000,000 and not less than DM 5,000,000, in the case of
German Term Commitments or German Revolving Commitments, (ii) the Company shall
not terminate or reduce any U.S. Revolving Commitments if, after giving effect
to any concurrent prepayment of the Revolving Loans in accordance with Section
2.11, the sum of the U.S. Revolving Exposures would exceed the total U.S.
Revolving Commitments and (iii) the Company shall not terminate or reduce any
German Revolving Commitments if, after giving effect to any concurrent
prepayment of the German Revolving Loans in accordance with Section 2.11, the
sum of the German Revolving Exposures would exceed the total German Revolving
Commitments.
(c) In the event and on each occasion that any mandatory
prepayment of Loans is required pursuant to Section 2.11(b), (c) or (d) in an
amount that exceeds the then outstanding principal amount, if any, of all Term
Loans hereunder, then the German Revolving Commitments and/or the U.S. Revolving
Commitments shall be automatically and permanently reduced on the date any such
prepayment would be required under Section 2.11 in an amount equal to such
excess (or in an amount equal to the full amount of such required prepayment if
no Term Loans are outstanding), or the Dollar Equivalent thereof, as the case
may be. Any such reduction shall be allocated, in the case of a Prepayment Event
affecting a German Borrower, first to the German Revolving Commitments, and
otherwise shall be allocated between the U.S. Revolving Commitments and the
German Revolving Commitments as the
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53
Company, after consultation with the Administrative Agent, shall in its sole
discretion determine.
(d) The Company shall notify the Administrative Agent of any
election to terminate or reduce the Commitments under paragraph (b) of this
Section at least three Business Days prior to the effective date of such
termination or reduction, specifying such election and the effective date
thereof. Promptly following receipt of any notice, the Administrative Agent
shall advise the affected Lenders of the contents thereof. Each notice delivered
by the Company pursuant to this Section shall be irrevocable; PROVIDED that a
notice of termination of any Revolving Commitments delivered by the Company may
state that such notice is conditioned upon the effectiveness of other credit
facilities, in which case such notice may be revoked by the Company (by notice
to the Administrative Agent on or prior to the specified effective date) if such
condition is not satisfied. Any termination or reduction of the Commitments of
any Class shall be permanent. Each reduction of the Commitments of any Class
shall be made ratably among the Lenders in accordance with their respective
Commitments of such Class.
SECTION 2.09. REPAYMENT OF LOANS; EVIDENCE OF DEBT. (a) Each
Borrower hereby unconditionally promises to pay (i) to the Administrative Agent
for the account of each Lender the then unpaid principal amount of each
Revolving Loan of such Borrower on the Revolving Maturity Date, (ii) to the
Administrative Agent for the account of each Lender the then unpaid principal
amount of each Term Loan of such Borrower as provided in Section 2.10 and (iii)
to each Swingline Lender the then unpaid principal amount of each Swingline Loan
on the Revolving Maturity Date.
(b) Each Lender shall maintain in accordance with its usual
practice an account or accounts evidencing the indebtedness of each Borrower to
such Lender resulting from each Loan made by such Lender, including the amounts
of principal and interest payable and paid to such Lender from time to time
hereunder.
(c) The Administrative Agent shall maintain accounts in which
it shall record (i) the amount of each Loan made hereunder, the Class, Type and
currency thereof and the Interest Period applicable thereto, (ii) the amount of
any principal or interest due and payable or to become due and payable from each
Borrower to each Lender hereunder and (iii) the amount of any sum received by
the Administrative Agent hereunder for the account of the Lenders and each
Lender's share thereof.
(d) The entries made in the accounts maintained pursuant to
paragraph (b) or (c) of this Section shall be PRIMA FACIE evidence of the
existence and amounts of the obligations recorded therein; PROVIDED that the
failure of any Lender
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54
or the Administrative Agent to maintain such accounts or any error therein shall
not in any manner affect the obligation of any Borrower to repay the Loans in
accordance with the terms of this Agreement.
(e) Any Lender may request that Loans of any Class made by it
to a Borrower be evidenced by a promissory note. In such event, the relevant
Borrower shall prepare, execute and deliver to such Lender a promissory note (a
"Note") payable to the order of such Lender (or, if requested by such Lender, to
such Lender and its registered assigns) and in a form reasonably satisfactory to
the Administrative Agent and consistent with the terms of this Agreement.
Thereafter, the Loans evidenced by each such Note and interest thereon shall at
all times (including after assignment pursuant to Section 9.04) be represented
by one or more Notes in such form payable to the order of the payee named
therein (or, if such Note is a registered Note, to such payee and its registered
assigns).
SECTION 2.10. AMORTIZATION OF TERM LOANS. (a) Subject to
adjustment pursuant to paragraph (e) of this Section, the Company shall repay
Tranche A Term Borrowings on each of the following dates in the aggregate
principal amount set forth for such date: (i) $1,000,000 on the last day of
March, June, September and December of 1997, 1998, 1999, 2000 and 2001; (ii)
$1,250,000 on the last day of March, June, September and December of 2002; and
(iii) $2,500,000 on March 31, 2003 and on the Tranche A Maturity Date.
(b) Subject to adjustment pursuant to paragraph (e) of this
Section, the Company shall repay Tranche B Term Borrowings on each of the
following dates in the aggregate principal amount set forth for such date: (i)
$1,000,000 on December 31 of 1997, 1998, 1999, 2000, 2001 and 2002; and (ii)
$21,800,000 on the last day of June and December of 2003 and 2004 and on the
Tranche B Maturity Date.
(c) Subject to adjustment pursuant to paragraph (e) of this
Section, Holdings shall repay German Term Borrowings on each of the following
dates in the aggregate principal amount set forth for such date: (i) DM
1,875,000 on the last day of March, June, September and December of 1997; (ii)
DM 2,812,500 on the last day of March, June, September and December of 1998;
(iii) DM 3,750,000 on the last day of March, June, September and December of
1999; (iv) DM 4,687,500 on the last day of March, June, September and December
of 2000 and 2001; (v) DM 5,625,000 on the last day of March, June, September and
December of 2002; and (vi) DM 15,375,000 on March 31, 2003 and on the German
Term Loan Maturity Date.
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55
(d) To the extent not previously paid, (i) all Tranche A Term
Loans shall be due and payable on the Tranche A Maturity Date, (ii) all Tranche
B Term Loans shall be due and payable on the Tranche B Maturity Date, and (iii)
all German Term Loans shall be due and payable on the German Term Loan Maturity
Date.
(e) If the initial aggregate amount of the Lenders' Term
Commitments of any Class exceeds the aggregate principal amount of Term Loans of
such Class that are made during the Effective Period, then the scheduled
repayments of Term Borrowings of such Class to be made pursuant to this Section
shall be reduced ratably by an aggregate amount equal to such excess. Any
prepayment of a Term Borrowing of any Class shall be applied to reduce the
subsequent scheduled repayments of the Term Borrowings of such Class to be made
pursuant to this Section ratably, in accordance with the amounts of such
scheduled repayments.
(f) Prior to any repayment of any Term Borrowings of any Class
under this Section 2.10, the relevant Borrower shall select the Borrowing or
Borrowings of the applicable Class to be repaid and shall notify the
Administrative Agent by telephone or telecopy of such selection not later than
(i) 11:00 a.m., Detroit time, in the case of Tranche A Term Borrowings or
Tranche B Term Borrowings, and (ii) 11:00 a.m., Frankfurt time, in the case of
German Term Borrowings, in each case three Business Days before the scheduled
date of such repayment (any such telephonic notice to be promptly confirmed by
such Borrower by telecopy); PROVIDED that each repayment of Term Borrowings of
any Class shall be applied to repay any outstanding ABR Term Borrowings of such
Class before any other Borrowings of such Class. If a Borrower fails to make a
timely selection of the Borrowing or Borrowings to be repaid, such repayment
shall be applied, first, to repay any outstanding ABR Term Borrowings of the
applicable Class and, second, to other Borrowings of such Class in the order of
the remaining duration of their respective Interest Periods (the Borrowing with
the shortest remaining Interest Period to be repaid first). Each repayment of a
Borrowing shall be applied ratably to the Loans included in the repaid
Borrowing. Repayments of Term Borrowings shall be accompanied by accrued
interest.
SECTION 2.11. PREPAYMENT OF LOANS. (a) A Borrower shall have
the right at any time and from time to time to prepay any Borrowing of such
Borrower in whole or in part, subject to the requirements of this Section
applicable to optional prepayments.
(b) In the event and on each occasion that any Net Proceeds
are received by or on behalf of the Company or any Subsidiary in respect of any
Prepayment Event other than an Equity Issuance, the Borrowers shall, not later
than the Business Day next following the day on which such Net Proceeds are
received by the Company or any Subsidiary, prepay Term Borrowings (in accordance
with
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paragraph (e) below) in an aggregate amount equal to such Net Proceeds (or the
Dollar Equivalent thereof on the payment date in the case of Borrowings in a
currency other than that of such Net Proceeds). For purposes of this paragraph
(b), Net Proceeds in respect of any Prepayment Event referred to in clause (b)
of the definition of "Prepayment Event" shall be deemed received on the later of
the date of actual receipt of such Net Proceeds by the Company or any Subsidiary
and the date on which the relevant event becomes a Prepayment Event pursuant to
clause (b) of such definition.
(c) In the event and on each occasion that any Net Proceeds
are received by or on behalf of the Company or any Subsidiary in respect of any
Equity Issuance, the Borrowers shall, not later than the Business Day next
following the day on which such Net Proceeds are received, prepay Term
Borrowings (in accordance with paragraph (e) below) in an aggregate amount equal
to 75% of such Net Proceeds.
(d) Following the end of each fiscal year of the Company,
commencing with the fiscal year ending December 31, 1997, the Borrowers shall
prepay Term Borrowings (in accordance with paragraph (e) below) in an aggregate
amount equal to (i) 75% of Excess Cash Flow for such fiscal year if the Leverage
Ratio as of the last day of such fiscal year is greater than 2.0 to 1.0 and (ii)
50% of Excess Cash Flow for such fiscal year if the Leverage Ratio as of the
last day of such fiscal year is equal to or less than 2.0 to 1.0. Each
prepayment pursuant to this paragraph shall be made on or before the date on
which financial statements are delivered pursuant to Section 5.01 with respect
to the fiscal year for which Excess Cash Flow is being calculated (and in any
event within 105 days after the end of such fiscal year).
(e) Prior to any optional prepayment of Borrowings hereunder,
a Borrower shall select the Borrowing or Borrowings to be prepaid and shall
specify such selection in the notice of such prepayment pursuant to paragraph
(g) of this Section; PROVIDED that each prepayment of Borrowings of any Class
shall be applied to prepay any ABR Borrowings of such Class before any other
Borrowings of such Class. If a Borrower fails to make a timely selection of the
Borrowing or Borrowings to be prepaid, such prepayment shall be applied, first,
to prepay any outstanding ABR Borrowings of the applicable Class and, second, to
other Borrowings of such Class in the order of the remaining duration of their
respective Interest Periods (the Borrowing with the shortest remaining Interest
Period to be prepaid first). In the event of any optional prepayment of Term
Borrowings made at a time when Term Borrowings of more than one Class remain
outstanding, a Borrower shall select the amount of each Class to be prepaid,
PROVIDED that each prepayment resulting from a Prepayment Event with respect to
a German Borrower shall first be applied to German Term
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Borrowings. Optional prepayments used to prepay any Class of Term Borrowings
shall be applied pro rata to the remaining amortization payments of such Class.
(f) Mandatory prepayments of Term Borrowings hereunder shall
be allocated pro rata among the Classes of Term Borrowings based on the
aggregate principal amount of outstanding Borrowings of each such Class
(including the Dollar Equivalent of any Eurodeutschemark Borrowings). Amounts
allocated to each Class shall be applied pro rata to the remaining amortization
payments of such Class. In the event that mandatory prepayments are made at a
time when no amounts are outstanding under any Class of Term Borrowing, or in
the event that a portion of a mandatory prepayment reduces to zero the amount
outstanding under all Classes of Term Borrowings, mandatory prepayments
hereunder will be applied to Revolving Borrowings in such amounts as the
Administrative Agent may determine.
(g) On any date when the aggregate U.S. Revolving Exposures of
the Lenders exceed the aggregate U.S. Revolving Commitments or the aggregate
German Revolving Exposures of the Lenders exceed the aggregate German Revolving
Commitments, the Borrowers will prepay Loans and/or cash collateralize
outstanding Letters of Credit in accordance with the provisions of Section
2.05(j), in such amounts as may be necessary to eliminate such excess (treating
the cash collateralized portion of outstanding Letters of Credit, solely for
purposes of the foregoing, as no longer being outstanding).
(h) The relevant Borrower shall notify the Administrative
Agent (and, in the case of prepayment of a Swingline Loan, the relevant
Swingline Lender) by telephone or telecopy (confirmed by telecopy promptly
following any such telephonic notice) of any prepayment hereunder (i) in the
case of prepayment of a Eurodollar Revolving Borrowing, not later than 11:00
a.m., Detroit time, one Business Day before the date of prepayment, (ii) in the
case of prepayment of a Eurodeutschemark Revolving Borrowing, not later than
11:00 a.m., Frankfurt time, three Business Days before the date of prepayment,
(iii) in the case of prepayment of an ABR Revolving Borrowing or U.S. Swingline
Borrowing, not later than 11:00 a.m., Detroit time, on the date of prepayment or
(iv) in the case of prepayment of a German Swingline Loan, not later than 11:00
a.m., Frankfurt time, on the date of prepayment. Each such notice shall be
irrevocable and shall specify the prepayment date, the principal amount of each
Borrowing or portion thereof to be prepaid (in accordance with paragraph (e) of
this Section) and, in the case of a mandatory prepayment, a reasonably detailed
calculation of the amount of such prepayment; PROVIDED that, if a notice of
optional prepayment is given in connection with a conditional notice of
termination of the Revolving Commitments as contemplated by Section 2.08, then
such notice of prepayment may be revoked if such notice of termination is
revoked in accordance with Section 2.08. Promptly following receipt of any such
notice (other
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than a notice relating solely to Swingline Loans), the Administrative Agent
shall advise the Lenders of the contents thereof. Each partial prepayment of any
Borrowing shall be in an amount that would be permitted in the case of an
advance of a Borrowing of the same Type as provided in Section 2.02, except as
necessary to apply fully the required amount of a mandatory prepayment. Each
prepayment of a Borrowing shall be applied ratably to the Loans included in the
prepaid Borrowing. Prepayments shall be accompanied by accrued interest to the
extent required by Section 2.13.
(i) In the event the amount of any mandatory prepayment
required to be made on any date pursuant to this Section shall exceed the amount
of the Loans of the relevant Class of Borrowings that are ABR Borrowings or
Swingline Borrowings or that have Interest Periods ending on such date (the
amount of any such excess being called the "Excess Amount"), the relevant
Borrower shall have the right, in lieu of making such prepayment in full, to
prepay on such date all the outstanding ABR Loans, Swingline Loans and Loans
having Interest Periods ending on such date within such Class of Borrowing and
to deposit an amount equal to the Excess Amount with the Collateral Agent in a
cash collateral account maintained (pursuant to customary account documentation
of the Administrative Agent) by and in the sole dominion and control of the
Collateral Agent, and otherwise subject to the terms of this paragraph (i). Any
amounts so deposited shall be held by the Collateral Agent as collateral for the
Obligations of the relevant Borrower and applied to the prepayment of the
Eurodollar Loans or Eurodeutschemark Loans of such Class at the end of the
current Interest Periods applicable thereto. On any Business Day on which (x)
collected amounts remain on deposit in or to the credit of such cash collateral
account after giving effect to the payments made on such date pursuant to this
Section 2.11(i) and (y) the relevant Borrower shall have delivered to the
Collateral Agent a written request or a telephonic request (which telephonic
request shall be promptly confirmed by telecopy) that such remaining collected
amounts be invested in the Permitted Investments specified in such request, the
Collateral Agent shall use its reasonable efforts to invest such remaining
collected amounts in such Permitted Investments; PROVIDED, HOWEVER, that the
Collateral Agent shall have continuous dominion and full control over any such
investments (and over any interest that accrues thereon) to the same extent that
it has dominion and control over such cash collateral account and no Permitted
Investment shall mature after the end of the Interest Period for the Loan in
respect of which it is to be applied. The depositing Borrower shall not have any
right to withdraw any amount from such cash collateral account until the
relevant Loans subject to prepayment hereunder and accrued interest thereon are
paid in full, at which time the Collateral Agent shall, promptly upon the
written request of the relevant depositing Borrower, release to such Borrower
the amount due such Borrower from such cash collateral account, unless a Default
or Event of Default then exists or would result from such release.
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SECTION 2.12. FEES. (a) Each of the Company and Holdings
agrees to pay to the Administrative Agent for the account of each Lender a
facility fee at the rate of 0.50% per annum, on the average daily amount
(regardless of usage) of the U.S. Revolving Commitment (in the case of the
Company) and the German Revolving Commitment (in the case of Holdings) of such
Lender during the preceding quarter (or shorter period commencing and including
the Effective Date and ending on and excluding the date on which such Commitment
terminates). Accrued facility fees shall be payable in arrears on the last day
of March, June, September and December of each year and on the date on which the
Revolving Commitments terminate, commencing on the first such date to occur
after the date hereof. All facility fees shall be computed on the basis of a
year of 360 days and shall be payable for the actual number of days elapsed
(including the first day but excluding the last day). The facility fees in
respect of the U.S. Revolving Commitments shall be payable by the Company in
dollars and the facility fees in respect of the German Revolving Commitments
shall be payable by Holdings in Deutschemarks.
(b) The Company or Holdings, as applicable, agrees to pay (i)
to the Administrative Agent for the account of each Revolving Lender a
participation fee (in dollars or Deutschemarks, respectively) with respect to
its participations in U.S. Letters of Credit or German Letters of Credit, as
applicable, which shall accrue, at a rate per annum equal to the Applicable Rate
that would apply in calculating interest on Eurocurrency Revolving Loans, on the
average daily amount of such Lender's U.S. LC Exposure or German LC Exposure, as
applicable (excluding any portion thereof attributable to unreimbursed LC
Disbursements) during the period from and including the date of this Agreement
to but excluding the later of the date on which such Lender's Revolving
Commitment terminates and the date on which such Lender ceases to have any LC
Exposure, and (ii) to each Issuing Bank a fronting fee (in dollars or
Deutschemarks, respectively), which shall accrue at the rate of .125% per annum
on the average daily amount of the U.S. LC Exposure or German LC Exposure, as
applicable, attributable to Letters of Credit issued by such Issuing Bank
(excluding any portion thereof attributable to unreimbursed LC Disbursements),
during the period from and including the date of this Agreement to but excluding
the later of the date of termination of the Revolving Commitments and the date
on which there ceases to be any LC Exposure, as well as such Issuing Banks'
standard fees with respect to the issuance, amendment, renewal or extension of
any Letter of Credit or processing of drawings thereunder. Participation fees
and fronting fees accrued through and including the last day of March, June,
September and December of each year shall be payable on such last day,
commencing on the first such date to occur after the date of this Agreement;
PROVIDED that all such fees shall be payable on the date on which the Revolving
Commitments terminate and any such fees accruing after the date on which the
Revolving Commitments terminate shall be payable on demand. Any other fees
payable to the Issuing Bank pursuant to this paragraph shall be payable
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within 10 days after demand. All participation fees and fronting fees shall be
computed on the basis of a year of 365 days (or 366 days in a leap year) and
shall be payable for the actual number of days elapsed (including the first day
but excluding the last day).
(c) The Borrowers agree to pay to the Agents, for their own
account, fees payable in the amounts and at the times separately agreed upon
between the Borrowers and the Agents.
(d) All fees payable hereunder shall be paid on the dates due,
in immediately available funds, to the Administrative Agent (or to the Issuing
Banks, in the case of fees payable to them) for distribution, in the case of
commitment fees, participation fees and facility fees, to the Lenders entitled
thereto. Fees paid shall not be refundable under any circumstances.
SECTION 2.13. INTEREST. (a) U.S. Swingline Loans and the Loans
comprising each ABR Borrowing shall bear interest at the Alternate Base Rate
plus the Applicable Rate.
(b) The Loans comprising each Eurocurrency Borrowing shall
bear interest at the Adjusted LIBO Rate or the Adjusted DIBO Rate, as
applicable, for the Interest Period in effect for such Borrowing plus the
Applicable Rate.
(c) German Swingline Loans shall bear interest at the FNBC
Prime Rate.
(d) Notwithstanding the foregoing, if any principal of or
interest on any Loan or any fee or other amount payable by any Borrower
hereunder is not paid when due, whether at stated maturity, upon acceleration or
otherwise, such overdue amount shall bear interest, after as well as before
judgment, at a rate per annum equal to (i) in the case of overdue principal of
any Loan, 2% plus the rate otherwise applicable to such Loan as provided in the
preceding paragraphs of this Section, (ii) in the case of any other amount with
respect to any Tranche A Loan, Tranche B Loan or U.S. Revolving Loan, 2% plus
the rate applicable to ABR Revolving Loans as provided in paragraph (a) of this
Section or (iii) in the case of any other amount with respect to any German Term
Loan or German Revolving Loan, 2% plus the FNBC Prime Rate.
(e) Accrued interest on each Loan shall be payable in arrears
on each Interest Payment Date for such Loan and, in the case of Revolving Loans
of any Class, upon termination of the Revolving Commitments for such Class;
PROVIDED that (i) interest accrued pursuant to paragraph (d) of this Section
shall be payable on
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demand, (ii) in the event of any repayment or prepayment of any Loan (other than
a prepayment of an ABR Revolving Loan prior to the end of the Revolving
Availability Period), accrued interest on the principal amount repaid or prepaid
shall be payable on the date of such repayment or prepayment and (iii) in the
event of any conversion of any Eurocurrency Loan prior to the end of the current
Interest Period therefor, accrued interest on such Loan shall be payable on the
effective date of such conversion.
(f) All interest hereunder shall be computed on the basis of a
year of 360 days, except that interest computed by reference to the Alternate
Base Rate at times when the Alternate Base Rate is based on the Prime Rate shall
be computed on the basis of a year of 365 days (or 366 days in a leap year), and
in each case shall be payable for the actual number of days elapsed (including
the first day but excluding the last day). The applicable Alternate Base Rate,
FNBC Prime Rate, Adjusted LIBO Rate or Adjusted DIBO Rate shall be determined by
the Administrative Agent, and such determination shall be conclusive absent
manifest error.
SECTION 2.14. ALTERNATE RATE OF INTEREST. If prior to the
commence- ment of any Interest Period for a Eurocurrency Borrowing:
(a) the Administrative Agent determines (which determination
shall be conclusive absent manifest error) that adequate and reasonable
means do not exist for ascertaining the Adjusted LIBO Rate or Adjusted
DIBO Rate for such Interest Period;
(b) the Administrative Agent is advised by the Required
Lenders that the Adjusted LIBO Rate or Adjusted DIBO Rate for such
Interest Period will not adequately and fairly reflect the cost to such
Lenders of making or maintaining their Loans included in such Borrowing
for such Interest Period; or
(c) in the case of a Deutschemark Borrowing, the
Administrative Agent determines (which determination shall be
conclusive absent manifest error) that deposits in Deutschemarks are
not generally available, or cannot be obtained by certain categories of
financial institutions represented among the Lenders, in the London
interbank market;
then the Administrative Agent shall give notice thereof to the Company and the
Lenders by telephone or telecopy as promptly as practicable thereafter and,
until the Administrative Agent notifies the Company and the Lenders that the
circumstances giving rise to such notice no longer exist, (i) any Interest
Election Request that requests the conversion of any Borrowing to, or
continuation of any Borrowing as, a Eurocurrency Borrowing shall be ineffective,
and any Eurocurrency Borrowing so
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requested to be continued shall be converted to an ABR Borrowing denominated in
dollars at the Exchange Rate determined by the Administrative Agent on the last
day of the then current Interest Period with respect thereto, (ii) if any
Borrowing Request requests a Eurodollar Borrowing, such Borrowing shall be made
as an ABR Borrowing and (iii) any request by any Borrower for a Eurodeutschemark
Borrowing shall be ineffective; PROVIDED that if the circumstances giving rise
to such notice affect Borrowings in only one currency, then requests for
Eurocurrency Borrowings in the other currency shall be permitted.
SECTION 2.15. INCREASED COSTS. (a) If any Change in Law shall:
(i) impose, modify or deem applicable any reserve, special
deposit or similar requirement against assets of, deposits with or for
the account of, or credit extended by, any Lender (except any such
reserve requirement reflected in the Adjusted LIBO Rate or Adjusted
DIBO Rate) or Issuing Bank; or
(ii) impose on any Lender or Issuing Bank or the London interbank
market any other condition affecting this Agreement or Eurocurrency
Loans made by such Lender or any Letter of Credit or participation
therein;
and the result of any of the foregoing shall be to increase the cost to such
Lender of making or maintaining any Eurocurrency Loan (or of maintaining its
obligation to make any such Loan) or to increase the cost to such Lender or
Issuing Bank of participating in, issuing or maintaining any Letter of Credit or
to reduce the amount of any sum received or receivable by such Lender or Issuing
Bank hereunder (whether of principal, interest or otherwise), then the Company
or the relevant German Borrower, as applicable, will pay to such Lender or the
Issuing Bank, as the case may be, such additional amount or amounts as will
compensate such Lender or the Issuing Bank, as the case may be, for such
additional costs incurred or reduction suffered.
(b) If any Lender or Issuing Bank determines that any Change
in Law regarding capital requirements has or would have the effect of reducing
the rate of return on such Lender's or Issuing Bank's capital or on the capital
of such Lender's or Issuing Bank's holding company, if any, as a consequence of
this Agreement or the Loans made by, or participations in Letters of Credit held
by, such Lender, or the Letters of Credit issued by the Issuing Bank, to a level
below that which such Lender or the Issuing Bank or such Lender's or Issuing
Bank's holding company could have achieved but for such Change in Law (taking
into consideration such Lender's or Issuing Bank's policies and the policies of
such Lender's or Issuing Bank's holding company with respect to capital
adequacy), then from time to time the Company or the relevant German Borrower,
as applicable, will pay to such Lender or the relevant Issuing Bank, as the case
may be, such additional amount or amounts as will com-
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pensate such Lender or Issuing Bank or such Lender's or Issuing Bank's holding
company for any such reduction suffered.
(c) A certificate of a Lender or Issuing Bank setting forth
the amount or amounts necessary to compensate such Lender or Issuing Bank or its
holding company, as the case may be, as specified in paragraph (a) or (b) of
this Section shall be delivered to the Company or the relevant German Borrower,
as the case may be, and shall be conclusive absent manifest error. The Borrowers
shall pay such Lender or Issuing Bank, as the case may be, the amount shown as
due on any such certificate within 10 days after receipt thereof by the Company
or such German Borrower.
(d) Failure or delay on the part of any Lender or Issuing Bank
to demand compensation pursuant to this Section shall not constitute a waiver of
such Lender's or the Issuing Bank's right to demand such compensation; PROVIDED
that the Borrowers shall not be required to compensate a Lender or Issuing Bank
pursuant to this Section for any increased costs or reductions incurred more
than 90 days prior to the date that such Lender or Issuing Bank, as the case may
be, notifies the Company or the relevant German Borrower, as the case may be, of
the Change in Law giving rise to such increased costs or reductions and of such
Lender's or Issuing Bank's intention to claim compensation therefor; PROVIDED
FURTHER that, if the Change in Law giving rise to such increased costs or
reductions is retroactive, then the 90-day period referred to above shall be
extended to include the period of retroactive effect thereof.
(e) Notwithstanding any other provision of this Agreement, if,
after the date hereof, (i) any Change in Law shall make it unlawful for any
Lender to make or maintain any Eurocurrency Loan or to give effect to its
obligations as contemplated hereby with respect to any Eurocurrency Loan, or
(ii) there shall have occurred any change in national or international
financial, political or economic conditions (including the imposition of or any
change in exchange controls) or currency exchange rates which would make it
impracticable for any Lender to make Loans denominated in the relevant
Eurocurrency to, or for the account of, a Borrower, then, by written notice to
the Company and to the Administrative Agent:
(i) such Lender may declare that Eurocurrency Loans (in the
affected currency or currencies) will not thereafter (for the duration
of such unlawfulness) be made by such Lender hereunder (or be continued
for additional Interest Periods and ABR Loans will not thereafter (for
such duration) be converted into Eurodollar Loans if the affected
currency is dollars), whereupon any request for a Eurocurrency
Borrowing (in the affected currency or currencies) (or to convert an
ABR Borrowing to a Eurocurrency Borrowing or to continue a Eurocurrency
Borrowing (in the affected currency or currencies), as the case may be,
for an additional Interest Period) shall, as to such Lender
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only, be deemed a request for an ABR Loan (or a request to continue an
ABR Loan as such for an additional Interest Period or to convert a
Eurocurrency Loan into an ABR Loan, as the case may be), unless such
declaration shall be subsequently withdrawn; and
(ii) such Lender may require that all outstanding Eurocurrency
Loans (in the affected currency or currencies), made by it be converted
to ABR Loans (at the then current Exchange Rate, in the case of any
conversion of Eurodeutschemark Loans), in which event all such
Eurocurrency Loans (in the affected currency or currencies) shall be
automatically converted to ABR Loans as of the effective date of such
notice as provided in paragraph (f) below.
In the event any Lender shall exercise its rights under (i) or (ii) above, all
payments and prepayments of principal that would otherwise have been applied to
repay the Eurocurrency Loans that would have been made by such Lender or the
converted Eurocurrency Loans of such Lender shall instead be applied to repay
the ABR Loans made by such Lender in lieu of, or resulting from the conversion
of, such Eurocurrency Loans.
(f) For purposes of this Section 2.15, a notice to the Company
by any Lender shall be effective as to each Eurocurrency Loan made by such
Lender, if lawful, on the last day of the Interest Period currently applicable
to such Eurocurrency Loan; in all other cases such notice shall be effective on
the date of receipt by the Company.
SECTION 2.16. BREAK FUNDING PAYMENTS. In the event of (a) the
payment of any principal of any Eurocurrency Loan other than on the last day of
an Interest Period applicable thereto (including as a result of an Event of
Default), (b) the conversion of any Eurocurrency Loan other than on the last day
of the Interest Period applicable thereto, (c) the conversion of any
Eurodeutschemark Loan or German Swingline Loan to a dollar denominated Loan
pursuant to Section 2.15(e) or 2.18(f), (d) the failure to borrow, convert,
continue or prepay any Revolving Loan or Term Loan on the date specified in any
notice delivered pursuant hereto (regardless of whether such notice may be
revoked under Section 2.11(g) and is revoked in accordance therewith), or (e)
the assignment of any Eurocurrency Loan other than on the last day of the
Interest Period applicable thereto as a result of a request by a Borrower
pursuant to Section 2.19, then, in any such event, the relevant Borrower shall
compensate each Lender for the loss, cost and expense attributable to such event
(and in the case of any conversion of Eurodeutschemark Loans or German Swingline
Loans to dollar denominated Loans, such loss, cost or expense shall also include
any loss, cost or expense sustained by a German Revolving Lender as a result of
such
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65
conversion). In the case of a Eurocurrency Loan, such loss, cost or expense to
any Lender, to the extent that it relates to interest costs associated with
funding, shall be deemed to consist solely of an amount determined by such
Lender to be the excess, if any, of (i) the amount of interest which would have
accrued on the principal amount of such Loan had such event not occurred, at the
Adjusted LIBO Rate or Adjusted DIBO Rate that would have been applicable to such
Loan, for the period from the date of such event to the last day of the then
current Interest Period therefor (or, in the case of a failure to borrow,
convert or continue, for the period that would have been the Interest Period for
such Loan), over (ii) the amount of interest which would accrue on such
principal amount for such period at the interest rate which such Lender would
bid were it to bid, at the commencement of such period, for deposits in the same
currency of a comparable amount and period from other banks in the eurodollar
market. A certificate of any Lender setting forth any amount or amounts that
such Lender is entitled to receive pursuant to this Section shall be delivered
to the Company and shall be conclusive absent manifest error. The relevant
Borrower shall pay such Lender the amount shown as due on any such certificate
within 10 days after receipt thereof by the Company.
SECTION 2.17. TAXES. (a) Subject to paragraphs (e) and (f)
below, any and all payments by or on account of any obligation of any Borrower
hereunder or under any other Loan Document shall be made free and clear of and
without deduction for any Indemnified Taxes or Other Taxes; PROVIDED that if any
Borrower shall be required to deduct any Indemnified Taxes or Other Taxes from
such payments, then (i) the sum payable shall be increased as necessary so that
after making all required deductions (including deductions applicable to
additional sums payable under this Section) the Administrative Agent, Lender or
Issuing Bank (as the case may be) receives an amount equal to the sum it would
have received had no such deductions been made, (ii) such Borrower shall make
such deductions and (iii) such Borrower shall pay the full amount deducted to
the relevant Governmental Authority in accordance with applicable law.
(b) In addition, subject to paragraphs (e) and (f) below, the
Borrowers shall pay any Other Taxes to the relevant Governmental Authority in
accordance with applicable law.
(c) Subject to paragraphs (e) and (f) below, the relevant
Borrower shall indemnify the Administrative Agent, each Lender and each Issuing
Bank, within 10 days after written demand therefor, for the full amount of any
Indemnified Taxes or Other Taxes paid by the Administrative Agent, such Lender
or such Issuing Bank, as the case may be, on or with respect to any payment by
or on account of any obligation of any Borrower hereunder or under any other
Loan Document (including Indemnified Taxes or Other Taxes imposed or asserted on
or attributable to amounts
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66
payable under this Section) and any penalties, interest and reasonable expenses
arising therefrom or with respect thereto, whether or not such Indemnified Taxes
or Other Taxes were correctly or legally imposed or asserted by the relevant
Governmental Authority, PROVIDED that such Borrower shall have no obligation to
so indemnify the Administrative Agent, any Lender or any Issuing Bank with
respect to any Indemnified Taxes or Other Taxes to the extent that such Borrower
has paid amounts owing in respect of Indemnified Taxes or Other Taxes pursuant
to Section 2.17(a) or (b) and complied with Section 2.17(d). A certificate as to
the amount of such payment or liability delivered to the Company by a Lender or
the Issuing Bank, or by the Administrative Agent on its own behalf or on behalf
of a Lender or the Issuing Bank, shall be conclusive absent manifest error.
(d) As soon as practicable after any payment of Indemnified
Taxes or Other Taxes by any Borrower to a Governmental Authority, such Borrower
shall deliver to the Administrative Agent the original or a certified copy of a
receipt issued by such Governmental Authority evidencing such payment, a copy of
the return reporting such payment or other evidence of such payment reasonably
satisfactory to the Administrative Agent.
(e)(i) Each Lender organized under the laws of a jurisdiction
outside the United States of America shall, on or prior to the date of its
execution and delivery of this Agreement, and on the date of the Assignment and
Acceptance pursuant to which it became a Lender, as the case may be, and from
time to time thereafter at the time or times prescribed by applicable law or if
requested in writing by the Company or any Agent (but only so long thereafter as
such Lender remains lawfully able to do so), provide each Agent and the Company
with Internal Revenue Service Form 1001 or 4224, as appropriate (or, in the case
of any Lender that is not a "bank" as defined in Section 881(c)(3)(A) of the
Code, Internal Revenue Form W-8 and a statement that it is not a "bank" as
defined in Section 881(c)(3)(A) of the Code), or any successor form prescribed
by the Internal Revenue Service, certifying that such Lender is exempt from or
is entitled to a reduced rate of United States withholding tax on payments under
this Agreement or the Notes. If the form provided by a Lender at the time such
Lender first becomes a party to this Agreement indicates a United States
interest withholding tax rate in excess of zero, withholding tax at such rate
shall be considered an Excluded Tax unless and until such Lender provides the
appropriate form certifying that a lesser rate applies, whereupon withholding
tax at such lesser rate only shall be considered an Excluded Tax for periods
governed by such form. If any form or document referred to in this subsection
(e)(ii) requires the disclosure of information, other than information necessary
to compute the tax payable and information required on the date hereof by
Internal Revenue Form 1001 or 4224, that the Lender reasonably considers to be
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confidential, the Lender shall give notice thereof to the Company and shall not
be obligated to include in such form or document such confidential information.
(ii) Each Lender to a German Borrower, which Lender is
organized under the laws of a jurisdiction outside the Federal Republic of
Germany shall, on or prior to the date of its execution and delivery of this
Agreement, and on the date of the Assignment and Acceptance pursuant to which it
became a Lender, as the case may be, and from time to time thereafter at the
time or times prescribed by applicable law or if requested in writing by any
German Borrower or any Agent (but only so long thereafter as such Lender remains
lawfully able to do so), provide each Agent and each German Borrower with
properly completed and executed documentation prescribed by German law or
regulation or reasonably requested by the Company and certifying or otherwise
demonstrating that such Lender is exempt from or is entitled to a reduced rate
of German withholding tax on payments under this Agreement or the Notes such
that each German Borrower is permitted to make such payments without withholding
or at a reduced rate of withholding. If the form provided by a Lender at the
time such Lender first becomes a party to this Agreement indicates a German
interest withholding tax rate in excess of zero, withholding tax at such rate
shall be considered an Excluded Tax unless and until such Lender provides the
appropriate documentation certifying or otherwise demonstrating that a lesser
rate applies, whereupon withholding tax at such lesser rate only shall be
considered an Excluded Tax for periods governed by such form or other
documentation. If any form or document referred to in this subsection (e)(ii)
requires the disclosure of information, other than information necessary to
compute the tax payable and other information required on the date thereof by
the appropriate documentation relating to the exemption from or entitlement to a
reduced rate of German withholding tax, that the Lender reasonably considers to
be confidential, the Lender shall give notice thereof to the Borrowers and shall
not be obligated to include in such documentation such confidential information.
(f) For any period with respect to which a Lender has failed
to provide the Borrowers with the appropriate form or other documentation
described in subsection (e) (OTHER THAN if such failure is due to a change in
law occurring after the date on which such form of other documentation
originally was required to be provided or if such form or other documentation
otherwise is not required under subsection (e)), such Lender shall not be
entitled to indemnification under subsection (a) or (c) with respect to
Indemnified Taxes or Other Taxes imposed by the United States or Germany that
would not have been imposed had such Lender provided such form or documentation;
PROVIDED, HOWEVER, that should a Lender become subject to Indemnified Taxes or
Other Taxes because of its failure to deliver a form or other documentation
required hereunder, the relevant Borrower shall take
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such steps as such Lender shall reasonably request to assist such Lender to
recover such Indemnified Taxes or Other Taxes.
SECTION 2.18. PAYMENTS GENERALLY; PRO RATA TREATMENT; SHARING
OF SET-OFFS. (a) Each Borrower shall make each payment required to be made by it
hereunder or under any other Loan Document (whether of principal, interest, fees
or reimbursement of LC Disbursements, or of amounts payable under Section 2.15,
2.16 or 2.17, or otherwise) from a payment location in the United States or, in
the case of Deutschemark payments, in Germany prior to 2:00 p.m., Detroit time
or Frankfurt time, as the case may be, on the date when due, in immediately
available funds, without set-off or counterclaim (provided that any payment in
Deutschemarks may, in the discretion of the Administrative Agent, be deemed to
have been received on the next succeeding Business Day for purposes of
calculating interest thereon unless SWIFT payment instructions shall have been
given by the payor bank not later than 10:00 a.m., Frankfurt time, in respect of
such payment). Any amounts received after such time on any date may, in the
discretion of the Administrative Agent, be deemed to have been received on the
next succeeding Business Day for purposes of calculating interest thereon. All
such payments shall be made to the Administrative Agent, in the case of dollar
payments, at its offices at 611 Woodward Avenue, Detroit, Michigan 48226, and in
the case of Deutschemark payments, at the offices of its Affiliate, The First
National Bank of Chicago, Frankfurt Branch, at Hochstrasse 35, 60313
Frankurt-am-Main, Germany, except payments to be made directly to an Issuing
Bank or a Swingline Lender as expressly provided herein and except that payments
pursuant to Sections 2.15, 2.16, 2.17 and 9.03 shall be made directly to the
Persons entitled thereto and payments pursuant to other Loan Documents shall be
made to the Persons specified therein. The Administrative Agent shall distribute
any such payments received by it for the account of any other Person to the
appropriate recipient promptly following receipt thereof. If any payment under
any Loan Document shall be due on a day that is not a Business Day, the date for
payment shall be extended to the next succeeding Business Day, and, in the case
of any payment accruing interest or fees, interest thereon or fees shall be
payable for the period of such extension. All payments under each Loan Document
shall be made in dollars or Deutschemarks, as specified therein, and in the
absence of any specification, in dollars (based, if necessary, on the Exchange
Rate in effect on the date of payment).
(b) If at any time insufficient funds are received by and
available to the Administrative Agent to pay fully all amounts of principal,
unreimbursed LC Disbursements, interest and fees then due hereunder, such funds
shall be applied (i) first, towards payment of interest and fees then due
hereunder, ratably among the parties entitled thereto in accordance with the
amounts of interest and fees then due to such parties, and (ii) second, towards
payment of principal and unreimbursed LC Disbursements then due hereunder,
ratably among the parties entitled thereto in
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accordance with the amounts of principal and unreimbursed LC Disbursements then
due to such parties.
(c) Subject to the provisions of paragraph (f) of this
Section, if any Lender shall, by exercising any right of set-off or counterclaim
or otherwise, obtain payment in respect of any principal of or interest on any
of its Revolving Loans or Term Loans of any Class or participations in LC
Disbursements or Swingline Loans resulting in such Lender receiving payment of a
greater proportion of the aggregate amount of its Revolving Loans or Term Loans
of any Class and participations in LC Disbursements and Swingline Loans and
accrued interest thereon than the proportion received by any other Lender, then
the Lender receiving such greater proportion shall purchase (for cash at face
value) participations in the Revolving Loans or Term Loans of such Class and
participations in such LC Disbursements and Swingline Loans of other Lenders to
the extent necessary so that the benefit of all such payments shall be shared by
the Lenders ratably in accordance with the aggregate amount of principal of and
accrued interest on their respective Revolving Loans or Term Loans or any Class
and participations in such LC Disbursements and Swingline Loans; PROVIDED that
(i) if any such participations are purchased and all or any portion of the
payment giving rise thereto is recovered, such participations shall be rescinded
and the purchase price restored to the extent of such recovery, without
interest, and (ii) the provisions of this paragraph shall not be construed to
apply to any payment made by the Borrowers pursuant to and in accordance with
the express terms of this Agreement or any payment obtained by a Lender as
consideration for the assignment of or sale of a participation in any of its
Loans or participations in LC Disbursements to any assignee or participant,
other than to the Company or any Subsidiary or Affiliate thereof (as to which
the provisions of this paragraph shall apply). Each Borrower consents to the
foregoing and agrees, to the extent it may effectively do so under applicable
law, that any Lender acquiring a participation pursuant to the foregoing
arrangements may exercise against such Borrower rights of set-off and
counterclaim with respect to such participation as fully as if such Lender were
a direct creditor of such Borrower in the amount of such participation.
(d) Unless the Administrative Agent shall have received notice
from a Borrower prior to the date on which any payment is due to the
Administrative Agent for the account of the Lenders or the Issuing Bank
hereunder that such Borrower will not make such payment, the Administrative
Agent may assume that such Borrower has made such payment on such date in
accordance herewith and may, in reliance upon such assumption, distribute to the
Lenders or the relevant Issuing Bank, as the case may be, the amount due. In
such event, if the Borrower has not in fact made such payment, then each of the
Lenders or such Issuing Bank, as the case may be, severally agrees to repay to
the Administrative Agent forthwith on demand the amount so distributed to such
Lender or Issuing Bank with interest thereon, for each day from
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and including the date such amount is distributed to it to but excluding the
date of payment to the Administrative Agent, (i) in the case of a Borrowing in
dollars, at the Federal Funds Effective Rate and (ii) in the case of a Borrowing
in Deutschemarks, at the rate reasonably determined by the Administrative Agent
to be the cost to it of funding such amount.
(e) If any Lender shall fail to make any payment required to
be made by it pursuant to Section 2.04, 2.05(d) or (e), 2.06(b) or 2.18(d), then
the Administrative Agent may, in its discretion (notwithstanding any contrary
provision hereof), apply any amounts thereafter received by the Administrative
Agent for the account of such Lender to satisfy such Lender's obligations under
such Sections until all such unsatisfied obligations are fully paid.
(f) In the event that the Commitments are terminated or the
Loans are accelerated pursuant to Article VII hereof (a "Conversion Event"),
then (except as set forth below) the Obligations of each German Loan Party that
are denominated in Deutschemarks shall automatically be converted to obligations
of the same Loan Party denominated in dollars. Such conversion shall be effected
based upon the Exchange Rate in effect at the time of the occurrence of the
applicable Conversion Event, as determined by the Administrative Agent in
accordance with the terms hereof. Upon any conversion, each converted Obligation
("Converted Obligation") in respect of any outstanding and unpaid Loan, LC
Disbursement, fee or other amount due hereunder shall bear interest at the rate
applicable to overdue ABR Borrowings under Section 2.13(d). Upon any such
Conversion Event, the Tranche B Lenders, on the one hand, and the German
Revolving Lenders and German Term Lenders, on the other hand, shall
automatically and without any further act be deemed to have exchanged, at par,
participations in Tranche B Loans for participations in Loans and unpaid LC
Disbursements included in the Converted Obligations (collectively, "Converted
Loans") in such amounts as shall be necessary so that, after giving effect
thereto, each Tranche B Lender holds participations in the principal amount of
Converted Loans in an amount equal to its Conversion Percentage of all Converted
Loans. All such participations shall be effected pro rata among the German
Revolving Lenders and German Term Lenders in accordance with the amounts of
their respective German Revolving Commitments and German Term Loans at the time
of the Conversion Event. In the event the accrued and unpaid interest on the
principal amounts of any Converted Loans and Tranche B Term Loans exchanged, at
par, through such participations is different, the Lender acquiring a
participation in the obligation with the greater amount of accrued interest will
pay the transferring Lender, in dollars, the amount of any such excess by wire
transfer of immediately available funds. Any reimbursed LC Disbursements which
are made in respect of German Letters of Credit after a Conversion Event shall
automatically be converted into a dollar reimbursement obligation of Holdings on
the date of such LC Disbursement based on the Exchange
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Rate in effect on such date (and shall bear interest at the rate applicable to
past due ABR Borrowings). In the event any German Letters of Credit are
outstanding at the time of a Conversion Event, each Tranche B Lender will be
deemed to have purchased (on a pro rata basis from the German Revolving Lenders)
a participation therein, in accordance with the provisions of Section 2.05, in
the amount of its Conversion Percentage of the amount of such Letter of Credit;
PROVIDED, HOWEVER, that (i) payment of such Lender's Conversion Percentage of
any unreimbursed LC Disbursements in respect of such Letter of Credit shall be
made by transferring a participation in an equal principal amount of Tranche B
Term Loans or by wire transfer of dollars, if no such Loans are then held by the
Tranche B Lender, and (ii) to the extent an LC Disbursement in respect of such
Letter of Credit is reimbursed by the relevant Borrower prior to any purchase
pursuant to clause (i), the Issuing Bank will promptly purchase for dollars at
par a participation in the Tranche B Term Loans of such Lender in an amount
equal to such Lender's Conversion Percentage of the Dollar Equivalent of such
reimbursement on the date made. Each Lender, each person acquiring a
participation from any Lender as contemplated by this Section and each Loan
Party hereby consents and agrees to the foregoing provisions. For purposes
hereof, the "Conversion Percentage" of a Tranche B Lender shall mean a fraction,
expressed as a decimal, in which (i) the numerator is the aggregate principal
amount of the Tranche B Term Loans of such Lender immediately prior to a
Conversion Event and (ii) the denominator is an amount equal to the sum, at such
time, of (x) the aggregate principal amount of all outstanding Term Loans, (y)
the aggregate amount of U.S. Revolving Exposures and (z) the aggregate amount of
German Revolving Exposures. Promptly following any Conversion Event, the
Administrative Agent shall advise the Lenders of their respective interests in
the Converted Obligations and Tranche B Term Loans as a result thereof.
SECTION 2.19. MITIGATION OBLIGATIONS; REPLACEMENT OF LENDERS.
(a) If any Lender requests (or would be entitled to request, after giving effect
to any designation of, or assignment to, one of its offices, branches or
Affiliates hereunder) compensation under Section 2.15, or if a Borrower is
required (or would be required) to pay any additional amount to any Lender or
any Governmental Authority for the account of any Lender pursuant to Section
2.17, then such Lender shall use reasonable efforts to designate a different
lending office for funding or booking its Loans hereunder or to assign its
rights and obligations hereunder to another of its offices, branches or
affiliates, if, in the judgment of such Lender, such other designation or such
assignment (i) would eliminate or reduce amounts payable pursuant to Section
2.15 or 2.17, as the case may be, in the future and (ii) would not subject such
Lender to any unreimbursed cost or expense and would not otherwise be
disadvantageous in any material respect to such Lender. The Company hereby
agrees to pay all reasonable costs and expenses incurred by any Lender in
connection with any such designation or assignment.
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(b) If any Lender requests compensation under Section 2.15, or
if a Borrower is or would otherwise be required to pay any amount to any Lender
or any Governmental Authority for the account of any Lender pursuant to Section
2.17, or if any Lender defaults in its obligation to fund Loans hereunder, then
a Borrower may, at its sole expense and effort, upon notice to such Lender and
the Administrative Agent, require such Lender to assign and delegate, without
recourse (in accordance with and subject to the restrictions contained in
Section 9.04), all its interests, rights and obligations under this Agreement to
an assignee that shall assume such obligations (which assignee may be another
Lender, if a Lender accepts such assignment); PROVIDED that (i) such Borrower
shall have received the prior written consent of the Administrative Agent (and,
if a Revolving Commitment is being assigned, the relevant Issuing Bank and the
relevant Swingline Lender), which consent shall not unreasonably be withheld,
(ii) such Lender shall have received payment of an amount equal to the
outstanding principal of its Loans and participations in LC Disbursements and
Swingline Loans, accrued interest thereon, accrued fees and all other amounts
payable to it hereunder, from the assignee (to the extent of such outstanding
principal and accrued interest and fees) or such Borrower (in the case of all
other amounts) and (iii) in the case of any such assignment resulting from a
claim for compensation under Section 2.15 or payments required to be made
pursuant to Section 2.17, such assignment will result in a reduction in such
compensation or payments. A Lender shall not be required to make any such
assignment and delegation if, prior thereto, as a result of a waiver by such
Lender or otherwise, the circumstances entitling a Borrower to require such
assignment and delegation cease to apply.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
------------------------------
Each Borrower represents and warrants to the Lenders that:
SECTION 3.01. ORGANIZATION; POWERS. Each of the Company and
its Subsidiaries is duly organized, validly existing and (in the case of the
Company and the U.S. Subsidiaries) in good standing under the laws of the
jurisdiction of its organization, has all requisite power and authority to carry
on its business as now conducted and, except where the failure to be so
qualified and in good standing, individually or in the aggregate, could not
reasonably be expected to result in a Material Adverse Effect, is qualified to
do business in, and is in good standing in, every jurisdiction where such
qualification is required.
SECTION 3.02. AUTHORIZATION; ENFORCEABILITY. The Transactions
to be entered into or effected by each Loan Party are within such Loan Party's
corporate
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powers and have been duly authorized by all necessary corporate and, if
required, stockholder action. This Agreement has been duly executed and
delivered by each Borrower and constitutes, and each other Loan Document to
which any Loan Party is to be a party, when executed and delivered by such Loan
Party, will constitute, a legal, valid and binding obligation of each Borrower
or such Loan Party (as the case may be), enforceable in accordance with its
terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium
or other laws affecting creditors' rights generally and subject to general
principles of equity, regardless of whether considered in a proceeding in equity
or at law.
SECTION 3.03. GOVERNMENTAL APPROVALS; NO CONFLICTS. The
Transactions (a) do not require any consent or approval of, registration or
filing with, or any other action by, any Governmental Authority, except such as
have been obtained or made and are in full force and effect and except filings
necessary to perfect Liens created under the Loan Documents, (b) will not
violate any applicable law or regulation or the charter, by-laws or other
organizational documents of the Company or any of its Subsidiaries or any order
of any Governmental Authority, (c) will not violate or result in a default under
any indenture, agreement or other instrument binding upon the Company or any of
its Subsidiaries or its assets, or give rise to a right thereunder to require
any payment to be made by the Company or any of its Subsidiaries, except with
respect to indentures, agreements or other instruments governing Indebtedness
which will be permanently repaid in full, and all other amounts owing under
which will be paid in full, with the proceeds of, and substantially at the same
time as, the initial Borrowings hereunder, and (d) will not result in the
creation or imposition of any Lien on any asset of the Company or any of its
Subsidiaries, except Liens created under the Loan Documents.
SECTION 3.04. FINANCIAL CONDITION; NO MATERIAL ADVERSE CHANGE.
(a) The Company has heretofore furnished to the Lenders its consolidated balance
sheet and statements of operations and of cash flows and, in the case of clause
(i) below, of changes in common stockholders' equity, (i) as of and for the
fiscal year ended December 31, 1995, reported on by Arthur Andersen LLP,
independent public accountants, and (ii) as of and for the fiscal quarter and
the portion of the fiscal year ended September 30, 1996, certified by its chief
financial officer (collectively, the "Historical Statements"). The Historical
Statements present fairly, in all material respects, the financial position and
results of operations and cash flows of the Company and its consolidated
Subsidiaries as of such dates and for such periods in accordance with GAAP,
subject to year-end audit adjustments and the absence of footnotes in the case
of the statements referred to in clause (ii) above.
(b) The Company has heretofore furnished to the Lenders its
unaudited projected pro forma consolidating and consolidated balance sheets and
income
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statements as of December 31, 1996 and for the year ended December 31, 1996,
giving effect to the Acquisitions as if they had occurred on January 1, 1996
(the "Pro Forma Financial Statements"), each of which is contained in the
Confidential Information Memorandum. Such Pro Forma Financial Statements have
been prepared in good faith by the Company, based on assumptions believed by the
management of the Company to be reasonable at the time made, accurately reflect
all adjustments required to be made to give effect to the Acquisitions and
present fairly on a pro forma basis the financial position and operations of the
Company and Subsidiaries assuming that the Acquisitions had actually occurred at
the beginning of the period covered thereby.
(c) Since December 31, 1995, there has been no material
adverse change in the business, assets, operations or condition (financial or
otherwise) of the Company and its Subsidiaries, taken as a whole.
SECTION 3.05. PROPERTIES. (a) Each of the Company and its
Subsidiaries has good title to, or valid leasehold interests in, all its real
property material to its business (including its Mortgaged Properties) as set
forth on Schedule 3.05(a) and all personal property material to its business, in
each case except for Liens permitted pursuant to Section 6.02 and for minor
defects in title that do not interfere with its ability to conduct its business
as currently conducted or to utilize such properties for their intended
purposes.
(b) Each of the Company and its Subsidiaries owns, or is
licensed to use, all trademarks, tradenames, copyrights, patents and other
intellectual property material to its business, and the use thereof by the
Company and its Subsidiaries does not infringe upon the rights of any other
Person, except for any such infringements that, individually or in the
aggregate, could not reasonably be expected to result in a Material Adverse
Effect.
(c) As of the Effective Date, neither the Company nor any of
its Subsidiaries has received notice of, or has knowledge of, any pending or
contemplated condemnation proceeding affecting any Mortgaged Property or any
sale or disposition thereof in lieu of condemnation. Neither any Mortgaged
Property nor any interest therein is subject to any right of first refusal,
option or other contractual right to purchase such Mortgaged Property or
interest therein.
SECTION 3.06. LITIGATION AND ENVIRONMENTAL MATTERS. (a) There
are no actions, suits or proceedings by or before any arbitrator or Governmental
Authority pending against or, to the knowledge of the Company, threatened
against or affecting the Company or any of its Subsidiaries (i) as to which
there is a reasonable possibility of an adverse determination and that, if
adversely determined, could
<PAGE> 81
75
reasonably be expected, individually or in the aggregate, to result in a
Material Adverse Effect (other than the Disclosed Matters) or (ii) that involve
any of the Loan Documents or the Transactions.
(b) Except for the Disclosed Matters and except with respect
to any other matters that, individually or in the aggregate, could not
reasonably be expected to result in a Material Adverse Effect, neither the
Company nor any of its Subsidiaries (i) has failed to comply with any
Environmental Law or to obtain, maintain or comply with any permit, license or
other approval required under any Environmental Law, (ii) has become subject to
any Environmental Liability, (iii) has received notice of any claim with respect
to any Environmental Liability or (iv) knows of any basis for any Environmental
Liability.
(c) Since the date of this Agreement, there has been no change
in the status of the Disclosed Matters that, individually or in the aggregate,
has resulted in, or materially increased the likelihood of, a Material Adverse
Effect.
SECTION 3.07. COMPLIANCE WITH LAWS AND AGREEMENTS. Except for
Disclosed Matters, each of the Company and its Subsidiaries is in compliance
with all laws, regulations and orders of any Governmental Authority applicable
to it or its property (including, without limitation, ERISA, regulations of the
Board and environmental laws and regulations) and all indentures, agreements and
other instruments binding upon it or its property, except where the failure to
so comply, individually or in the aggregate, could not reasonably be expected to
result in a Material Adverse Effect. No Default has occurred and is continuing.
SECTION 3.08. INVESTMENT AND HOLDING COMPANY STATUS. Neither
the Company nor any of its Subsidiaries is (a) an "investment company" as
defined in, or subject to regulation under, the Investment Company Act of 1940
or (b) a "holding company" as defined in, or subject to regulation under, the
Public Utility Holding Company Act of 1935.
SECTION 3.09. TAXES. Except as set forth in Schedule 3.09,
each of the Company and its Subsidiaries (a) has filed or caused to be filed all
Tax returns and reports required to have been filed, all such Tax returns and
reports being accurate in all material respects as and when filed, and (b) has
paid or caused to be paid all Taxes shown as due thereon; except in each case
for (x) filings or Taxes that are being contested in good faith by appropriate
proceedings and for which the Company or such Subsidiary, as applicable, has set
aside on its books adequate reserves, and (y) any failure to file or cause to be
filed such Tax returns or reports, or to pay or cause to be paid such Taxes, to
the extent that such failure could not reasonably be expected to result in a
Material Adverse Effect.
<PAGE> 82
76
SECTION 3.10. ERISA. No ERISA Event has occurred or is
reasonably expected to occur that, when taken together with all other such ERISA
Events for which liability is reasonably expected to occur, could reasonably be
expected to result in a Material Adverse Effect. The present value of all
accumulated benefit obligations of all underfunded Plans (based on the
assumptions used for purposes of Statement of Financial Accounting Standards No.
87) did not, as of the date of the most recent financial statements reflecting
such amounts, exceed by more than $5,000,000 the fair market value of the assets
of all such underfunded Plans.
SECTION 3.11. DISCLOSURE. The Company has disclosed to the
Lenders all agreements, instruments and corporate or other restrictions to which
the Company or any of its Subsidiaries is subject, and all other matters known
to any of them, that, individually or in the aggregate, would reasonably be
expected to result in a Material Adverse Effect. None of the reports, financial
statements, certificates or other information contained in the Confidential
Information Memorandum or furnished by or on behalf of any Loan Party to the
Administrative Agent or any Lender pursuant to Section 5.01 (other than
paragraph (f) thereof), 5.02 or 5.03 of this Agreement (as modified or
supplemented by other information so furnished) contains any untrue statement of
a material fact or omits to state any material fact necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading; PROVIDED that, with respect to projected financial
information, the Company represents only that such information was prepared in
good faith based upon assumptions believed to be reasonable at the time and with
respect to assumptions utilized to compile pro forma historical financial
statements, the Company represents only that such assumptions were believed to
be reasonable at the time so utilized.
SECTION 3.12. SUBSIDIARIES. Schedule 3.12 sets forth as of the
Effective Date the name of, and the ownership interest of the Company in, each
Subsidiary of the Company and identifies each Subsidiary that is a Loan Party as
of the Effective Date.
SECTION 3.13. INSURANCE. Schedule 3.13 sets forth a
description of all insurance maintained by or on behalf of the Company and its
Subsidiaries as of the Effective Date. All premiums in respect of such insurance
due and payable on or before the Effective Date have been paid.
SECTION 3.14. LABOR MATTERS. Except as described in Schedule
3.14, as of the date hereof and the Effective Date, there are no strikes,
lockouts or slowdowns against the Company or any Subsidiary pending or, to the
knowledge of the Company, threatened. The hours worked by and payments made to
employees of the Company and the Subsidiaries have not been in violation of the
Fair
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77
Labor Standards Act or any other applicable Federal, state, local or foreign law
dealing with such matters. All payments due from the Company or any Subsidiary,
or for which any claim may be made against the Company or any Subsidiary, on
account of wages and employee health and welfare insurance and other benefits,
have been paid or accrued as a liability on the books of the Company or such
Subsidiary. The consummation of the Transactions will not give rise to any right
of termination or right of renegotiation on the part of any union under any
collective bargaining agreement to which the Company or any Subsidiary is bound.
SECTION 3.15. SOLVENCY. Immediately after the consummation of
the Transactions to occur on the date of the initial Borrowing hereunder and
immediately following the making of each Loan made on such date and after giving
effect to the application of the proceeds of such Loans, (a) the fair value of
the assets of (i) Holdings and its Subsidiaries, taken in the aggregate, and
(ii) each U.S. Loan Party, at a fair valuation, will exceed their or its debts
and liabilities, subordinated, contingent or otherwise; (b) the present fair
saleable value of the property of (i) Holdings and its Subsidiaries, taken in
the aggregate, and (ii) each U.S. Loan Party will be greater than the amount
that will be required to pay the probable liability on their or its debts and
other liabilities, subordinated, contingent or otherwise, as such debts and
other liabilities become absolute and matured; (c) each of (i) Holdings and its
Subsidiaries, taken in the aggregate, and (ii) each U.S. Loan Party will be able
to pay its debts and liabilities, subordinated, contingent or otherwise, as such
debts and liabilities become absolute and matured; and (d) no U.S. Loan Party
will have and Holdings and its Subsidiaries, taken together, will not have
unreasonably small capital with which to conduct the business in which it is or
they are engaged as such business is now conducted and is proposed to be
conducted following the Effective Date.
ARTICLE IV
CONDITIONS
----------
SECTION 4.01. EFFECTIVE DATE. The obligations of the Lenders
to make Loans and of the Issuing Banks to issue Letters of Credit hereunder
shall not become effective until the date on which each of the following
conditions is satisfied (or waived in accordance with Section 9.02):
(a) The Syndication Agent (or its counsel) shall have received
from each party hereto either (i) a counterpart of this Agreement
signed on behalf of such party or (ii) written evidence satisfactory
to the Syndication Agent (which
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may include telecopy transmission of a signed signature page of this
Agreement) that such party has signed a counterpart of this Agreement.
(b) The Syndication Agent shall have received favorable written
opinions (addressed to the Syndication Agent and the Lenders and dated
the Effective Date) of each of (i) Jones, Day, Reavis & Pogue, U.S.
counsel for the Borrowers, substantially in the form of Exhibit L-1,
(ii) Jones, Day, Reavis & Pogue, and Bose, McKinney & Evans, special
counsel to the Borrowers as to Mortgages, substantially in the form of
Exhibit L-2 and (iii) Jones, Day, Reavis & Pogue, German counsel to
the Borrowers, substantially in the form of Exhibit L-3, and, in the
case of each such opinion required by this paragraph, covering such
other matters relating to the Loan Parties, the Loan Documents or the
Transactions as the Required Lenders shall reasonably request. The
Borrowers hereby request such counsel to deliver such opinions.
(c) The Syndication Agent shall have received such documents and
certificates as the Syndication Agent or its counsel may reasonably
request relating to the organization, existence and (in the case of
the Company and the U.S. Subsidiary Loan Parties) good standing of
each Loan Party, the authorization of the Transactions and any other
legal matters relating to the Loan Parties, the Loan Documents or the
Transactions, all in form and substance satisfactory to the
Syndication Agent and its counsel.
(d) The Syndication Agent shall have received a certificate,
dated the Effective Date and signed by a Financial Officer of the
Company, confirming compliance with the conditions set forth in
paragraphs (a) and (b) of Section 4.02.
(e) The Syndication Agent shall have received, to the extent
invoiced, all fees and other amounts due and payable on or prior to
the Effective Date, including, to the extent invoiced, reimbursement
or payment of all out-of-pocket expenses required to be reimbursed or
paid by any Loan Party hereunder or under any other Loan Document.
(f) The Syndication Agent shall have received counterparts of (i)
the Company Guarantee signed on behalf of the Company, (ii) the U.S.
Subsidiary Guarantee Agreement signed on behalf of each U.S.
Subsidiary Loan Party, and (iii) the German Subsidiary Guarantee
signed on behalf of each German Group Member other than Holdings.
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79
(g) The Collateral Agent shall have received (i) counterparts
of the (x) the Company Pledge Agreement signed on behalf of the
Company, (y) the Company Holdings Pledge Agreement signed and notarized
on behalf of the Company and (z) the U.S. Subsidiary Pledge Agreement
signed on behalf of each U.S. Subsidiary Loan Party, (ii) stock
certificates representing all the outstanding shares of capital stock
of each U.S. Subsidiary owned by or on behalf of the Company or any
U.S. Subsidiary Loan Party, (iii) promissory notes evidencing all
intercompany Indebtedness owed by any U.S. Subsidiary or the Company to
the Company or any U.S. Subsidiary Loan Party and (iv) stock powers and
instruments of transfer, endorsed in blank, with respect to such stock
certificates and promissory notes.
(h) The Collateral Agent shall have received (i) counterparts
of the Holdings Pledge Agreement signed and notarized on behalf of
Holdings and (ii) counterparts of the Holdings Assignment of Claims
signed on behalf of Holdings.
(i) The Collateral Agent shall have received (i) counterparts
of (x) the Company Security Agreement signed on behalf of the Company
and (y) the U.S. Subsidiary Security Agreement signed on behalf of each
U.S. Subsidiary Loan Party and (ii) all documents and instruments,
including Uniform Commercial Code financing statements, required by law
or reasonably requested by the Collateral Agent to be filed, registered
or recorded to create or perfect the Liens intended to be created under
the Security Agreements.
(j) The Collateral Agent shall have received (i) counterparts
of a Mortgage with respect to each Mortgaged Property signed on behalf
of the record owner of such Mortgaged Property, (ii) a policy or
policies of title insurance issued by a nationally recognized title
insurance company, insuring the Lien of each such Mortgage as a valid
first Lien on the Mortgaged Property described therein, free of any
other Liens except as permitted by Section 6.02, together with such
endorsements, coinsurance and reinsurance as the Collateral Agent or
the Required Lenders may reasonably request, and (iii) such surveys,
abstracts, appraisals and legal opinions as may be required pursuant to
such Mortgages or as the Collateral Agent or the Required Lenders may
reasonably request, including FIRREA appraisals to the extent required
by applicable law or regulation.
(k) The Collateral Agent shall have received a completed
Perfection Certificate dated the Effective Date and signed by an
executive officer or Financial Officer of the Company, together with
all attachments contemplated thereby, including (i) the results of a
search of the Uniform Commercial Code
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(or equivalent) filings made with respect to the Loan Parties in the
jurisdictions contemplated by the Perfection Certificate and (ii)
copies of the financing statements (or similar documents) disclosed by
such search and evidence reasonably satisfactory to the Collateral
Agent that the Liens indicated by such financing statements (or similar
documents) are permitted by Section 6.02 or have been released.
(l) The German Issuing Bank shall have issued a German Letter
of Credit to Deutsche Bank in the stated amount of DM 30,000,000 and
Deutsche Bank shall, in a manner reasonably satisfactory to the
Administrative Agent, have (i) released all Liens securing Deutsche
Bank's extensions of credit to any Subsidiary and (ii) agreed not to
take or perfect any such Liens while this Agreement is in effect,
except as otherwise permitted by Section 6.02.
(m) The Acquisitions shall have been consummated on or prior
to the Effective Date and the Lenders shall be satisfied with the
capitalization, structure and equity ownership of the Company and its
Subsidiaries after the Acquisitions to the extent any of the foregoing
varies in any material respect from the information with respect
thereto set forth in the Confidential Information Memorandum. The
aggregate fees and expenses in connection with the Acquisitions shall
not exceed $10,000,000. The Lenders shall have received a certificate
of a Financial Officer of the Company with respect to the foregoing
matters, in form and detail reasonably satisfactory to the Syndication
Agent.
(n) Except as permitted under Section 6.01(viii), all
Indebtedness of the Company and its Subsidiaries, including those
acquired in the Transactions (other than Indebtedness set forth on
Schedule 6.01), shall have been repaid in full, and all obligations
thereunder and security interests relating thereto shall have been
discharged, and the Syndication Agent shall have received satisfactory
evidence of such repayment and discharge.
(o) The Lenders shall have received the Historical Statements
and the Pro Forma Financial Statements, and the Lenders shall be
satisfied that the transactions in connection with the Acquisitions and
the financing arrangements contemplated hereby are consistent with the
sources and uses of funds shown on Schedule 4.01(o).
(p) The Lenders shall be reasonably satisfied as to the amount
and nature of any environmental and employee health and safety
exposures to which the Company and its Subsidiaries may be subject and
the plans of the Company with respect thereto, and the Lenders shall
have received environ-
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mental assessments (including Phase I reports) satisfactory to the
Lenders from an environmental consulting firm satisfactory to the
Syndication Agent.
(q) The Lenders shall be reasonably satisfied in all respects
with (i) the tax position and the contingent tax and other liabilities
of the Company, the Acquired Entities and their respective subsidiaries
and (ii) the arrangements of the Company, the Acquired Entities and
their respective subsidiaries for the repatriation of revenues from
foreign operations to the United States and, in each case, the plans of
the Company with respect thereto.
(r) The Lenders shall be reasonably satisfied with the
sufficiency of amounts available under the Revolving Facilities to meet
the ongoing working capital requirements of the Company and its
Subsidiaries following the Acquisitions and the consummation of the
Transactions.
(s) The consummation of the Transactions shall not (a) violate
any applicable law, statute, rule or regulation or (b) conflict with,
or result in a default or event of default under, (i) any indenture
relating to any Indebtedness of the Company, the Acquired Entities or
any of the their respective subsidiaries that is not being repaid,
repurchased or redeemed in connection with the Acquisitions or (ii) any
other material agreement of the Company, the Acquired Entities or any
of the their respective subsidiaries, and the Syndication Agent shall
have received one or more legal opinions to such effect (including, as
appropriate, those referred to in paragraph (b) above), satisfactory to
the Syndication Agent, from counsel to the Borrowers satisfactory to
the Syndication Agent.
(t) All requisite material Governmental Authorities and third
parties shall have approved or consented to the Acquisitions and the
Transactions to the extent required, all applicable appeal periods
shall have expired and there shall be no governmental or judicial
action, actual or threatened, that could reasonably be expected to
restrain, prevent or impose burdensome conditions on the Acquisitions
or the other Transactions.
(u) The Syndication Agent shall have received evidence
reasonably satisfactory to it that the Company has, and has caused each
of its Subsidiaries to have, with financially sound and reputable
insurance companies, insurance (or, to the extent customary for similar
companies engaged in the same or similar businesses, self insurance) in
such amounts and against such risks (including fire and other risks
insured by extended coverage) as are customarily maintained by similar
companies engaged in the same or similar businesses operating in the
same or similar locations, including public liability
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82
insurance against claims for personal injury, death or property damage
occurring upon, about or in connection with the use of any properties
owned, occupied or controlled by it as well as such other insurance as
may be required by law.
The Syndication Agent shall notify the Company and the Lenders of the Effective
Date, and such notice shall be conclusive and binding. Notwithstanding the
foregoing, the Commitments of the Lenders shall terminate and the obligations of
the Issuing Banks to issue Letters of Credit hereunder shall not become
effective unless each of the foregoing conditions is satisfied (or waived
pursuant to Section 9.02) at or prior to 3:00 p.m., Detroit time, on January 31,
1997.
SECTION 4.02. EACH CREDIT EVENT. The obligation of each Lender
to make a Loan on the occasion of any Borrowing, and of an Issuing Bank to
issue, amend, renew or extend any Letter of Credit (any of the foregoing, a
"CREDIT EVENT"), is (except as otherwise specifically provided in Section 2.04)
subject to the satisfaction of the following conditions:
(a) The representations and warranties of each Loan Party set
forth in the Loan Documents shall be true and correct in all material
respects on and as of the date of such Credit Event.
(b) At the time of and immediately after giving effect to such
Credit Event, no Default shall have occurred and be continuing.
(c) In the event such Loan is to be made to a Subsidiary
Borrower, the German Borrower Condition shall have been satisfied with
respect to such Subsidiary Borrower at or prior to the time of such
Borrowing.
Each Credit Event shall be deemed to constitute a representation and warranty by
the Company and the relevant Borrower on the date thereof as to the matters
specified in paragraphs (a) and (b) of this Section.
ARTICLE V
AFFIRMATIVE COVENANTS
---------------------
Until the Commitments have expired or been terminated and the
principal of and interest on each Loan and all fees payable hereunder shall have
been paid in full and all Letters of Credit shall have expired or terminated and
all
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LC Disbursements shall have been reimbursed, each Borrower covenants and agrees
with the Lenders that:
SECTION 5.01. FINANCIAL STATEMENTS AND OTHER INFORMATION. The
Company will furnish to the Administrative Agent and each Lender:
(a) within 105 days after the end of each fiscal year of the
Company, its audited consolidated balance sheet and related statements
of operations, changes in stockholders' equity and cash flows as of the
end of and for such year, setting forth in each case in comparative
form the figures for the previous fiscal year, all reported on by
Arthur Andersen LLP or other independent public accountants of
recognized national standing (without a "going concern" or like
qualification or exception and without any qualification or exception
as to the scope of such audit) to the effect that such consolidated
financial statements present fairly in all material respects the
financial condition and results of operations of the Company and its
consolidated Subsidiaries on a consolidated basis in accordance with
GAAP consistently applied;
(b) within 50 days after the end of each of the first three
fiscal quarters of each fiscal year of the Company, its consolidated
and, solely with respect to the consolidation of the Company and
Holdings, consolidating balance sheet and related statements of
operations and of cash flows as of the end of and for such fiscal
quarter and the then elapsed portion of the fiscal year, setting forth
in each case in comparative form the figures for the corresponding
period or periods of (or, in the case of the balance sheet, as of the
end of) the previous fiscal year, all certified by one of its Financial
Officers as presenting fairly in all material respects the financial
condition and results of operations of the Company and its consolidated
Subsidiaries on a consolidated basis in accordance with GAAP
consistently applied, subject to normal year-end audit adjustments and
the absence of footnotes;
(c) concurrently with any delivery of financial statements
under clause (a) or (b) above, a certificate of a Financial Officer of
the Company (i) certifying as to whether a Default has occurred and, if
a Default has occurred, specifying the details thereof and any action
taken or proposed to be taken with respect thereto, (ii) setting forth
reasonably detailed calculations demonstrating compliance with Sections
6.11, 6.12, 6.13 and 6.14 and setting forth reasonably detailed
calculations of Excess Cash Flow for the periods covered thereby, (iii)
stating whether any change in GAAP or in the application thereof has
occurred since the date of the Company's audited financial statements
referred to in Section 3.04 and, if any such change has occurred,
specifying the effect of such change on the financial statements
accompanying
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such certificate and (iv) as applicable, certifying as to the
information required under Section 5.03(b);
(d) concurrently with any delivery of financial statements under
clause (a) above, a certificate of the accounting firm that reported
on such financial statements stating whether they obtained knowledge
during the course of their examination of such financial statements of
any Default (which certificate may be limited to the extent required
by accounting rules or guidelines and the preparation of which shall
not require special procedures beyond those ordinarily employed in
connection with such an examination conducted in accordance with
generally accepted auditing standards);
(e) promptly after the same become publicly available, copies of
all periodic and other reports, proxy statements and other materials
filed by the Company or any Subsidiary with the Securities and
Exchange Commission, or any Governmental Authority succeeding to any
or all of the functions of said Commission, or with any national
securities exchange, or distributed by the Company to its shareholders
generally, as the case may be; and
(f) promptly following any request therefor, such other
information regarding the operations, business affairs and financial
condition of the Company or any Subsidiary, or compliance with the
terms of any Loan Document, as either Agent or any Lender may
reasonably request.
SECTION 5.02. NOTICES OF MATERIAL EVENTS. The Company will
furnish to the Administrative Agent and each Lender prompt written notice,
within three Business Days of obtaining knowledge thereof, of the following:
(a) the occurrence of any Default;
(b) the filing or commencement of any action, suit or proceeding
by or before any arbitrator or Governmental Authority against or
affecting the Company or any Affiliate thereof that, if adversely
determined, could reasonably be expected to result in a Material
Adverse Effect;
(c) the occurrence of any ERISA Event that, alone or together
with any other ERISA Events that have occurred, could reasonably be
expected to result in liability of the Company and its Subsidiaries in
an aggregate amount exceeding $5,000,000; and
(d) any other development that results in, or would reasonably be
expected to result in, a Material Adverse Effect.
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Each notice delivered under this Section shall be accompanied by a statement of
a Financial Officer or other executive officer of the Company setting forth the
details of the event or development requiring such notice and any action taken
or proposed to be taken with respect thereto.
SECTION 5.03. INFORMATION REGARDING COLLATERAL. (a) The
Company will furnish to the Collateral Agent prompt written notice of any change
(i) in any U.S. Loan Party's corporate name or in any trade name used to
identify it in the conduct of its business or in the ownership of its
properties, (ii) in the location of any U.S. Loan Party's chief executive
office, its principal place of business, any office in which it maintains books
or records relating to Collateral owned by it or any office or facility at which
Collateral owned by it is located (including the establishment of any such new
office or facility), (iii) in any U.S. Loan Party's identity or corporate
structure or (iv) in any U.S. Loan Party's Federal Taxpayer Identification
Number. The Company agrees not to effect or permit any change referred to in the
preceding sentence unless all filings have been made under the Uniform
Commercial Code or otherwise that are required in order for the Collateral Agent
to continue at all times following such change to have a valid, legal and
perfected security interest in all the Collateral. The Company also agrees
promptly to notify the Collateral Agent if any material portion of the
Collateral is damaged or destroyed.
(b) Each year, at the time of delivery of annual financial
statements with respect to the preceding fiscal year pursuant to clause (a) of
Section 5.01, the Company shall deliver to the Collateral Agent a certificate of
a Financial Officer of the Company (i) setting forth the information required
pursuant to the Perfection Certificate or confirming that there has been no
change in such information since the date of the Perfection Certificate
delivered on the Effective Date or the date of the most recent certificate
delivered pursuant to this Section and (ii) certifying that all Uniform
Commercial Code financing statements (including fixture filings, as applicable)
or other appropriate filings, recordings or registrations, including all
refilings, rerecordings and reregistrations, containing a description of the
Collateral have been filed of record in each governmental, municipal or other
appropriate office in each jurisdiction identified pursuant to clause (i) above
to the extent necessary to protect and perfect the security interests under the
Security Agreements for a period of not less than 18 months after the date of
such certificate (except as noted therein with respect to any continuation
statements to be filed within such period).
SECTION 5.04. EXISTENCE; CONDUCT OF BUSINESS. The Company
will, and will cause each of its Subsidiaries to, do or cause to be done all
things necessary to preserve, renew and keep in full force and effect its legal
existence and the rights, licenses, permits, privileges and franchises material
to the conduct of its business; PROVIDED that the foregoing shall not prohibit
any merger, consolidation, liquidation or
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dissolution permitted under Section 6.03 or any transaction permitted by
Section 6.04(b).
SECTION 5.05. PAYMENT OF OBLIGATIONS. The Company will, and
will cause each of its Subsidiaries to, pay its Indebtedness and other
obligations, including Tax liabilities, before the same shall become delinquent
or in default, except where (a) the validity or amount thereof is being
contested in good faith by appropriate proceedings, (b) the Company or such
Subsidiary has set aside on its books adequate reserves with respect thereto in
accordance with GAAP and (c) such contest effectively suspends collection of the
contested obligation and the enforcement of any Lien securing such obligation.
SECTION 5.06. MAINTENANCE OF PROPERTIES. The Company will, and
will cause each of its Subsidiaries to, keep and maintain all property material
to the conduct of its business in good working order and condition, ordinary
wear and tear excepted.
SECTION 5.07. INSURANCE. (a) The Company will, and will cause
each of its Subsidiaries to, maintain, with financially sound and reputable
insurance companies, insurance (or, to the extent customary for similar
companies engaged in the same or similar businesses, self insurance) in such
amounts and against such risks (including fire and other risks insured by
extended coverage) as are customarily maintained by similar companies engaged in
the same or similar businesses operating in the same or similar locations,
including public liability insurance against claims for personal injury, death
or property damage occurring upon, about or in connection with the use of any
properties owned, occupied or controlled by it as well as such other insurance
as may be required by law.
(b) All polices of casualty insurance maintained by or for the
benefit of any U.S. Loan Party shall be endorsed or otherwise amended to include
a "standard" or "New York" lender's loss payable endorsement, in favor of and
satisfactory to the Collateral Agent, which endorsement shall provide that if
the insurance carrier shall have received written notice from the Administrative
Agent or the Collateral Agent of the occurrence of an Event of Default, or if
the proceeds, payable thereunder are in an amount exceeding $1,000,000, then the
insurance carrier shall pay all proceeds otherwise payable to any U.S. Loan
Party under such policies directly to the Collateral Agent. All such policies
also shall provide that neither the Company, the Administrative Agent, the
Collateral Agent nor any other party shall be a coinsurer thereunder and shall
contain a "Replacement Cost Endorsement", without any deduction for
depreciation, "mortgagee's interest"/"breach of warranty coverage" and such
other provisions as the Administrative Agent or the Collateral Agent may
reasonably require from time to time to protect the interests of the Lenders.
Each
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such policy also shall provide that it shall not be canceled, modified or not
renewed (i) by reason of nonpayment of premium except upon not less than 10
days' prior written notice thereof by the insurer to the Administrative Agent
and the Collateral Agent (giving the Administrative Agent and the Collateral
Agent the right to cure defaults in the payment of premiums) or (ii) for any
other reason except upon not less than 30 days' prior written notice thereof by
the insurer to the Administrative Agent and the Collateral Agent. The Company
shall deliver to the Administrative Agent and the Collateral Agent, prior to the
cancellation, modification or nonrenewal of any such policy of insurance, a copy
of a renewal or replacement policy (or other evidence of renewal of a policy
previously delivered to the Administrative Agent and the Collateral Agent)
together with evidence satisfactory to the Administrative Agent and the
Collateral Agent of payment of the premium therefor to the extent due and
payable.
(c) If at any time the area in which any Mortgaged Property is
located is designated (i) a "flood hazard area" in any Flood Insurance Rate Map
published by the Federal Emergency Management Agency (or any successor agency),
the Company shall obtain flood insurance in such total amount as the
Administrative Agent, the Collateral Agent or the Required Lenders may from time
to time require, and otherwise comply with the National Flood Insurance Program
as set forth in the Flood Disaster Protection Act of 1973, as amended from time
to time.
(d) With respect to any Mortgaged Property, the Company shall
carry and maintain comprehensive general liability insurance including the
"broad form CGL endorsement" and coverage on an occurrence basis against claims
made for personal injury (including bodily injury, death and property damage)
and umbrella liability insurance against any and all claims, with a customary
combined single limit, naming the Collateral Agent as an additional insured, on
forms satisfactory to the Collateral Agent.
(e) The Company shall notify the Administrative Agent and the
Collateral Agent immediately whenever any separate insurance concurrent in form
or contributing in the event of loss with that required to be maintained under
this Section is taken out by any U.S. Loan Party; and shall promptly deliver to
the Administrative Agent and the Collateral Agent a duplicate original copy of
such policy or policies.
SECTION 5.08. BOOKS AND RECORDS; INSPECTION AND AUDIT RIGHTS.
The Company will, and will cause each of its Subsidiaries to, keep proper books
of record and account in which full, true and correct entries are made of all
dealings and transactions in relation to its business and activities to the
extent necessary to maintain financial records in accordance with GAAP. The
Company will, and will cause each of its Subsidiaries to, permit any
representatives designated by either Agent or any
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Lender, upon reasonable prior notice, to visit and inspect its properties, to
examine and make extracts from its books and records, and to discuss its
affairs, finances and condition with its officers and independent accountants,
all at such reasonable times and as often as reasonably requested.
SECTION 5.09. COMPLIANCE WITH LAWS. The Company will, and will
cause each of its Subsidiaries to, comply with all laws, rules, regulations and
orders of any Governmental Authority applicable to it or its property, except
where the failure to do so, individually or in the aggregate, could not
reasonably be expected to result in a Material Adverse Effect.
SECTION 5.10. USE OF PROCEEDS AND LETTERS OF CREDIT. The
proceeds of the Term Loans and the Revolving Loans being made on the date of the
initial Borrowing hereunder will be used only (a) to pay the purchase price (and
related fees and expenses) in connection with the Acquisitions and (b) to repay
Indebtedness of the Borrower and its Subsidiaries on such date. The proceeds of
the Revolving Loans and Swingline Loans will be used only for general corporate
purposes and not for any transaction that has not been approved or recommended
by the board of directors, general partner or equivalent body of the Person to
be acquired. No part of the proceeds of any Loan will be used, whether directly
or indirectly, for any purpose that entails a violation of any of the
Regulations of the Board, including Regulations G, U and X. Letters of Credit
will be limited to standby letters of credit, as opposed to trade letters of
credit, and will be issued for general corporate purposes, including supporting
industrial revenue bond obligations of the Company.
SECTION 5.11. SUBSIDIARIES. (a) If any additional Subsidiary
is formed or acquired after the date hereof, the Company will notify the
Administrative Agent and the Lenders thereof and (i) if such Subsidiary is a
U.S. Subsidiary Loan Party, the Company will cause such Subsidiary to become a
party to the U.S. Subsidiary Guarantee, the U.S. Subsidiary Pledge Agreement and
the U.S. Subsidiary Security Agreement within three Business Days after such
Subsidiary is formed or acquired and promptly take such actions to create and
perfect Liens on such Subsidiary's assets to secure the Obligations of such
Subsidiary as the Collateral Agent or the Required Lenders shall reasonably
request, (ii) if such Subsidiary is a subsidiary of Holdings and a German Group
Member, Holdings will (x) cause such Subsidiary to become a party to the German
Subsidiary Guarantee and (y) execute and deliver to the Collateral Agent a
Holdings Assignment of Claims with respect to inter-company Indebtedness of such
Subsidiary owed to Holdings, and (z) if such Subsidiary is a directly owned
Subsidiary of Holdings, pledge its shares of such Subsidiary pursuant to the
Holdings Pledge Agreement, in each case within three Business Days after such
Subsidiary is formed or acquired and (iii) if any shares of capital stock or
Indebtedness of such Subsidiary are owned by or on behalf of any
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U.S. Loan Party, the Company will cause such shares and promissory notes
evidencing such Indebtedness to be pledged pursuant to a Pledge Agreement within
three Business Days after such Subsidiary is formed or acquired. Any shares of
common stock of a Foreign Subsidiary to be pledged pursuant to the Company
Pledge Agreement, the U.S. Subsidiary Pledge Agreement or any similar security
document shall be limited to 65% of the outstanding shares of common stock of
such Subsidiary).
(b) Holdings will continue to own, directly or indirectly, at
least 51% of the capital stock of each of the German Loan Parties other than
Holdings.
SECTION 5.12. FURTHER ASSURANCES. (a) The Company will, and
will cause each Subsidiary Loan Party to, execute any and all further documents,
financing statements, agreements and instruments, and take all such further
actions (including the filing and recording of financing statements, fixture
filings, mortgages, deeds of trust and other documents), which may be required
under any applicable law, or which either Agent or the Required Lenders may
reasonably request, to effectuate the transactions contemplated by the Loan
Documents or to grant, preserve, protect or perfect the Liens created or
intended to be created by the Security Documents or the validity or priority of
any such Lien, all at the expense of the Loan Parties. The Company also agrees
to provide to either Agent, upon request, lien searches reasonably satisfactory
to such Agent relating to the perfection and priority of the Liens created or
intended to be created by the Security Documents.
(b) If any material assets (including any real property or
improvements thereto or any interest therein) are acquired by the Company or any
U.S. Subsidiary Loan Party after the Effective Date or if Holdings acquires any
stock in any additional direct Subsidiary of Holdings after the Effective Date
(in each case, other than assets constituting Collateral under the Pledge
Agreements or the U.S. Security Agreements), the Company will notify the
Administrative Agent and the Lenders thereof, and, if requested by the
Administrative Agent or the Required Lenders, the Company will cause such assets
or stock to be subjected to a Lien securing the Obligations (or in the case of
Holdings, the Obligations secured under the Holdings Pledge Agreement) and will
take, and cause the Loan Parties to take, such actions as shall be necessary or
reasonably requested by the Collateral Agent to grant and perfect such Liens,
including actions described in paragraph (a) of this Section, all at the expense
of the Loan Parties.
SECTION 5.13. CASUALTY AND CONDEMNATION. (a) The Company will
furnish to the Agents and the Lenders prompt written notice of any significant
casualty or other insured damage to any portion of any Mortgaged Property or the
commencement of any action or proceeding for the taking of any Mortgaged
Property
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or any part thereof or interest therein under power of eminent domain or by
condemnation or similar proceeding.
(b) If any event described in paragraph (a) of this Section
results in Net Proceeds (whether in the form of insurance proceeds, condemnation
award or otherwise), the Collateral Agent is authorized to collect such Net
Proceeds and, if received by the Company or any Subsidiary, such Net Proceeds
shall be paid over to the Collateral Agent; PROVIDED that if the aggregate Net
Proceeds in respect of such event are less than $750,000, such Net Proceeds
shall be paid over to the Company unless a Default has occurred and is
continuing. All such Net Proceeds retained by or paid over to the Collateral
Agent shall be held by the Collateral Agent and released from time to time to
pay the costs of repairing, restoring or replacing the affected property in
accordance with the terms of the applicable Mortgage, subject to the provisions
of the applicable Mortgage regarding application of such Net Proceeds during a
Default.
(c) If any Net Proceeds retained by or paid over to the
Collateral Agent as provided above continue to be held by the Collateral Agent
on the date that is 270 days after the occurrence of the event resulting in such
Net Proceeds, then such Net Proceeds shall be applied to prepay Term Borrowings
as provided in Section 2.11(c).
SECTION 5.14. RATE PROTECTION ARRANGEMENTS. On or prior to
June 30, 1997, the Company and Holdings, respectively, will enter into, and
thereafter maintain in effect, one or more Rate Protection Agreements (which, to
the extent entered into with a Lender will be secured in the same manner as the
Company's Obligations or Holdings' Obligations, as the case may be, but
otherwise shall be unsecured), the effect of which shall be to limit at all
times the interest payable in connection with a notional principal amount of
Indebtedness not less than 50% of the principal amount of the Term Loans of the
Company or of Holdings, as the case may be, outstanding hereunder from time to
time to a maximum rate and on terms and conditions reasonably acceptable, taking
into account current market conditions, to the Administrative Agent.
SECTION 5.15. FISCAL YEAR. The Company will, and will cause
each of its Subsidiaries to, at all times maintain a fiscal year ending on
December 31.
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ARTICLE VI
NEGATIVE COVENANTS
------------------
Until the Commitments have expired or terminated and the
principal of and interest on each Loan and all fees payable hereunder have been
paid in full and all Letters of Credit have expired or terminated and all LC
Disbursements shall have been reimbursed, each Borrower covenants and agrees
with the Lenders that:
SECTION 6.01. INDEBTEDNESS. The Company will not, and will not
permit any Subsidiary to, create, incur, assume or permit to exist any
Indebtedness, except:
(i) Indebtedness created under the Loan Documents;
(ii) Indebtedness existing on the date hereof and set forth in
Schedule 6.01 and extensions, renewals and replacements of any such
Indebtedness that do not increase the outstanding principal amount
thereof;
(iii) Indebtedness of the Company to any Subsidiary and of any
Subsidiary to the Company or any other Subsidiary; PROVIDED that
Indebtedness of any Subsidiary that is not a Loan Party to the Company
or any U.S. Subsidiary Loan Party shall be subject to Section 6.04;
(iv) Guarantees by the Company of Indebtedness of any Subsidiary
and by any Subsidiary of Indebtedness of the Company or any other
Subsidiary; PROVIDED that Guarantees by the Company or any Subsidiary
Loan Party of Indebtedness of any Subsidiary that is not a Loan Party
shall be subject to Section 6.04;
(v) Indebtedness of the Company or any Subsidiary incurred to
finance the acquisition, construction or improvement of any fixed or
capital assets, including Capital Lease Obligations and any
Indebtedness assumed in connection with the acquisition of any such
assets or secured by a Lien on any such assets prior to the acquisition
thereof, and extensions, renewals and replacements of any such
Indebtedness that do not increase the outstanding principal amount
thereof; PROVIDED that (A) such Indebtedness is incurred prior to or
within 90 days after such acquisition or the completion of such
construction or improvement and (B) the aggregate principal amount of
Indebtedness permitted by this clause (v) shall not exceed $5,000,000
at any time outstanding and (C) the aggregate principal amount of all
Basket Indebtedness at any time outstanding shall not exceed
$15,000,000;
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(vi) Indebtedness of any Person that becomes a Subsidiary after
the date hereof and extensions, renewals and replacements of any such
Indebtedness that do not increase the outstanding principal amount
thereof, PROVIDED that (A) such Indebtedness (other than any such
renewal or replacement Indebtedness) exists at the time such Person
becomes a Subsidiary and is not created in contemplation of or in
connection with such Person becoming a Subsidiary, (B) the aggregate
principal amount of Indebtedness permitted by this clause (vi) shall
not exceed $10,000,000 at any time outstanding and (C) the aggregate
principal amount of all Basket Indebtedness at any time outstanding
shall not exceed $15,000,000;
(vii) Indebtedness of the Company or any Subsidiary as an account
party in respect of trade letters of credit;
(viii) until the Deutsche Bank Termination Date, but not
thereafter, Indebtedness of Holdings or any Subsidiary of Holdings
under a revolving line of credit from Deutsche Bank in an aggregate
principal amount at any time outstanding not in excess of DM
30,000,000, which Indebtedness is supported by a German Letter of
Credit issued by the German Issuing Bank in the maximum stated amount
of DM 30,000,000 but is otherwise unsecured; and
(ix) other unsecured Indebtedness in an aggregate principal
amount not exceeding $5,000,000 at any time outstanding; PROVIDED that
the aggregate principal amount of Basket Indebtedness shall not exceed
$15,000,000 at any time outstanding.
SECTION 6.02. LIENS; SALE AND LEASE-BACK TRANSACTIONS. (a) The
Company will not, and will not permit any Subsidiary to, create, incur, assume
or permit to exist any Lien on any property or asset now owned or hereafter
acquired by it, or assign or sell any income or revenues (including accounts
receivable) or rights in respect of any thereof, except:
(i) Liens created under the Loan Documents;
(ii) Permitted Encumbrances;
(iii) any Lien on any property or asset of the Company or any
Subsidiary existing on the date hereof and set forth in Schedule 6.02;
PROVIDED that (i) such Lien shall not apply to any other property or
asset of the Company or any Subsidiary and (ii) such Lien shall secure
only those obligations which it secures on the date hereof and
extensions, renewals and replacements thereof that do not increase the
outstanding principal amount thereof;
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(iv) any Lien existing on any property or asset prior to the
acquisition thereof by the Company or any Subsidiary or existing on any
property or asset of any Person that becomes a Subsidiary after the
date hereof prior to the time such Person becomes a Subsidiary;
PROVIDED that (A) such Lien does not secure any Indebtedness which is
not permitted by Section 6.01, (B) such Lien is not created in
contemplation of or in connection with such acquisition or such Person
becoming a Subsidiary, as the case may be, (C) such Lien shall not
apply to any other property or assets of the Company or any Subsidiary
and (D) such Lien shall secure only those obligations which it secures
on the date of such acquisition or the date such Person becomes a
Subsidiary, as the case may be and extensions, renewals and
replacements thereof that do not increase the outstanding principal
amount thereof;
(v) Liens on fixed or capital assets acquired, constructed or
improved by the Company or any Subsidiary; PROVIDED that (A) such
security interests secure Indebtedness permitted by clause (v) of
Section 6.01, (B) such security interests and the Indebtedness secured
thereby are incurred prior to or within 90 days after such acquisition
or the completion of such construction or improvement (except in the
case of any extension, renewal or replacement Indebtedness permitted by
Section 6.01(v) and Liens securing the same), (C) the Indebtedness
secured thereby (other than Capital Lease Obligations) does not exceed
90% of the cost of acquiring, constructing or improving such fixed or
capital assets and (D) such security interests shall not apply to any
other property or assets of the Company or any Subsidiary;
(vi) Liens in favor of the Company or any Subsidiary;
(vii) any interest of a lessor in the property subject to any
capital lease or operating lease not prohibited by the other provisions
of this Agreement;
(viii) any option or other agreement to purchase any asset of the
Company or any Subsidiary the purchase, sale or other disposition of
which is not otherwise prohibited under this Agreement or any other
Loan Document;
(ix) any interest or title of any consignor of goods consigned
to, or of any creditor of any consignor in goods consigned to such
consignee by, the Company or any Subsidiary;
(x) judgment Liens in respect of any judgment to the extent
that the failure to discharge which, or the existence of which, does
not constitute an Event of Default and as to which no foreclosure
action has been taken;
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(xi) rights of setoff and other interests and claims in favor of
any financial institution with which the Company or any Subsidiary
maintains a lockbox or other deposit account;
(xii) leases or subleases granted to others that do not
materially interfere with the intended use of the relevant property by
the Company or its Subsidiaries;
(xiii) Liens arising out of conditional sale, title retention,
consignment or similar arrangements for the sale of goods entered into
by the Company or any of its Subsidiaries in the ordinary course of
business of the Company or any of its Subsidiaries and, to the extent
such arrangements constitute Indebtedness, securing Indebtedness
permitted by Section 6.01(v) or (vi); and
(xiv) Liens on any proceeds (including, without limitation,
insurance, condemnation, eminent domain and analogous proceeds) of any
property subject to a Lien permitted pursuant to the foregoing
provisions of this Section, and Liens on a product or mass which
includes goods subject to a Lien permitted by the foregoing provisions
of this Section, to the extent contemplated by Section 9-315 of the
Uniform Commercial Code of the State of New York.
(b) The Company will not, and will not permit any Subsidiary
to, enter into any arrangement, directly or indirectly, with any Person whereby
it shall sell or transfer any property, real or personal, used or useful in its
business, whether now owned or hereafter acquired, and thereafter rent or lease
such property or other property which it intends to use for substantially the
same purpose or purposes as the property being sold or transferred.
SECTION 6.03. FUNDAMENTAL CHANGES. (a) The Company will not,
and will not permit any of its Subsidiaries to, merge into or consolidate with
any other Person, or permit any other Person to merge into or consolidate with
it, or sell, transfer, lease or otherwise dispose of (in one transaction or in a
series of transactions) all or substantially all of its assets, or all or
substantially all of the stock of any of its Subsidiaries (in each case, whether
now owned or hereafter acquired), or liquidate or dissolve, except that, if at
the time thereof and immediately after giving effect thereto no Default shall
have occurred and be continuing (i) any Subsidiary may merge into the Company in
a transaction in which the Company is the surviving corporation, (ii) any
Subsidiary may merge into any Subsidiary in a transaction in which the surviving
entity is a Subsidiary, (iii) any Subsidiary may sell, transfer, lease or
otherwise dispose of its assets to the Company or to another Subsidiary and (iv)
any Subsidiary may liquidate or dissolve if the Company determines in good faith
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that such liquidation or dissolution is in the best interests of the Company and
is not materially disadvantageous to the Lenders; PROVIDED that (x) any such
merger involving a Person that is not a wholly owned Subsidiary immediately
prior to such merger shall not be permitted unless also permitted by the
provisions of Section 6.04 (other than Section 6.04(b)(ii)(y), which shall not
provide the basis for any such merger being permissible under this Section) and
(y) a Subsidiary that is a Borrower may not merge, consolidate, liquidate or
dissolve unless, in addition to the foregoing conditions, the surviving entity,
or the entity into which such Subsidiary liquidates or dissolves, is a Borrower
and assumes all Obligations of such Subsidiary in a manner satisfactory to the
Administrative Agent.
(b) The Company will not, and will not permit any of its
Subsidiaries to, engage to any material extent in any business other than
businesses of the type conducted by the Company and its Subsidiaries on the date
of execution of this Agreement and businesses reasonably related thereto.
SECTION 6.04. INVESTMENTS, LOANS, ADVANCES, GUARANTEES AND
ACQUISITIONS; ASSET SALES. (a) The Company will not, and will not permit any of
its Subsidiaries to, purchase, hold or acquire (including pursuant to any merger
with any Person that was not a wholly owned Subsidiary prior to such merger) any
capital stock, evidences of indebtedness or other securities (including any
option, warrant or other right to acquire any of the foregoing) of any other
Person make or permit to exist any loans or advances to any other Person,
Guarantee any obligations of any other Person, pay any Invested Entity Expenses,
or make or permit to exist any investment or any other interest in any other
Person or purchase or otherwise acquire (in one transaction or a series of
transactions) any assets of any other Person constituting a business unit (all
the foregoing, collectively, "INVESTMENTS"), except:
(i) Permitted Investments;
(ii) Investments existing on the date hereof in Subsidiaries
and Invested Entities and Investments received as dividends or
distributions in respect thereof or in exchange therefor, provided in
each case that any transaction giving rise thereto is not otherwise
prohibited by this Agreement or any other Loan Document;
(iii) Investments by the Company and its wholly owned
Subsidiaries in the capital stock of their wholly owned Subsidiaries
(or of Persons that, after giving effect to such Investment, will
become wholly owned Subsidiaries) or in assets of any other Person
constituting a business unit; PROVIDED that any such shares of capital
stock held by a U.S. Loan Party or held directly by Holdings, and the
shares of capital stock of any Subsidiary (to the extent held by the
<PAGE> 102
96
Company or any U.S. Subsidiary or directly by Holdings) acquiring
assets constituting a business unit shall, in each case, be pledged
pursuant to the applicable Pledge Agreement (subject to the
limitations applicable to common stock of a Foreign Subsidiary
referred to in Section 5.11);
(iv) loans or advances made by the Company to any wholly owned
Subsidiary and made by any Subsidiary to the Company or any wholly
owned Subsidiary; PROVIDED that any such loans and advances made by
(x) a U.S. Loan Party shall be pledged pursuant to the applicable
Pledge Agreement and evidenced by a promissory note so pledged and (y)
Holdings shall be assigned to the Lenders pursuant to a Holdings
Assignment of Claims delivered to the Collateral Agent;
(v) Guarantees constituting Indebtedness permitted by Section
6.01;
(vi) Investments acquired in exchange for or in satisfaction of
any payment claim against another Person in connection with a workout
or reorganization of, or bankruptcy or insolvency proceeding relating
to, or a claim settlement with, such Person;
(vii) Hedging Agreements, to the extent permitted by Section 6.05
and covered by this Section 6.04;
(viii) Investments made after the date hereof by the Company or
any Subsidiary in Invested Entities or non-wholly owned Subsidiaries,
provided the aggregate amount of all such Investments outstanding from
time to time does not exceed $5,000,000;
(ix) other Investments, provided that the amount thereof on the
date when made, when added to the sum of (x) the aggregate amount of
then outstanding Investments theretofore made pursuant to this clause
(ix) and that will be outstanding immediately after giving effect to
the proposed investment and (y) the aggregate amount of Restricted
Payments theretofore made (or declared but not yet paid) pursuant to
Section 6.06(a)(iv), does not exceed an amount equal to (I) 25% of the
aggregate amount of Excess Cash Flow for each fiscal year ended on or
after December 31, 1997 and prior to such date in which Excess Cash
Flow is positive MINUS (II) 100% of Excess Cash Flow for any such
fiscal year in which Excess Cash Flow is negative.
<PAGE> 103
97
(b) The Company will not, and will not permit any of its
Subsidiaries to, sell, transfer, lease or otherwise dispose of any asset,
including any capital stock (but excluding payments or transfers of cash in
connection with transactions not otherwise prohibited hereby or by any other
Loan Document), except:
(i) sales of inventory, used or surplus property and sales of
Permitted Investments, in each case in the ordinary course of
business;
(ii) (x) transfers of the purchase price of Investments permitted
by paragraph (a) of this Section, transfers constituting Restricted
Payments permitted by Section 6.06, (y) transfers consisting of Liens
permitted by Section 6.02 and transfers and other dispositions
permitted by Section 6.03(a);
(iii) sales, transfers, leases and dispositions to the Company or
a Subsidiary; PROVIDED that any such sales, transfers or dispositions
involving a Subsidiary that is not a Loan Party shall be made in
compliance with Section 6.07; and
(iv) the sale or disposition of the capital stock or assets of
Sintermetallwerk Lubeck GmbH and of Pressmetall Krebsoege GmbH,
provided that the Net Proceeds thereof are applied in accordance with
Section 2.11(b);
PROVIDED that all sales, transfers, leases and other dispositions permitted by
clauses (i) and (iv) above shall be made for fair value and solely for cash
consideration (or for Investments permitted by Section 6.04(a)(vi) in the
circumstances described therein).
SECTION 6.05. HEDGING AGREEMENTS. The Company will not, and
will not permit any of its Subsidiaries to, enter into any Hedging Agreement,
other than (i) Hedging Agreements entered into in the ordinary course of
business to hedge or mitigate risks to which the Company or any Subsidiary is
exposed in the conduct of its business or the management of its liabilities and
(ii) Rate Protection Agreements entered into pursuant to Section 5.14.
SECTION 6.06. RESTRICTED PAYMENTS; PREPAYMENT OF DEBT. (a) The
Company will not, and will not permit any Subsidiary to, declare or make, or
agree to pay or make, directly or indirectly, any Restricted Payment, except (i)
the Company may declare and pay dividends with respect to its capital stock
payable solely in additional shares of its common stock, (ii) subject to Section
5.04, Subsidiaries may declare and pay dividends or make other distributions
ratably with respect to their capital stock, (iii) the Company may make
Restricted Payments pursuant to and in accordance with stock option plans or
other benefit plans for management or employees of the Company and its
Subsidiaries and (iv) the Company
<PAGE> 104
98
may, provided no Default is continuing or would result therefrom, pay cash
dividends with respect to its capital stock in any fiscal year, not earlier than
the date of delivery of financial statements under Section 5.01(a) in respect of
the immediately preceding fiscal year and not later than June 30 of the current
fiscal year, in an aggregate amount not in excess of 25% of Excess Cash Flow, if
positive, for such immediately preceding fiscal year MINUS any portion of such
Excess Cash Flow theretofore relied upon to make Investments under Section
6.04(a)(ix).
(b) The Company will not, and will not permit any Subsidiary
to, repay, prepay or purchase any Indebtedness for borrowed money of the Company
or any Subsidiary (other than intercompany Indebtedness owed by the Company or a
Subsidiary to the Company or a Subsidiary), except:
(i) the Indebtedness under the Loan Documents;
(ii) payments of Indebtedness permitted under Section 6.01 in
conformity with the regularly scheduled maturity thereof or mandatory
payment provisions thereof;
(iii) if no Default has occurred and is continuing or would
result therefrom, refinancings permitted by Section 6.01;
(iv) the Indebtedness described in clause (viii) of Section 6.01;
and
(v) Indebtedness under the Company's Swedish credit facility in
an aggregate principal amount not to exceed SEK 13,500,000.
SECTION 6.07. TRANSACTIONS WITH AFFILIATES. The Company will
not, and will not permit any Subsidiary to, sell, lease or otherwise transfer
any property or assets to, or purchase, lease or otherwise acquire any property
or assets from, or otherwise engage in any other transactions with, any of its
Affiliates, except (a) transactions in the ordinary course of business at prices
and on terms and conditions not less favorable to the Company or such Subsidiary
than could be obtained on an arm's-length basis from unrelated third parties,
(b) transactions between or among the Company and direct or indirect wholly
owned Subsidiaries of the Company not involving any other Affiliate, (c) any
Restricted Payment permitted by Section 6.06 and (d) as set forth on Schedule
6.07(d).
SECTION 6.08. RESTRICTIVE AGREEMENTS. The Company will not,
and will not permit any Subsidiary to, directly or indirectly, enter into, incur
or permit to exist any agreement or other consensual arrangement that prohibits,
restricts or imposes any condition upon (a) the ability of the Company or any
Subsidiary to
<PAGE> 105
99
create, incur or permit to exist any Lien upon any of its property or assets, or
(b) the ability of any Subsidiary to pay dividends or other distributions with
respect to any shares of its capital stock or to make or repay loans or advances
to the Company or any other Subsidiary or to Guarantee Indebtedness of the
Company or any other Subsidiary; PROVIDED that (i) the foregoing shall not apply
to restrictions and conditions imposed by law or by any Loan Document, (ii) the
foregoing shall not apply to restrictions and conditions existing on the date
hereof identified on Schedule 6.08 (but shall apply to any extension or renewal
of, or any amendment or modification expanding the scope of, any such
restriction or condition), (iii) the foregoing shall not apply to customary
restrictions and conditions contained in agreements relating to the sale of a
Subsidiary (or any assets of any Subsidiary) pending such sale, provided such
restrictions and conditions apply only to the Subsidiary (or the assets) to be
sold and such sale is permitted hereunder, (iv) clause (a) of the foregoing
shall not apply to restrictions or conditions imposed by any agreement relating
to secured Indebtedness permitted by this Agreement if such restrictions or
conditions apply only to the property or assets securing such Indebtedness
(including in the case of Capital Lease Obligations, the assets subject thereto)
and (v) clause (a) of the foregoing shall not apply to customary provisions in
leases and other contracts restricting the assignment thereof or to restrictions
on Liens on assets transferred to the Company on a consignment basis.
SECTION 6.09. CAPITAL EXPENDITURES. The Company will not, and
will not permit any of its Subsidiaries to, make cash Capital Expenditures in
any fiscal year set forth below to the extent that the aggregate amount thereof
for the Company and all its Subsidiaries would exceed the sum of (i) the amount
set forth opposite such fiscal year in the table below PLUS (ii) the lesser of
(x) the excess, if any, of the amount of Capital Expenditures set forth in the
table below in respect of the immediately prior fiscal year over the aggregate
cash Capital Expenditures made in such prior fiscal year and (y) 25% of the
amount of Capital Expenditures set forth in the table below in respect of the
immediately prior fiscal year, PROVIDED that Capital Expenditures constituting
the application of cash held by the trustee under the Richton IRB for Capital
Expenditures relating to the Richton Park facility shall not constitute Capital
Expenditures for purposes of this Section:
<PAGE> 106
100
<TABLE>
<CAPTION>
FISCAL YEAR CAPITAL EXPENDITURE AMOUNT
----------- --------------------------
<S> <C>
1996 $25,000,000
1997 23,000,000
1998 22,000,000
1999 22,000,000
2000 22,000,000
2001 24,500,000
2002 26,500,000
2003 and thereafter 28,500,000
</TABLE>
SECTION 6.10. OTHER ARRANGEMENTS. The Company will not and
will not permit any of its Subsidiaries to, directly or indirectly terminate,
amend, waive or permit to be terminated, amended or waived any agreement
governing Indebtedness or any other material agreement in a manner adverse in
any material respect to the interests of the Lenders.
SECTION 6.11. DEBT TO CONSOLIDATED EBITDA. The Company will
not (i) permit the ratio of Total Debt to 400% of Consolidated EBITDA for the
fiscal quarter ending March 31, 1997, to be greater than 4.25 to 1.00 on any
date from March 31, 1997 through June 29, 1997, (ii) permit the ratio of Total
Debt to 200% of Consolidated EBITDA for the six month period ending June 30,
1997, to be greater than 4.25 to 1.00 on any date from June 30, 1997 through
September 29, 1997, (iii) permit the ratio of Total Debt to 133 1/3% of
Consolidated EBITDA for the nine month period ending September 30, 1997, to be
greater than 4.25 to 1.00 on any date from September 30, 1997 through December
30, 1997 and (iv) on any date on or after December 31, 1997, permit the ratio of
Total Debt to Consolidated EBITDA for the period of four consecutive fiscal
quarters most recently ended on or prior to such date to be greater than the
ratio set forth below in respect of the relevant period that includes the last
day of such period of four consecutive fiscal quarters:
<PAGE> 107
101
<TABLE>
<CAPTION>
LAST DAY OF FOUR FISCAL
-----------------------
QUARTERS OCCURRING RATIO
------------------ -----
<S> <C>
On or after December 31, 1997 and
on or prior to June 30, 1998 4.25 to 1.00
After June 30, 1998, and on or
prior to December 31, 1999 3.75 to 1.00
After December 31, 1999 and on or
prior to December 31, 2000 3.00 to 1.00
After December 31, 2000 2.50 to 1.00
</TABLE>
SECTION 6.12. FIXED CHARGE COVERAGE RATIO. The Company will
not permit the Fixed Charge Coverage Ratio (i) for any of the periods of one,
two, three or four fiscal quarters ending March 31, 1997, June 30, 1997,
September 30, 1997, or December 31, 1997, respectively, to be less than 1.00 to
1.00, (ii) for any period of four fiscal quarters ending March 31, 1998 and June
30, 1998 to be less than 1.00 to 1.00, (iii) for any period of four fiscal
quarters ending on or after September 30, 1998, and on or before December 31,
1999 to be less than 1.05 to 1.00 or (iv) for any period of four consecutive
fiscal quarters ending on or after March 31, 2000 to be less than 1.10 to 1.00.
SECTION 6.13. INTEREST COVERAGE RATIO. The Company will not
permit the ratio of Consolidated EBITDA to Consolidated Interest Expense for any
of the periods of one, two, three or four fiscal quarters ended March 31, 1997,
June 30, 1997, September 30, 1997, or December 31, 1997, respectively, to be
less than 3.00 to 1.00, or for any period of four consecutive fiscal quarters
ending on or after March 31, 1998 to be less than the ratio set forth below
opposite the period which includes the last day of such period of four
consecutive quarters:
<TABLE>
<CAPTION>
PERIOD RATIO
------ -----
<S> <C>
Through June 30, 1998 3.25 to 1.00
From July 1, 1998 through December 31, 1998 3.50 to 1.00
From January 1, 1999 through December 31, 1999 3.75 to 1.00
From January 1, 2000 through June 30, 2000 4.00 to 1.00
Thereafter 4.50 to 1.00
</TABLE>
SECTION 6.14. NET WORTH. The Company will not permit its
Consolidated Net Worth on any date (i) through and including December 30, 1996,
to be less than $48,500,000, and (ii) on or after December 31, 1996, to be less
than (x) the greater of $48,500,000 and 90% of the Company's Consolidated Net
Worth as
<PAGE> 108
102
reported in its audited financial statements for the year ending December 31,
1996, plus (y) 50% of Consolidated Net Income of the Company, if positive, for
each fiscal year ending after December 31, 1996, plus (z) if such date is not
the last day of a fiscal year, 50% of Consolidated Net Income of the Company, if
positive, for the period consisting of any fiscal quarters of the then current
fiscal year that have ended on or before such date.
SECTION 6.15. EBITDA. The Company will not permit Consolidated
EBITDA of the Company and its Subsidiaries for the fiscal quarter ending March
31, 1997, to be less than $15,000,000, for the period of two fiscal quarters
ending June 30, 1997 to be less than $30,000,000, for the period of three fiscal
quarters ending September 30, 1997 to be less than $40,000,000 and for any
period of four consecutive fiscal quarters ended on or after December 31, 1997
to be less than the amount set forth below opposite the period which includes
the last day of such period of four fiscal quarters:
<TABLE>
<CAPTION>
PERIOD AMOUNT
------ ------
<S> <C>
Through December 31, 1997 $55,000,000
From January 1, 1998 through September 30, 1998 60,000,000
From October 1, 1998 through December 31, 1998 65,000,000
From January 1, 1999 through September 30, 1999 67,500,000
From October 1, 1999 through December 31, 1999 72,500,000
From January 1, 2000 through September 30, 2000 75,000,000
From October 1, 2000 through December 31, 2000 80,000,000
On and after January 1, 2001 85,000,000
</TABLE>
ARTICLE VII
EVENTS OF DEFAULT
-----------------
If any of the following events ("EVENTS OF DEFAULT") shall
occur:
(a) any Borrower shall fail to pay any principal of any Loan
or any reimbursement obligation of such Borrower in respect of any LC
Disbursement when and as the same shall become due and payable, whether
at the due date thereof or at a date fixed for prepayment thereof or
otherwise;
(b) any Borrower shall fail to pay any interest on any Loan of
such Borrower or any fee or any other amount (other than an amount
referred to in
<PAGE> 109
103
clause (a) of this Article) payable by such Borrower under this
Agreement, when and as the same shall become due and payable, and such
failure shall continue unremedied for a period of three Business Days;
(c) any representation or warranty made or deemed made by or
on behalf of any Borrower or any Subsidiary in or in connection with
any Loan Document or any amendment or modification thereof or waiver
thereunder, or in any report, certificate, financial statement or other
document furnished pursuant to or in connection with any Loan Document
or any amendment or modification thereof or waiver thereunder, shall
prove to have been incorrect in any material respect when made or
deemed made;
(d) any Borrower shall fail to observe or perform any
covenant, condition or agreement contained in Section 5.02, 5.04 or
5.10 or in Article VI;
(e) any Loan Party shall fail to observe or perform any
covenant, condition or agreement contained in any Loan Document (other
than those specified in clause (a), (b) or (d) of this Article), and
such failure shall continue unremedied for a period of 30 days after
notice thereof from the Administrative Agent to the Company (which
notice will be given at the request of any Lender);
(f) the Company or any Subsidiary shall fail to make any
payment (whether of principal or interest and regardless of amount) in
respect of any Material Indebtedness, when and as the same shall become
due and payable or within any period of grace applicable thereto;
(g) any event or condition occurs that results in any Material
Indebtedness becoming due prior to its scheduled maturity or that at
the time enables or permits the holder or holders of any Material
Indebtedness or any trustee or agent on its or their behalf with the
giving of notice (after giving effect to any applicable period of
grace) to cause any Material Indebtedness to become due, or to require
the prepayment, repurchase, redemption or defeasance thereof, prior to
its scheduled maturity; PROVIDED that this clause (g) shall not apply
to secured Indebtedness that becomes due as a result of the voluntary
sale or transfer of, or casualty, condemnation or other involuntary
occurrence with respect to, the property or assets securing such
Indebtedness (including assets subject to Capital Lease Obligations);
(h) an involuntary proceeding shall be commenced or an
involuntary petition shall be filed seeking (i) liquidation,
reorganization or other relief in
<PAGE> 110
104
respect of the Company or any other Loan Party or its debts, or of a
substantial part of its assets, under any Federal, state or foreign
bankruptcy, insolvency, receivership or similar law now or hereafter in
effect or (ii) the appointment of a receiver, trustee, custodian,
sequestrator, conservator or similar official for the Company or any
other Loan Party or for a substantial part of its assets, and, in any
such case, such proceeding or petition shall continue undismissed for
60 days or an order or decree approving or ordering any of the
foregoing shall be entered;
(i) the Company or any other Loan Party shall (i) voluntarily
commence any proceeding or file any petition seeking liquidation,
reorganization or other relief under any Federal, state or foreign
bankruptcy, insolvency, receivership or similar law now or hereafter in
effect, (ii) consent to the institution of, or fail to contest in a
timely and appropriate manner, any proceeding or petition described in
clause (h) of this Article, (iii) apply for or consent to the
appointment of a receiver, trustee, custodian, sequestrator,
conservator or similar official for the Company or any other Loan party
or for a substantial part of its assets, (iv) file an answer admitting
the material allegations of a petition filed against it in any such
proceeding, (v) make a general assignment for the benefit of creditors
or (vi) take any action for the purpose of effecting any of the
foregoing;
(j) the Company or any other Loan Party shall become unable,
admit in writing its inability, or fail generally, to pay its debts as
they become due;
(k) one or more judgments for the payment of money in an
aggregate amount in excess of $5,000,000 (or the Dollar Equivalent
thereof) shall be rendered against the Company, any other Loan Party or
any combination thereof and the same shall remain undischarged for a
period of 30 consecutive days during which execution shall not be
effectively stayed, or any action shall be legally taken by a judgment
creditor to attach or levy upon any assets of the Company or any other
Loan Party to enforce any such judgment;
(l) an ERISA Event shall have occurred that, in the opinion of
the Required Lenders, when taken together with all other ERISA Events
that have occurred, could reasonably be expected to result in a
Material Adverse Effect;
(m) any Lien purported to be created under any Security
Document shall cease to be, or shall be asserted by any Loan Party not
to be, a valid and perfected Lien on any Collateral, with the priority
required by the applicable Security Document, except (i) as a result of
the sale or other disposition of the applicable Collateral in a
transaction permitted under the Loan Documents or
<PAGE> 111
105
(ii) as a result of the Collateral Agent's failure to maintain
possession of any stock certificates, promissory notes or other
instruments delivered to it under any Pledge Agreement;
(n) any of the Guarantee Agreements or Security Agreements
shall for whatever reason be terminated or cease to be in full force
and effect, or the enforceability thereof shall be contested by any
Loan Party; or
(o) a Change in Control shall occur;
then, and in every such event (other than an event with respect to any Borrower
described in clause (h) or (i) of this Article), and at any time thereafter
during the continuance of such event, the Administrative Agent may, and at the
request of the Required Lenders shall, by notice to the Company, take either or
both of the following actions, at the same or different times: (i) terminate the
Commitments, and thereupon the Commitments shall terminate immediately, and (ii)
declare the Loans then outstanding to be due and payable in whole (or in part,
in which case any principal not so declared to be due and payable may thereafter
be declared to be due and payable), and thereupon the principal of the Loans so
declared to be due and payable, together with accrued interest thereon and all
fees and other obligations of the Borrowers accrued hereunder, shall become due
and payable immediately, without presentment, demand, protest or other notice of
any kind, all of which are hereby waived by each Borrower; and in case of any
event with respect to any Borrower described in clause (h) or (i) of this
Article, the Commitments shall automatically terminate and the principal of the
Loans then outstanding, together with accrued interest thereon and all fees and
other obligations of the Borrowers accrued hereunder, shall automatically become
due and payable, without presentment, demand, protest or other notice of any
kind, all of which are hereby waived by each Borrower.
ARTICLE VIII
THE AGENTS
----------
Each of the Lenders and each Issuing Bank hereby irrevocably
appoints each Agent as its agent, including, without limitation, to accept, as
Collateral Agent on behalf of each Lender, the pledge of shares in any
Subsidiary as security for the Obligations of any Loan Party, and authorizes
each Agent to take such actions on its behalf and to exercise such powers as are
delegated to the such Agent by the terms of the Loan Documents, together with
such actions and powers as are reasonably incidental thereto.
<PAGE> 112
106
Any bank serving as an Agent hereunder shall have the same
rights and powers in its capacity as a Lender as any other Lender and may
exercise the same as though it were not an Agent, and such bank and its
Affiliates may accept deposits from, lend money to and generally engage in any
kind of business with the Company or any Subsidiary or other Affiliate thereof
as if it were not an Agent hereunder.
Neither Agent shall have any duties or obligations except
those expressly set forth in the Loan Documents. Without limiting the generality
of the foregoing, (a) neither Agent shall be subject to any fiduciary or other
implied duties, regardless of whether a Default has occurred and is continuing,
(b) neither Agent shall have any duty to take any discretionary action or
exercise any discretionary powers, except discretionary rights and powers
expressly contemplated by the Loan Documents that such Agent is required to
exercise in writing by the Required Lenders (or such other number or percentage
of the Lenders as shall be necessary under the circumstances as provided in
Section 9.02), and (c) except as expressly set forth in the Loan Documents,
neither Agent shall have any duty to disclose, and shall not be liable for the
failure to disclose, any information relating to the Company or any of its
Subsidiaries that is communicated to or obtained by the bank serving as Agent or
any of its Affiliates in any capacity. Neither Agent shall be liable for any
action taken or not taken by it with the consent or at the request of the
Required Lenders (or such other number or percentage of the Lenders as shall be
necessary under the circumstances as provided in Section 9.02) or in the absence
of its own gross negligence or wilful misconduct. Each Agent shall be deemed not
to have knowledge of any Default unless and until written notice thereof is
given to the Administrative Agent by the Company or a Lender, in which case the
Administrative Agent shall promptly give notice to the Lenders of the receipt of
such notice of Default, and neither Agent shall be responsible for or have any
duty to ascertain or inquire into (i) any statement, warranty or representation
made in or in connection with any Loan Document, (ii) the contents of any
certificate, report or other document delivered thereunder or in connection
therewith, (iii) the performance or observance of any of the covenants,
agreements or other terms or conditions set forth in any Loan Document, (iv) the
validity, enforceability, effectiveness or genuineness of any Loan Document or
any other agreement, instrument or document, or (v) the satisfaction of any
condition set forth in Article IV or elsewhere in any Loan Document, other than
to confirm receipt of items expressly required to be delivered to such Agent.
Each Agent shall be entitled to rely upon, and shall not incur
any liability for relying upon, any notice, request, certificate, consent,
statement, instrument, document or other writing believed by it to be genuine
and to have been signed or sent by the proper Person. Each Agent also may rely
upon any statement made to it orally or by telephone and believed by it to be
made by the proper Person, and shall not incur any liability for relying
thereon. Each Agent may consult with
<PAGE> 113
107
legal counsel (who may be counsel for the Borrowers), independent accountants
and other experts selected by it, and shall not be liable for any action taken
or not taken by it in accordance with the advice of any such counsel,
accountants or experts.
Each Agent may perform any and all its duties and exercise its
rights and powers by or through any one or more sub-agents appointed by such
Agent. Each Agent and any such sub-agent may perform any and all its duties and
exercise its rights and powers through their respective Related Parties. The
exculpatory provisions of the preceding paragraphs shall apply to any such
sub-agent and to the Related Parties of each Agent and any such sub-agent, and
shall apply to their respective activities in connection with the syndication of
the credit facilities provided for herein as well as activities as Agent. NBD
Bank has appointed its Affiliate, The First National Bank of Chicago, to act as
a sub-agent in respect of the German Loan Parties and Loans and payments to be
made hereunder in Deutschemarks.
Subject to the appointment and acceptance of a successor Agent
as provided in this paragraph, an Agent may resign at any time by notifying the
Lenders, the Issuing Banks and the Company. Upon any such resignation, the
Required Lenders shall have the right, in consultation with the Company, to
appoint a successor. If no successor shall have been so appointed by the
Required Lenders and shall have accepted such appointment within 30 days after
the retiring Agent gives notice of its resignation, then the retiring Agent may,
on behalf of the Lenders and the Issuing Banks, appoint a successor Agent which
shall be a bank with an office in New York, New York, or an Affiliate of any
such bank. Upon the acceptance of its appointment as Agent hereunder by a
successor, such successor shall succeed to and become vested with all the
rights, powers, privileges and duties of the retiring Agent, and the retiring
Agent shall be discharged from its duties and obligations hereunder. The fees
payable by the Borrowers to a successor Agent shall be the same as those payable
to its predecessor unless otherwise agreed between the Company and such
successor. After an Agent's resignation hereunder, the provisions of this
Article and Section 9.03 shall continue in effect for the benefit of such
retiring Agent, its subagents and their respective Related Parties in respect of
any actions taken or omitted to be taken by any of them while it was acting as
Agent.
Each Lender acknowledges that it has, independently and
without reliance upon either Agent or any other Lender and based on such
documents and information as it has deemed appropriate, made its own credit
analysis and decision to enter into this Agreement. Each Lender also
acknowledges that it will, independently and without reliance upon either Agent
or any other Lender and based on such documents and information as it shall from
time to time deem appropriate, continue to make its own decisions in taking or
not taking action under or based upon this
<PAGE> 114
108
Agreement, any other Loan Document or related agreement or any document
furnished hereunder or thereunder.
Each Lender hereby (i) appoints the Collateral Agent the
attorney-in-fact of such Lender to execute and deliver, on behalf of and in the
name of such Lender, any pledge agreement, guarantee or assignment of claims of
any subsidiary of the Company or Holdings in favor of such Lender, (ii)
authorizes the Collateral Agent to appoint any further agents or attorneys to
execute and deliver, or otherwise to act, on behalf of and in the name of the
Collateral Agent for any such purpose and (iii) approves, pursuant to Section
185 of the German Civil Code, the acts performed and declarations made by Claus
Gerber before Notary Dr. Pilger in Frankfurt am Main, Germany on December 17,
1996 in connection with the pledge to the Lenders of shares in Holdings
(Notary's Document No. 529/96), Krebsoege Sinterholding Gmbh (Notary's Document
No. 530/96) and Metallwerk Langensalza Gmbh (Notary's Document No. 531/96). The
Lenders hereby relieve Claus Gerber from the self-dealing restrictions imposed
by Section 181 of the German Civil Code.
ARTICLE IX
MISCELLANEOUS
-------------
SECTION 9.01. NOTICES. Except in the case of notices and other
communications expressly permitted to be given by telephone, all notices and
other communications provided for herein shall be in writing and shall be
delivered by hand or overnight courier service, mailed by certified or
registered mail or sent by telecopy, as follows:
(a) if to the Company, to it at 50 Public Square (Suite 3200),
Cleveland, OH 44113, Attention of Michael T. Kestner (Telecopy No.
(216) 771-1711), with a copy, which shall not constitute notice, to
Chris Kelley, Esq., Jones, Day, Reavis & Pogue, 901 Lakeside Avenue,
Cleveland, Ohio 44114 (Telecopy No. (216) 586-0212);
(b) if to any German Borrower, to it (in care of Holdings) at 50
Public Square (Suite 3200), Cleveland, Ohio 44113, Attention of
Michael T. Kestner (Telecopy No. (216) 771-1711), with a copy, which
shall not constitute notice to Jurgen Reemers, Esq., Jones, Day,
Reavis & Pogue, Bockenheimer Landstrasse 42, 60323 Frankfurt-am-Main,
Germany;
(c) if to the Administrative Agent, to NBD Bank, 611 Woodward
Avenue, Detroit, Michigan 48226, Attention of Agency Administrators
(Telecopy No. (313) 225-2747) or, in the case of notices relating to
German
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Swingline Borrowings, to The First National Bank of Chicago, Frankfurt
Branch, at Hochstrasse 35, 60313 Frankfurt-am-Main, Germany, Attention
of Steve Voigt (Telecopy No. 011-49-69-299876-80);
(d) if to the Collateral Agent, to it at 611 Woodward Avenue,
Detroit, Michigan 48226, Attention of Agency Administrators (Telecopy
No. (313) 225-2747);
(e) if to the German Issuing Bank, to First National Bank of
Chicago, Frankfurt Branch, at Hochstrasse 35, 60313 Frankfurt-am-Main,
Germany, Attention of Steve Voigt (Telecopy No. 011-49-69-299876-80);
(f) if to the U.S. Issuing Bank, to NBD Bank, at 611 Woodward
Avenue, Detroit, Michigan 48226, Attention of Agency Administrators,
(Telecopy No. (313) 225-2747);
(g) if to the German Swingline Lender, to First National Bank of
Chicago, Frankfurt Branch, at Hochstrasse 35, 60313 Frankfurt-am-Main,
Germany, Attention of Steve Voigt (Telecopy No. 011-49-69-299876-80);
(h) if to the U.S. Swingline Lender, to NBD Bank at 611 Woodward
Avenue, Detroit, Michigan 48226, Attention of Agency Administrators
(Telecopy No. (313)-225-2747); and
(i) if to any other Lender, to it at its address (or telecopy
number) set forth in its Administrative Questionnaire.
Any party hereto may change its address or telecopy number for notices and other
communications hereunder by notice to the other parties hereto. All notices and
other communications given to any party hereto in accordance with the provisions
of this Agreement shall be deemed to have been given on the date of receipt.
SECTION 9.02. WAIVERS; AMENDMENTS. (a) No failure or delay by
either Agent, either Issuing Bank or any Lender in exercising any right or power
hereunder or under any other Loan Document shall operate as a waiver thereof,
nor shall any single or partial exercise of any such right or power, or any
abandonment or discontinuance of steps to enforce such a right or power,
preclude any other or further exercise thereof or the exercise of any other
right or power. The rights and remedies of the Agents, the Issuing Banks and the
Lenders hereunder and under the other Loan Documents are cumulative and are not
exclusive of any rights or remedies that they would otherwise have. No waiver of
any provision of any Loan Document or consent to any departure by any Loan Party
therefrom shall in any event be
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effective unless the same shall be permitted by paragraph (b) of this Section,
and then such waiver or consent shall be effective only in the specific instance
and for the purpose for which given. Without limiting the generality of the
foregoing, the making of a Loan or issuance of a Letter of Credit shall not be
construed as a waiver of any Default, regardless of whether an Agent, any Lender
or any Issuing Bank may have had notice or knowledge of such Default at the
time.
(b) Neither this Agreement nor any other Loan Document nor any
provision hereof or thereof may be waived, amended or modified except, in the
case of this Agreement, pursuant to an agreement or agreements in writing
entered into by the Company and the Required Lenders or, in the case of any
other Loan Document, pursuant to an agreement or agreements in writing entered
into by the applicable Agent thereunder and the Loan Party or Loan Parties that
are parties thereto, in each case with the consent of the Required Lenders;
PROVIDED that no such agreement shall (i) increase the Commitment of any Lender
or increase the express obligations of any Lender hereunder (it being agreed
that waivers, amendments or other modifications relating to Defaults, Events of
Default, representations, warranties, conditions to borrowing, or covenants or
other obligations of any Loan Party that otherwise may be approved by the
Required Lenders shall be deemed not to increase an obligation of any Lender
hereunder) without the written consent of such Lender, (ii) reduce the principal
amount of any Loan or LC Disbursement or reduce the rate of interest thereon, or
reduce any fees payable hereunder, without the written consent of each Lender
affected thereby, (iii) postpone the scheduled date of payment of the principal
amount of any Loan or LC Disbursement, or any interest thereon, or any fees
payable hereunder, or reduce the amount of, waive or excuse any such payment,
waive any mandatory prepayment required by Section 2.11, or postpone the
scheduled date of expiration of any Commitment, without the written consent of
each Lender affected thereby, (iv) change Section 2.18(b) or (c) in a manner
that would alter the pro rata sharing of payments required thereby, without the
written consent of each Lender, (v) change any of the provisions of this Section
or the definition of "Required Lenders" or any other provision of any Loan
Document specifying the number or percentage of Lenders (or Lenders of any
Class) required to waive, amend or modify any rights thereunder or make any
determination or grant any consent thereunder, without the written consent of
each Lender (or each Lender of such Class, as the case may be), (vi) release the
Company or any Subsidiary Loan Party from its Guarantee under the relevant
Guarantee Agreement (except as expressly provided in such Guarantee Agreement),
or limit its liability in respect of such Guarantee, without the written consent
of each Lender affected thereby, (vii) release any substantial portion of the
Collateral from the Liens of the Security Documents, except as expressly
provided in such Security Document, without the written consent of each Lender
affected thereby, (viii) waive any of the conditions in Section 4.01, without
the written consent of each Lender affected thereby, (ix) modify the terms
affecting any
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issued and outstanding Letter of Credit without the consent of the relevant
Issuing Bank or (x) change any provisions of any Loan Document in a manner that
by its terms adversely affects the rights in respect of payments due to Lenders
holding Loans of any Class differently than those holding Loans of any other
Class, without the written consent of Lenders holding a majority in interest of
the outstanding Loans and unused Commitments of each affected Class; PROVIDED
FURTHER that no such agreement shall amend, modify or otherwise affect the
rights or duties of either Agent, either Issuing Bank or the Swingline Lender
hereunder without the prior written consent of such Agent, Issuing Bank or the
Swingline Lender, as the case may be. The foregoing shall not affect the ability
of the Administrative Agent or the Collateral Agent pursuant to Section 9.15 to
terminate Liens and security interests created by the Loan Documents without the
consent of the Lenders affected thereby.
SECTION 9.03. EXPENSES; INDEMNITY; DAMAGE WAIVER. (a) The
Company shall pay (i) all reasonable out-of-pocket expenses incurred by each
Agent, the Syndication Agent and their respective Affiliates, (x) in connection
with the syndication of the credit facilities provided for herein, the
preparation and ordinary administration of the Loan Documents, including the
reasonable fees, charges and disbursements of a single overall counsel, and
appropriate local counsel, including German counsel, for the Agents and (y) in
connection with any amendments, modifications or waivers of the provisions
thereof (whether or not the transactions contemplated hereby or thereby shall be
consummated), including the reasonable fees, charges and disbursements of
counsel for the Agents, (ii) all reasonable out-of-pocket expenses incurred by
either Issuing Bank in connection with the issuance, amendment, renewal or
extension of any Letter of Credit or any demand for payment thereunder and (iii)
all out-of-pocket expenses incurred by the either Agent, either Issuing Bank or
any Lender, including the fees, charges and disbursements of any counsel for
either Agent, the Syndication Agent, either Issuing Bank or any Lender, in
connection with the enforcement or protection of its rights in connection with
the Loan Documents, including its rights under this Section, or in connection
with the Loans made or Letters of Credit issued hereunder, including all such
out-of-pocket expenses incurred during any workout, restructuring or
negotiations in respect of such Loans or Letters of Credit, PROVIDED that the
Lenders shall bear the cost and expense of any visit or inspection pursuant to
Section 5.08 unless a Default shall have occurred and be continuing.
(b) The Company shall indemnify each Agent, the Syndication
Agent, each Issuing Bank and each Lender, and each Related Party of any of the
foregoing Persons (each such Person being called an "INDEMNITEE") against, and
hold each Indemnitee harmless from, any and all losses, claims, damages,
liabilities and related expenses, including the fees, charges and disbursements
of any counsel for any Indemnitee, incurred by or asserted against any
Indemnitee arising out of, in
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connection with, or as a result of any actual or prospective claim, litigation,
investigation or proceeding, whether based on contract, tort or any other theory
and regardless of whether any Indemnitee is a party thereto, relating to or
arising in connection with (i) the execution or delivery of any Loan Document or
any other agreement or instrument contemplated hereby, the performance by the
parties to the Loan Documents of their respective obligations thereunder or the
consummation of the Transactions or any other transactions contemplated hereby,
(ii) any Loan or Letter of Credit or the use or proposed use of the proceeds
therefrom (including any refusal by an Issuing Bank to honor a demand for
payment under a Letter of Credit if the documents presented in connection with
such demand do not strictly comply with the terms of such Letter of Credit) or
(iii) any actual or alleged presence or release of Hazardous Materials on or
from any Mortgaged Property or any other property owned or operated by the
Company or any of its Subsidiaries, or any Environmental Liability related in
any way to the Company or any of its Subsidiaries; PROVIDED that such indemnity
shall not, as to any Indemnitee, be available to the extent that such losses,
claims, damages, liabilities or related expenses are determined by a court of
competent jurisdiction by final and nonappealable judgment to have resulted from
the gross negligence or wilful misconduct of such Indemnitee.
(c) To the extent that the Company fails to pay any amount
required to be paid by it to either Agent, the Syndication Agent, either Issuing
Bank or either Swingline Lender under paragraph (a) or (b) of this Section, each
Lender severally agrees to pay to such Agent, the Syndication Agent, such
Issuing Bank or the Swingline Lender, as the case may be, such Lender's pro rata
share (determined as of the time that the applicable unreimbursed expense or
indemnity payment is sought) of such unpaid amount; PROVIDED that the
unreimbursed expense or indemnified loss, claim, damage, liability or related
expense, as the case may be, was incurred by or asserted against such Agent, the
Syndication Agent, such Issuing Bank or the Swingline Lender in its capacity as
such. For purposes hereof, a Lender's "pro rata share" shall be determined based
upon its share of the sum of the total Revolving Exposures, outstanding Term
Loans and unused Commitments at the time.
(d) To the extent permitted by applicable law, no Borrower
shall assert, and each Borrower hereby waives, any claim against any Indemnitee,
on any theory of liability, for special, indirect, consequential or punitive
damages (as opposed to direct or actual damages) arising out of, in connection
with, or as a result of, this Agreement or any agreement or instrument
contemplated hereby, the Transactions, any Loan or Letter of Credit or the use
of the proceeds thereof.
(e) All amounts due under this Section shall be payable not
later than three Business Days after written demand therefor.
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SECTION 9.04. SUCCESSORS AND ASSIGNS. (a) The provisions of
this Agreement shall be binding upon and inure to the benefit of the parties
hereto and their respective successors and assigns permitted hereby (including
any Affiliate of an Issuing Bank that issues any Letter of Credit), except that
no Borrower may assign or otherwise transfer any of its rights or obligations
hereunder or under any other Loan Document without the prior written consent of
each Lender (and any attempted assignment or transfer by any Borrower without
such consent shall be null and void). Nothing in this Agreement, expressed or
implied, shall be construed to confer upon any Person (other than the parties
hereto, their respective successors and assigns permitted hereby (including any
Affiliate of an Issuing Bank that issues any Letter of Credit) and, to the
extent expressly contemplated hereby, the Related Parties of each of the Agents,
Issuing Banks and the Lenders) any legal or equitable right, remedy or claim
under or by reason of this Agreement.
(b) Any Lender may assign to one or more assignees all or a
portion of its rights and obligations under this Agreement (including all or a
portion of its Commitment and the Loans at the time owing to it); PROVIDED that
(i) except in the case of an assignment to a Lender or an Affiliate of a Lender,
each of the Company (unless an Event of Default has occurred and is continuing)
and the Administrative Agent (and, in the case of an assignment of all or a
portion of a Revolving Commitment or any Lender's obligations in respect of its
LC Exposure or Swingline Exposure, the relevant Issuing Bank and the Swingline
Lender) must give their prior written consent to such assignment (which consent
shall not be unreasonably withheld), (ii) except in the case of an assignment to
a Lender or an Affiliate of a Lender or an assignment of the entire remaining
amount of the assigning Lender's Commitment or Loans, the amount of the
Commitment or Loans of the assigning Lender subject to each such assignment
(determined as of the date the Assignment and Acceptance with respect to such
assignment is delivered to the Administrative Agent) shall not be less than
$5,000,000 unless each of the Company and the Administrative Agent otherwise
consent, (iii) each partial assignment shall be made as an assignment of a
proportionate part of all the assigning Lender's rights and obligations under
this Agreement, including the same proportionate part of the assignor's U.S.
Revolving Commitment, German Revolving Commitment and Tranche A Term Loans and
German Term Loans, (iv) the parties to each assignment shall execute and deliver
to the Administrative Agent an Assignment and Acceptance, together with a
processing and recordation fee of $4,500, and (v) the assignee, if it shall not
be a Lender, shall deliver to the Administrative Agent an Administrative
Questionnaire; and PROVIDED FURTHER that any consent of the Company otherwise
required under this paragraph shall not be required if an Event of Default has
occurred and is continuing. Subject to acceptance and recording thereof pursuant
to paragraph (d) of this Section, from and after the effective date specified in
each Assignment and Acceptance the assignee thereunder shall be a party hereto
and, to the extent of the interest assigned by such
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Assignment and Acceptance, have the rights and obligations of a Lender under
this Agreement, and the assigning Lender thereunder shall, to the extent of the
interest assigned by such Assignment and Acceptance, be released from its
obligations under this Agreement (and, in the case of an Assignment and
Acceptance covering all of the assigning Lender's rights and obligations under
this Agreement, such Lender shall cease to be a party hereto but shall continue
to be entitled to the benefits of Sections 2.15, 2.16, 2.17 and 9.03). Any
assignment or transfer by a Lender of rights or obligations under this Agreement
that does not comply with this paragraph shall be treated for purposes of this
Agreement as a sale by such Lender of a participation in such rights and
obligations in accordance with paragraph (e) of this Section.
(c) The Administrative Agent, acting for this purpose as an
agent of the Borrowers, shall maintain at one of its offices in The City of New
York a copy of each Assignment and Acceptance delivered to it and a register for
the recordation of the names and addresses of the Lenders, and the Commitment
of, and principal amount of the Loans and LC Disbursements owing to, each Lender
pursuant to the terms hereof from time to time (the "REGISTER"). The entries in
the Register shall be conclusive, absent manifest error, and the Borrowers, the
Agents, the Issuing Banks and the Lenders may treat each Person whose name is
recorded in the Register pursuant to the terms hereof as a Lender hereunder for
all purposes of this Agreement, notwithstanding notice to the contrary. The
Register shall be available for inspection by the Company, the Issuing Banks and
any Lender, at any reasonable time and from time to time upon reasonable prior
notice.
(d) Upon its receipt of a duly completed Assignment and
Acceptance executed by an assigning Lender and an assignee, the assignee's
completed Administrative Questionnaire (unless the assignee shall already be a
Lender hereunder), the processing and recordation fee referred to in paragraph
(b) of this Section and any written consent to such assignment required by
paragraph (b) of this Section, the Administrative Agent shall accept such
Assignment and Acceptance and record the information contained therein in the
Register. No assignment shall be effective for purposes of this Agreement unless
it has been recorded in the Register as provided in this paragraph.
(e) Any Lender may, without the consent of any Borrower, the
Administrative Agent, the Issuing Bank or the Swingline Lender, sell
participations to one or more banks, mutual funds or other entities (a
"PARTICIPANT") in all or a portion of such Lender's rights and obligations under
this Agreement (including all or a portion of its Commitment and the Loans owing
to it); PROVIDED that (i) such Lender's obligations under this Agreement shall
remain unchanged, (ii) such Lender shall remain solely responsible to the other
parties hereto for the performance of such
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obligations and (iii) the Company, the Agents, the Issuing Banks and the other
Lenders shall continue to deal solely and directly with such Lender in
connection with such Lender's rights and obligations under this Agreement. Any
agreement or instrument pursuant to which a Lender sells such a participation
shall provide that such Lender shall retain the sole right to enforce the Loan
Documents and to approve any amendment, modification or waiver of any provision
of the Loan Documents; PROVIDED that such agreement or instrument may provide
that such Lender will not, without the consent of the Participant, agree to any
amendment, modification or waiver described in clause (i), (ii), (iii) or (vii)
of the first proviso to Section 9.02(b) that affects such Participant. Subject
to paragraph (f) of this Section, each Borrower agrees that each Participant
shall be entitled to the benefits of Sections 2.15, 2.16 or 2.17 to the same
extent as if it were a Lender and had acquired its interest by assignment
pursuant to paragraph (b) of this Section.
(f) A Participant shall not be entitled to receive any greater
payment under Section 2.15, 2.16 or 2.17 than the applicable Lender would have
been entitled to receive with respect to the participation sold to such
Participant, unless the sale of the participation to such Participant is made
with the Company's prior written consent. A Participant that would be a Foreign
Lender if it were a Lender shall not be entitled to the benefits of Section 2.17
unless the Company is notified of the participation sold to such Participant and
such Participant agrees, for the benefit of the Borrowers, to comply, and in
fact complies, with Section 2.17(e) as though it were a Lender.
(g) Any Lender may at any time pledge or assign a security
interest in all or any portion of its rights under this Agreement to secure
obligations of such Lender, including any pledge or assignment to secure
obligations to a Federal Reserve Bank, and this Section shall not apply to any
such pledge or assignment of a security interest; PROVIDED that no such pledge
or assignment of a security interest shall release a Lender from any of its
obligations hereunder or substitute any such pledgee or assignee for such Lender
as a party hereto.
SECTION 9.05. SURVIVAL. All covenants, agreements,
representations and warranties made by the Loan Parties in the Loan Documents
and in the certificates or other instruments delivered in connection with or
pursuant to this Agreement or any other Loan Document shall be considered to
have been relied upon by the other parties hereto and shall survive the
execution and delivery of the Loan Documents and the making of any Loans and
issuance of any Letters of Credit, regardless of any investigation made by any
such other party or on its behalf and notwithstanding that either Agent, either
Issuing Bank or any Lender may have had notice or knowledge of any Default or
incorrect representation or warranty at the time any credit is extended
hereunder, and shall continue in full force and effect as long as
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the principal of or any accrued interest on any Loan or any fee or any other
amount payable under this Agreement is outstanding and unpaid or any Letter of
Credit is outstanding and so long as the Commitments have not expired or
terminated. The provisions of Sections 2.15, 2.16, 2.17, 9.03 and 9.14 and
Article VIII shall survive and remain in full force and effect regardless of the
consummation of the transactions contemplated hereby, the repayment of the
Loans, the expiration or termination of the Letters of Credit and the
Commitments or the termination of this Agreement or any provision hereof.
SECTION 9.06. COUNTERPARTS; INTEGRATION; EFFECTIVENESS. This
Agreement may be executed in counterparts (and by different parties hereto on
different counterparts), each of which shall constitute an original, but all of
which when taken together shall constitute a single contract. This Agreement,
the other Loan Documents and any separate letter agreements with respect to fees
payable to the Agents constitute the entire contract among the parties relating
to the subject matter hereof and supersede any and all previous agreements and
understandings, oral or written, relating to the subject matter hereof. Except
as provided in Section 4.01, this Agreement shall become effective when it shall
have been executed by the Administrative Agent and when the Administrative Agent
shall have received counterparts hereof which, when taken together, bear the
signatures of each of the other parties hereto, and thereafter shall be binding
upon and inure to the benefit of the parties hereto and their respective
successors and assigns. Delivery of an executed counterpart of a signature page
of this Agreement by telecopy shall be effective as delivery of a manually
executed counterpart of this Agreement.
SECTION 9.07. SEVERABILITY. Any provision of this Agreement
held to be invalid, illegal or unenforceable in any jurisdiction shall, as to
such jurisdiction, be ineffective to the extent of such invalidity, illegality
or unenforceability without affecting the validity, legality and enforceability
of the remaining provisions hereof; and the invalidity of a particular provision
in a particular jurisdiction shall not invalidate such provision in any other
jurisdiction.
SECTION 9.08. RIGHT OF SETOFF. If an Event of Default shall
have occurred and be continuing, each Lender and each of its Affiliates is
hereby authorized at any time and from time to time, to the fullest extent
permitted by law, to set off and apply any and all deposits (general or special,
time or demand, provisional or final) at any time held and other obligations at
any time owing by such Lender or Affiliate to or for the credit or the account
of any Borrower against any of and all the obligations of such Borrower now or
hereafter existing under this Agreement held by such Lender, irrespective of
whether or not such Lender shall have made any demand under this Agreement and
although such obligations may be
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unmatured. The rights of each Lender under this Section are in addition to other
rights and remedies (including other rights of setoff) which such Lender may
have.
SECTION 9.09. GOVERNING LAW; JURISDICTION; CONSENT TO SERVICE
OF PROCESS. (a) This Agreement shall be construed in accordance with and
governed by the law of the State of New York.
(b) Each Borrower hereby irrevocably and unconditionally
submits, for itself and its property, to the nonexclusive jurisdiction of the
Supreme Court of the State of New York sitting in New York County and of the
United States District Court of the Southern District of New York, and any
appellate court from any thereof, in any action or proceeding arising out of or
relating to any Loan Document, or for recognition or enforcement of any
judgment, and each of the parties hereto hereby irrevocably and unconditionally
agrees that all claims in respect of any such action or proceeding may be heard
and determined in such New York State or, to the extent permitted by law, in
such Federal court. Each of the parties hereto agrees that a final judgment in
any such action or proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on the judgment or in any other manner provided by law.
Nothing in this Agreement or any other Loan Document shall affect any right that
either Agent, either Issuing Bank or any Lender may otherwise have to bring any
action or proceeding relating to this Agreement or any other Loan Document
against, any Borrower or its properties in the courts of any jurisdiction.
(c) Each Borrower hereby irrevocably and unconditionally
waives, to the fullest extent it may legally and effectively do so, any
objection which it may now or hereafter have to the laying of venue of any suit,
action or proceeding arising out of or relating to this Agreement or any other
Loan Document in any court referred to in paragraph (b) of this Section. Each of
the parties hereto hereby irrevocably waives, to the fullest extent permitted by
law, the defense of an inconvenient forum to the maintenance of such action or
proceeding in any such court.
(d) Each party to this Agreement irrevocably consents to
service of process in the manner provided for notices in Section 9.01, and each
Loan Party organized outside the United States hereby irrevocably appoints the
Company as its agent for service of process of any of the courts mentioned in
this Section. Nothing in this Agreement or any other Loan Document will affect
the right of any party to this Agreement to serve process in any other manner
permitted by law.
SECTION 9.10. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY
WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE
TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF
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OR RELATING TO THIS AGREEMENT, ANY OTHER LOAN DOCUMENT OR THE TRANSACTIONS
CONTEMPLATED HEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY). EACH
PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY
OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD
NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B)
ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER
INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND
CERTIFICATIONS IN THIS SECTION.
SECTION 9.11. HEADINGS. Article and Section headings and the
Table of Contents used herein are for convenience of reference only, are not
part of this Agreement and shall not affect the construction of, or be taken
into consideration in interpreting, this Agreement.
SECTION 9.12. CONFIDENTIALITY. Each of the Agents, the Issuing
Banks and the Lenders agrees to maintain the confidentiality of the Information
(as defined below), except that Information may be disclosed (a) to its and its
Affiliates' directors, officers, employees and agents, including accountants,
legal counsel and other advisors (it being understood that the Persons to whom
such disclosure is made will be informed of the confidential nature of such
Information and instructed to keep such Information confidential), (b) to the
extent requested by any regulatory authority, (c) to the extent required by
applicable laws or regulations or by any subpoena or similar legal process, (d)
to any other party to this Agreement, (e) in connection with the exercise of any
remedies hereunder or any suit, action or proceeding relating to this Agreement
or any other Loan Document or the enforcement of rights hereunder or thereunder,
(f) subject to an agreement containing provisions substantially the same as
those of this Section, to any assignee of or Participant in, or any prospective
assignee of or Participant in, any of its rights or obligations under this
Agreement, (g) with the consent of the Company, (h) to the National Association
of Insurance Commissioners or any similar organization or any nationally
recognized rating agency that requires access to information about a Lender's
investment portfolio in connection with ratings issued with respect to such
Lender, or (i) to the extent such Information (i) becomes publicly available
other than as a result of a breach of this Section or (ii) becomes available to
either Agent, either Issuing Bank or any Lender on a nonconfidential basis from
a source other than the Company. For the purposes of this Section, "INFORMATION"
means all information received from the Company relating to the Company or its
business, other than any such information that is available to either Agent,
either Issuing Bank or any Lender on a nonconfidential basis prior to disclosure
by Holdings or the Company; PROVIDED that, in the case of information received
from the Company after the date hereof, such information is
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clearly identified at the time of delivery as confidential. Any Person required
to maintain the confidentiality of Information as provided in this Section shall
be considered to have complied with its obligation to do so if such Person has
exercised the same degree of care to maintain the confidentiality of such
Information as such Person would accord to its own confidential information.
SECTION 9.13. INTEREST RATE LIMITATION. Notwithstanding
anything herein to the contrary, if at any time the interest rate applicable to
any Loan, together with all fees, charges and other amounts which are treated as
interest on such Loan under applicable law (collectively the "CHARGES"), shall
exceed the maximum lawful rate (the "MAXIMUM RATE") which may be contracted for,
charged, taken, received or reserved by the Lender holding such Loan in
accordance with applicable law, the rate of interest payable in respect of such
Loan hereunder, together with all Charges payable in respect thereof, shall be
limited to the Maximum Rate and, to the extent lawful, the interest and Charges
that would have been payable in respect of such Loan but were not payable as a
result of the operation of this Section shall be cumulated and the interest and
Charges payable to such Lender in respect of other Loans or periods shall be
increased (but not above the Maximum Rate therefor) until such cumulated amount,
together with interest thereon at the Federal Funds Effective Rate to the date
of repayment, shall have been received by such Lender.
SECTION 9.14. CONVERSION OF CURRENCIES. (a) If, for the
purpose of obtaining judgment in any court, it is necessary to convert a sum
owing hereunder in one currency into another currency, each party hereto agrees,
to the fullest extent that it may effectively do so, that the rate of exchange
used shall be that at which in accordance with normal banking procedures in the
relevant jurisdiction the first currency could be purchased with such other
currency on the Business Day immediately preceding the day on which final
judgment is given.
(b) The obligations of each Borrower in respect of any sum due
to any party hereto or any holder of the obligations owing hereunder (the
"Applicable Creditor") shall, notwithstanding any judgment in a currency (the
"Judgment Currency") other than the currency in which such sum is stated to be
due hereunder (the "Agreement Currency"), be discharged only to the extent that,
on the Business Day following receipt by the Applicable Creditor of any sum
adjudged to be so due in the Judgment Currency, the Applicable Creditor may in
accordance with normal banking procedures in the relevant jurisdiction purchase
the Agreement Currency with the Judgment Currency; if the amount of the
Agreement Currency so purchased is less than the sum originally due to the
Applicable Creditor in the Agreement Currency, such Borrower agrees, as a
separate obligation and notwithstanding any such judgment, to indemnify the
Applicable Creditor against such loss. The obligations of
<PAGE> 126
120
the Borrowers contained in this Section 9.14 shall survive the termination of
this Agreement and the payment of all other amounts owing hereunder.
SECTION 9.15. RELEASE OF LIENS AND GUARANTEES. In the event
that any Loan Party conveys, sells, leases, assigns, transfers or otherwise
disposes of all or any portion of any of the capital stock, assets or property
of such Loan Party in a transaction not prohibited by this Agreement or any
other Loan Document, the Administrative Agent and the Collateral Agent shall
promptly (and the Lenders hereby authorize the Administrative Agent and the
Collateral Agent to) take such action and execute any such documents as may be
reasonably requested by such Loan Party and at such Loan Party's expense to
release (or to confirm and acknowledge the release of) any Liens created by any
Loan Document in respect of such capital stock, assets or property, and, in the
case of a disposition of all or substantially all the capital stock or assets of
any Subsidiary party to a Guarantee Agreement terminate such Subsidiary's
obligations under the relevant Guarantee Agreement and the other Security
Documents to which it is a party. In addition, the Administrative Agent and the
Collateral Agent agree to execute and deliver such documents and instruments
(not constituting amendments or waivers hereof) and to take such other actions
as are reasonably requested by such Loan Party and at such Loan Party's expense
to terminate the Liens and security interests created by the Loan Documents when
all the Obligations of such Loan Party are paid in full and all Letters of
Credit and Commitments are terminated.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed by their respective authorized officers as of the
day and year first above written.
SINTER METALS, INC.,
by
----------------------------
Name:
Title:
<PAGE> 127
121
SINTER METALS, GMBH,
by
----------------------------
Name:
Title:
SALOMON BROTHERS INC, as
Syndication Agent,
by
----------------------------
Name:
Title:
SALOMON BROTHERS HOLDING
COMPANY INC,
by
----------------------------
Name:
Title:
NBD BANK, individually and as
Administrative Agent and Collateral
Agent,
by
----------------------------
Name:
Title:
THE FIRST NATIONAL BANK OF
CHICAGO, Frankfurt Branch,
by
----------------------------
Name:
Title:
CITICORP USA, INC.,
by
----------------------------
Name:
Title:
<PAGE> 128
CITIBANK, N.A., London,
by
----------------------------
Name:
Title:
KEYBANK NATIONAL ASSOCIATION,
by
----------------------------
Name:
Title:
BHF -- BANK Aktiengesellschaft,
by
----------------------------
Name:
Title:
BAYERISCHE VEREINSBANK AG,
New York Branch,
by
----------------------------
Name:
Title:
by
----------------------------
Name:
Title:
THE CHASE MANHATTAN BANK,
by
----------------------------
Name:
Title:
MELLON BANK N.A.,
by
----------------------------
Name:
Title:
<PAGE> 129
SENIOR DEBT PORTFOLIO,
by BOSTON MANAGEMENT AND
RESEARCH, as Investment
Advisor,
by
----------------------------
Name:
Title:
ALLSTATE LIFE INSURANCE
COMPANY,
by
----------------------------
Name:
Title:
COMPAGNIE FINANCIERE DE CIC ET
DE L'UNION EUROPEENNE,
by
----------------------------
Name:
Title:
KZH HOLDING CORPORATION,
by
----------------------------
Name:
Title:
MEDICAL LIABILITY MUTUAL
INSURANCE COMPANY,
by
----------------------------
Name:
Title:
VAN KAMPEN AMERICAN CAPITAL
PRIME RATE INCOME TRUST,
by
----------------------------
Name:
Title:
<PAGE> 130
THE MITSUBISHI TRUST AND
BANKING CORPORATION,
by
----------------------------
Name:
Title:
BANKERS TRUST COMPANY,
by
----------------------------
Name:
Title:
PRIME INCOME TRUST,
by
----------------------------
Name:
Title:
MERRILL LYNCH SENIOR FLOATING
RATE FUND, INC.,
by
----------------------------
Name:
Title:
CRESCENT/MACH I PARTNERS, L.P.
by TCW ASSET MANAGEMENT
COMPANY, its Investment
Manager,
by
----------------------------
Name:
Title:
KEYPORT LIFE INSURANCE
COMPANY,
by
----------------------------
Name:
Title:
<PAGE> 1
EXHIBIT 10.9
------------
SINTER METALS, INC.
DEFERRED COMPENSATION PLAN
FOR NONEMPLOYEE DIRECTORS
<PAGE> 2
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Page
----
<S> <C> <C>
ARTICLE I. PURPOSE............................................................................................. 1
ARTICLE II. DEFINITIONS AND CONSTRUCTION....................................................................... 1
Section 2.1. Definitions....................................................................... 1
Section 2.2. Construction...................................................................... 4
ARTICLE III. PARTICIPATION AND DEFERRALS....................................................................... 5
Section 3.1. Eligibility and Participation..................................................... 5
(a) Eligibility.......................................................... 5
(b) Participation........................................................ 5
(c) Initial Year of Participation........................................ 5
(d) Termination of Participation......................................... 5
Section 3.2. Amount of Deferral ................................................................ 5
Section 3.3. Modification of Deferral
Commitments............................................................................ 5
ARTICLE IV. PARTICIPANTS' ACCOUNTS............................................................................. 6
Section 4.1. Establishment of Accounts.......................................................... 6
Section 4.2. Elective Deferred Fee.............................................................. 6
Section 4.3. Determination of Accounts.......................................................... 6
(a) Determination of Accounts............................................ 6
(b) Accounting........................................................... 6
Section 4.4. Adjustments to Accounts............................................................ 6
Section 4.5. Statement of Accounts.............................................................. 6
Section 4.6. Vesting of Accounts................................................................ 7
ARTICLE V. FINANCING OF BENEFITS............................................................................... 7
Section 5.1. Contributions...................................................................... 7
Section 5.2. Establishment of Accounts.......................................................... 7
Section 5.3. Investments........................................................................ 7
Section 5.4. Claims of the Corporation's
Creditors.............................................................................. 8
Section 5.5. Notification of Insolvency......................................................... 8
ARTICLE VI. DISTRIBUTION OF BENEFITS............................................................................ 8
Section 6.1. Settlement Date..................................................................... 8
Section 6.2. Amount to be Distributed............................................................ 8
Section 6.3. Time of Distribution................................................................ 8
Section 6.4. Form of Distribution................................................................ 9
Section 6.5. Beneficiary Designation............................................................. 9
Section 6.6. Facility of Payment................................................................ 10
Section 6.7. Hardship Distributions............................................................. 10
ARTICLE VII. ADMINISTRATION, AMENDMENT AND TERMINATION......................................................... 10
Section 7.1. Administration..................................................................... 10
Section 7.2. Plan Administrator................................................................. 11
Section 7.3. Amendment, Termination and Withdrawal.............................................. 11
Section 7.4. Successors......................................................................... 11
Section 7.5. Claims............................................................................. 11
Section 7.6. Expenses........................................................................... 12
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C> <C>
ARTICLE VIII. MISCELLANEOUS.............................................................................. 12
Section 8.1. Applicable Law............................................................ 12
Section 8.2. Interests Not Transferable................................................ 12
Section 8.3. Severability.............................................................. 12
Section 8.4. Withholding of Taxes...................................................... 12
</TABLE>
ii
<PAGE> 4
SINTER METALS, INC.
DEFERRED COMPENSATION PLAN FOR NONEMPLOYEE DIRECTORS
The Sinter Metals, Inc. Deferred Compensation Plan For
Nonemployee Directors is made and executed as of the ___ day of _________, 1996
and is effective as of October 1, 1996.
ARTICLE I. PURPOSE
The SINTER METALS, INC. DEFERRED COMPENSATION PLAN FOR
NONEMPLOYEE DIRECTORS (the "Plan") is hereby established by Sinter Metals, Inc.
to allow members of the Board of Directors of the Corporation who are not
employees of the Corporation to defer all or a portion of the fees they receive
for serving as Directors. It is intended that the Plan will aid in attracting
and retaining Directors of exceptional ability by providing these benefits. The
terms and conditions of the Plan are set forth below.
ARTICLE II. DEFINITIONS AND CONSTRUCTION
Section 2.1. DEFINITIONS. Whenever the following terms are
used in this Plan they shall have the meanings specified below unless the
context clearly indicates to the contrary:
(a) "Account": The bookkeeping account maintained for each
Participant showing his interest under the Plan.
(b) "Accounting Date": December 31 of each year and the last
day of any calendar quarter in which a Participant's Settlement Date
occurs.
(c) "Accounting Period": The period beginning on the day
immediately following an Accounting Date and ending on the next
following Accounting Date.
(d) "Administrator": The committee established pursuant to
the provisions of Section 7.1.
(e) "Beneficiary": The person or persons (natural or
otherwise), within the meaning of Section 6.5, who are entitled to
receive distribution of the Participant's Account balance in the event
of the Participant's death.
(f) "Board of Directors": The Board of Directors of the
Corporation.
<PAGE> 5
(g) "Change in Control": Shall have occurred on the date on
which any of the following events is effective:
(A) The Corporation shall merge into itself, or be
merged or consolidated with, another corporation and as a
result of such merger or consolidation less than 70% of the
outstanding voting securities of the surviving or resulting
corporation shall be owned in the aggregate by the former
shareholders of the Corporation as the same shall have
existed immediately prior to such merger or consolidation;
(B) The Corporation shall sell or transfer to one
or more persons, corporations or entities, in a single
transaction or a series of related transactions, more than
one-half of the assets accounted for on the statement of
financial position contained in the Corporation's most
recent Annual Report as "properties" or "investments in
associated companies" (or such replacements for these
accounts as may be adopted from time to time) unless, by the
affirmative vote of two-thirds of the members of the Board
of Directors, the transaction or transactions are exempted
from the operation of this provision based on a good faith
finding that the transaction or transactions are not within
the intended scope of this definition for purposes of this
instrument;
(C) A person, within the meaning of Section
3(a)(9) or of Section 13(d)(3) (as in effect on the date
hereof) of the Securities Exchange Act of 1934, shall become
the beneficial owner (as defined in Rule 13d-3 of the
Securities and Exchange Commission pursuant to the
Securities Exchange Act of 1934) of 25% or more of the
outstanding voting securities of the Corporation (whether
directly or indirectly); or
(D) During any period of three consecutive years,
individuals who at the beginning of any such period
constitute the Board of Directors of the Corporation cease,
for any reason, to constitute at least a majority thereof,
unless the election, or the nomination for election by the
shareholders of the Corporation, of each Director first
elected during any such period was approved by a vote of at
least one-third of the Directors of the Corporation who are
Directors of the Corporation on the date of the beginning of
any such period.
(h)"Common Shares": The Class A common shares, par value
1/100th of one cent per share, of the Corporation.
2
<PAGE> 6
(i) "Code": The Internal Revenue Code of 1986, as amended
from time to time; any reference to a provision of the Code shall also
include any successor provision thereto.
(j) "Committee": The Compensation Committee of the Board of
Directors.
(k) "Corporation": Sinter Metals, Inc. or any successor or
successors thereto.
(l) "Deferral Commitment": An agreement by a Participant to
have all or a specified percentage of his Fee deferred under the Plan.
Such agreement shall be effective until revoked or replaced by a
subsequent effective Deferral Commitment.
(m) "Deferral Period": Means the Plan Year for which a
Participant has elected to defer a portion of his Fee.
(n) "Director": A member of the Board of Directors of the
Corporation.
(o) "Disability": The occurrence, while a Participant is a
Director, of a physical or mental incapacity which is likely to be
permanent and which likely will prevent a Participant from performing
his duties as a Director, as determined by the Administrator in its
sole discretion on the basis of medical evidence certified by a
physician or physicians designated by it.
(p) "Effective Date": October 1, 1996.
(q) "ERISA": The Employee Retirement Income Security Act of
1974, as amended from time to time; any reference to a provision of
ERISA shall also include any successor provision thereto.
(r) "Fee" or "Fees": Any compensation payable in cash to a
Director for his services as a member of the Board of Directors or any
committee thereof.
(s) "Financial Hardship": An unforeseeable financial
emergency of the Participant, determined by the Administrator on the
basis of information supplied by the Participant, arising from an
illness, disability, casualty loss, sudden financial reversal or other
such unforeseeable occurrence, but not including foreseeable events
such as the purchase of a house or education expenses for children.
(t) "Money Market Fund": The money market fund selected by
the Committee.
(u) "Participant": Any Director participating in the Plan in
accordance with the provisions of Section 3.1 or a
3
<PAGE> 7
former Director retaining benefits under the Plan that have not been
fully paid.
(v) "Participation Agreement": The Agreement submitted by a
Participant to the Administrator with respect to one or more Deferral
Commitments.
(w) "Plan": The Plan set forth in this instrument as it may,
from time to time, be amended.
(x) "Plan Year": The 12-month period beginning January 1
through December 31; provided that the first plan year shall begin on
October 1, 1996 and end on December 31, 1996.
(y) "Retirement": The date a Participant ceases to be a
Director on or after attainment of age 65.
(z) "Settlement Date": The earlier of the date on which a
Participant ceases to be a Director or the date on which a Change in
Control occurs. Settlement Date shall also include with respect to any
Deferral Period the date prior or subsequent to the date a Participant
ceases to be a Director as selected by a Participant in a
Participation Agreement for distribution of all or a portion of the
amounts deferred during such Deferral Period.
(aa) "Trust": Shall have the meaning assigned thereto in
Section 5.1(a) hereof.
(ab) "Trust Account": Shall have the meaning assigned
thereto in Section 5.2 hereof.
(ac) "Trust Agreement": Shall mean the Trust Agreement
entered into between the Corporation and the Trustee in connection
with the Plan.
(ad) "Trust Fund": Shall have the meaning assigned thereto
in Section 5.2 hereof.
(ae) "Trustee": Such person or entity as may be chosen by
the Corporation from time to time to act as trustee under the Trust
Agreement, together with the successors of such person or entity as
may be provided in the Trust Agreement.
Section 2.2. CONSTRUCTION. The masculine gender, where
appearing in the Plan, shall be deemed to include the feminine gender, and the
singular may include the plural, unless the context clearly indicates to the
contrary. The words "hereof," "herein," "hereunder," and other similar compounds
of the word "here" shall mean and refer to the entire Plan, and not to any
particular provision or Section.
4
<PAGE> 8
ARTICLE III. PARTICIPATION AND DEFERRALS
Section 3.1. ELIGIBILITY AND PARTICIPATION.
(a) ELIGIBILITY. Eligibility to participate in the Plan for
any Deferral Period is limited to Directors who are not employees of
the Corporation.
(b) PARTICIPATION. An eligible Director may elect to
participate in the Plan with respect to any Deferral Period by
submitting a Participation Agreement to the Administrator by the last
business day immediately preceding the applicable Deferral Period.
(c) INITIAL YEAR OF PARTICIPATION. In the event that an
individual first becomes eligible to participate during a Deferral
Period and wishes to elect a Deferral Commitment with respect to the
Fee earned by and payable to the individual during such Deferral
Period, a Participation Agreement must be submitted to the
Administrator no later than 30 days after such individual first
becomes eligible. Any Deferral Commitments elected in such
Participation Agreement shall be effective only with regard to Fees
earned following the submission of the Participation Agreement to the
Administrator. If an eligible individual does not submit a
Participation Agreement within such period of time, such individual
will not be eligible to participate in the Plan until the first day of
a Deferral Period subsequent to the Deferral Period in which the
individual initially became eligible to participate.
(d) TERMINATION OF PARTICIPATION. Participation in the Plan
shall continue as long as the Participant is eligible to receive
benefits under the Plan.
Section 3.2. AMOUNT OF DEFERRAL. With respect to each Plan
Year, a Participant may elect to defer all or a specified percentage of his Fee.
A Participant may change the percentage of his Fee to be deferred by filing a
written notice thereof with the Administrator. Any such change shall be
effective as of the first day of the Plan Year immediately succeeding the Plan
Year in which such notice is filed with the Administrator.
Section 3.3. MODIFICATION OF DEFERRAL COMMITMENTS. A
Deferral Commitment shall be irrevocable, except that the Administrator may, in
its sole discretion, permit a Participant to terminate, prospectively, any
Deferral Commitment for a Deferral Period. If a Participant terminates a
Deferral Commitment during a Deferral Period, such Participant will not be
permitted to enter into a new Deferral Commitment until the following Deferral
Period.
5
<PAGE> 9
ARTICLE IV. PARTICIPANTS' ACCOUNTS
Section 4.1. ESTABLISHMENT OF ACCOUNTS. The Corporation,
through its accounting records, shall establish an Account for each Participant.
In addition, the Corporation may establish one or more subaccounts of a
Participant's Account, if the Corporation determines that such subaccounts are
necessary or appropriate in administering the Plan.
Section 4.2. ELECTIVE DEFERRED FEE. A Participant's Fee that
is deferred pursuant to a Deferral Commitment shall be credited to the
Participant's Account within thirty days following the date the corresponding
non-deferred portion of his Fee would have been paid to the Participant. Any
withholding of taxes or other amounts with respect to deferred Fees which is
required by federal, state or local law shall be withheld from the Participant's
non-deferred Fees.
Section 4.3. DETERMINATION OF ACCOUNTS.
(a) DETERMINATION OF ACCOUNTS. The amount credited to each
Participant's Account as of a particular date shall equal the deemed
balance of such Account as of such date. The balance in the Account
shall equal the amount credited pursuant to Section 4.2, and shall be
adjusted in the manner provided in Section 4.4.
(b) ACCOUNTING. The Corporation, through its accounting
records, shall maintain a separate and distinct record of the amount
in each Account as adjusted to reflect income, gains, losses,
withdrawals and distributions.
Section 4.4. ADJUSTMENTS TO ACCOUNTS.
(a) Each Participant's Account shall be debited with the
amount of any distributions under the Plan to or on behalf of the
Participant or, in the event of his death, his Beneficiary during the
Accounting Period ending on such Accounting Date.
(b) The Participant's Account shall next be credited or
debited, as the case may be, with an income (loss) factor equal to an
amount determined by multiplying (i) the balance credited to the
Participant's Account as of the immediately preceding Accounting Date
(as adjusted pursuant to Section 4.4(a) for the current Accounting
Date) by (ii) the rate of return for the Accounting Period ending on
such Accounting Date on deemed investments provided for in Section
5.3.
Section 4.5. STATEMENT OF ACCOUNTS. As soon as practicable
after the end of each calendar quarter, a statement shall be furnished to each
Participant or, in the event of his death, to his Beneficiary showing the status
of his Account as of
6
<PAGE> 10
the end of such quarter, any changes in his Account since the end of the
immediately preceding calendar quarter, and such other information as the
Administrator shall determine.
Section 4.6. VESTING OF ACCOUNTS. Each Participant shall at
all times have a nonforfeitable interest in his Account balance.
ARTICLE V. FINANCING OF BENEFITS
Section 5.1. CONTRIBUTIONS. (a) The Corporation shall from
time to time transfer to the Trustee to be held under the Trust Agreement in a
trust (the "Trust") cash funds equal to the amount by which Participants elect
to have their Fee reduced pursuant to this Plan. All such transfers shall be
made within thirty days following the date the corresponding non-deferred
portion of his Fee would have been paid to the Participant.
(b) Following any initial filing of a written election with
the Administrator pursuant to Section 3.1 hereof by a Participant who has
previously entered into a deferred compensation agreement or arrangement with
the Corporation, the Corporation shall transfer to the Trustee to be held in the
Trust for the account of such Participant pursuant to Section 5.2 hereof cash
funds equal to the amounts previously deferred pursuant to such deferred
compensation agreement or arrangements together with an amount equal to any
interest credited thereon in accordance with such deferred compensation
agreement or arrangement to the date of such transfer.
(c) Except as provided with respect to the creditors of the
Corporation in Sections 5.4 and 5.5 hereof, all contributions and other
transfers by the Corporation to the Trust pursuant to Sections 5.1(a) and (b)
hereof shall be irrevocable and (except as so provided) the Corporation shall
have no right to the return of any funds so contributed or transferred to the
Trust or any earnings thereon.
Section 5.2. ESTABLISHMENT OF ACCOUNTS. The Trustee shall
establish a separate account under the Trust (a "Trust Account") for any
Participant who elects to have his Fee reduced pursuant to this Plan. As of
December 31 of each year and on such other dates as the Committee may direct,
the fair market value of the assets of the Trust allocated to all Trust Accounts
(the "Trust Fund") shall be determined by the Trustee.
Section 5.3. INVESTMENTS. The assets of the Trust Fund shall
be held by the Trustee in the name of the Trust. As amounts are received by the
Trustee, it shall invest the funds pursuant to the Trust Agreement, which shall
authorize the Trustee to invest Trust Account assets in Common Shares or in the
Money Market Fund pending investment in Common Shares. The Administrator may,
but is under no obligation to, deem the
7
<PAGE> 11
amounts credited to a Participant's Account to be invested in Common Shares or
in the Money Market Fund pending investment in Common Shares, or the
Administrator may, instead, in its sole discretion, deem such Account to be
invested in any deemed investment funds selected by the Administrator. Earnings
on any amounts deemed to have been invested in any deemed investment fund shall
be deemed to have been reinvested in such fund.
Section 5.4. CLAIMS OF THE CORPORATION'S CREDITORS. All
assets held in the Trust pursuant to the Plan, and any payment to be made by the
Trustee pursuant to the Plan and Trust Agreement, shall be subject to the claims
of the general creditors of the Corporation, including judgment creditors and
bankruptcy creditors. The rights of a Participant or his Beneficiary to any
assets of the Trust Fund shall be no greater than the rights of an unsecured
creditor of the Corporation.
Section 5.5. NOTIFICATION OF INSOLVENCY. The Chief Executive
Officer, or the highest ranking officer, of the Corporation shall have the duty
to immediately notify the Trustee if the Corporation becomes Insolvent (as
hereinafter defined). The Trustee shall not make any payments from the Trust
Fund to any Participant or any Beneficiary under the Plan after such
notification is received or at any time after the Trustee has knowledge of such
Insolvency. Under any such circumstance, the Trustee shall deliver any property
held in the Trust Fund only as a court of competent jurisdiction may direct to
satisfy the claims of the Corporation's creditors. For purposes of this Plan,
the Corporation shall be deemed to be "Insolvent" if the Corporation is subject
to a pending voluntary or involuntary proceeding as a debtor under the United
States Bankruptcy Code, as amended, or is unable to pay its debts as they become
due.
ARTICLE VI. DISTRIBUTION OF BENEFITS
Section 6.1. SETTLEMENT DATE. A Participant or, in the event
of his death, his Beneficiary, shall be entitled to distribution of the balance
of his Account, as provided in this Article VI, following his Settlement Date or
Dates.
Section 6.2. AMOUNT TO BE DISTRIBUTED. The amount to which a
Participant or, in the event of his death, his Beneficiary is entitled in
accordance with the following provisions of this Article shall be based on the
Participant's adjusted account balance determined as of the Accounting Date
coincident with or next following his Settlement Date or Dates.
Section 6.3. TIME OF DISTRIBUTION. Distribution of a
Participant's Account shall commence upon the earlier of (1) the date a
Participant ceases to be a Director, his disability or his death, or (ii) the
occurrence of a Change of Control of the Corporation. Any benefits paid to the
Participant as a distribution shall reduce the Participant's Account.
8
<PAGE> 12
Notwithstanding the foregoing, if elected by the Participant, the distribution
of all or a portion of the Participant's Account may commence on a date between
the Settlement Date and the date the Participant attains age sixty-five.
Section 6.4. FORM OF DISTRIBUTION. As soon as practicable
after the end of the Accounting Period in which a Participant's Settlement Date
occurs, but in no event later than thirty days following the end of such
Accounting Period, the Corporation shall commence distribution or cause
distribution to be commenced, to the Participant or, in the event of his death,
to his Beneficiary, of the balance of the Participant's Account, as determined
under Section 6.2, under one of the forms provided in this Section.
Distributions shall be in cash or in Common Shares (to the extent that a portion
of the Participant's Account is deemed to be invested in Common Shares), or any
combination thereof, as elected by the Participant.
Distribution of a Participant's Account with respect to any
Deferral Period shall be made in one of the following forms as elected by the
Participant by written notice filed with the Administrator not later than the
day before the Deferral Period in which the Fee is deferred:
(a) by a single lump sum payment; or
(b) by payment in five (5) annual installments; or
(c) by payment in ten (10) annual installments.
The amount of each installment shall be equal to the quotient obtained by
dividing the Participant's Account balance as of the date of such installment
payment by the number of installment payments remaining to be made to or in
respect of such Participant at the time of calculation.
If a Participant fails to make an election in a timely
manner as provided in this Section 6.4, distribution shall be made in cash in
ten (10) annual installments.
Section 6.5. BENEFICIARY DESIGNATION. As used in the Plan
the term "Beneficiary" means:
(a) The last person designated as Beneficiary
by the Participant in a written notice on a form
prescribed by the Administrator;
(b) If there is no designated Beneficiary or
if the person so designated shall not survive the
Participant, such Participant's spouse; or
(c) If no such designated Beneficiary and no such
spouse is living upon the death of a Participant, or if all
such persons die prior to the full distribution of
9
<PAGE> 13
the Participant's Account balance, then the legal
representative of the last survivor of the Participant and
such persons, or, if the Administrator shall not receive
notice of the appointment of any such legal representative
within one year after such death, the heirs-at-law of such
survivor (in the proportions in which they would inherit his
intestate personal property) shall be the Beneficiaries to
whom the then remaining balance of the Participant's Account
shall be distributed.
Any Beneficiary designation may be changed from time to time by like notice
similarly delivered. No notice given under this Section shall be effective
unless and until the Administrator actually receives such notice.
Section 6.6. FACILITY OF PAYMENT. Whenever and as often as any
Participant or his Beneficiary entitled to payments hereunder shall be under a
legal disability or, in the sole judgment of the Administrator, shall otherwise
be unable to apply such payments to his own best interests and advantage, the
Administrator in the exercise of its discretion may direct all or any portion of
such payments to be made in any one or more of the following ways: (i) directly
to him; (ii) to his legal guardian or conservator; or (iii) to his spouse or to
any other person, to be expended for his benefit; and the decision of the
Administrator, shall in each case be final and binding upon all persons in
interest.
Section 6.7. HARDSHIP DISTRIBUTIONS. Upon a finding by the
Administrator that a Participant has suffered a Financial Hardship, the
Administrator may, in its sole discretion, distribute, or direct the Trustee to
distribute, to the Participant an amount which does not exceed the amount
required to meet the immediate financial needs created by the Financial Hardship
and not reasonably available from other sources of the Participant; provided,
however, that in no event shall any amount attributable to a Deferral Commitment
be distributed less than six months after the date of the applicable
Participation Agreement. No distributions pursuant to this Article 6 may be made
in excess of the value of the Participant's Account at the time of such
distribution.
ARTICLE VII. ADMINISTRATION, AMENDMENT AND TERMINATION
Section 7.1. ADMINISTRATION. The Plan shall be administered by
an Administrator consisting of one or more persons who shall be appointed by and
serve at the pleasure of the Chief Executive Officer, or the highest ranking
officer, of the Corporation. The Administrator shall have such powers as may be
necessary to discharge its duties hereunder, including, but not by way of
limitation, to construe and interpret the Plan and determine the amount and time
of payment of any benefits
10
<PAGE> 14
hereunder. The Administrator may, from time to time, employ agents and delegate
to them such administrative duties as it sees fit, and may from time to time
consult with legal counsel who may be counsel to the Corporation. The
Administrator shall have no power to add to, subtract from or modify any of the
terms of the Plan, or to change or add to any benefits provided under the Plan,
or to waive or fail to apply any requirements of eligibility for a benefit under
the Plan. No member of the Administrator shall act in respect of his own
Account. All decisions and determinations by the Administrator shall be final
and binding on all parties. All decisions of the Administrator shall be made by
the vote of the majority, including actions in writing taken without a meeting.
All elections, notices and directions under the Plan by a Participant shall be
made on such forms as the Administrator shall prescribe.
Section 7.2. PLAN ADMINISTRATOR. The Corporation
shall be the "administrator" under the Plan for purposes of ERISA (to the
extent applicable).
Section 7.3. AMENDMENT, TERMINATION AND WITHDRAWAL. The Plan
may be amended from time to time or may be terminated at any time by the Board
of Directors. No amendment or termination of the Plan, however, may adversely
affect the amount or timing of payment of any person's benefits accrued under
the Plan to the date of amendment or termination without such person's written
consent.
Section 7.4. SUCCESSORS. The Corporation shall require any
successor (whether direct or indirect, by purchase, merger, consolidation,
reorganization or otherwise) to all or substantially all of the business and/or
assets of the Corporation expressly to assume and to agree to perform this Plan
in the same manner and to the same extent the Corporation would be required to
perform if no such succession had taken place. This Plan shall be binding upon
and inure to the benefit of the Corporation and any successor of or to the
Corporation, including without limitation any persons acquiring directly or
indirectly all or substantially all of the business and/or assets of the
Corporation whether by sale, merger, consolidation, reorganization or otherwise
(and such successor shall thereafter be deemed the "Corporation" for the
purposes of this Plan), and the heirs, beneficiaries, executors and
administrators of each Participant.
Section 7.5. CLAIMS. The Administrator will provide to any
Participant or Beneficiary whose claim for benefits under the Plan has been
fully or partially denied a written notice setting forth (i) the specific
reasons for such denial, (ii) a designation of any additional material or
information required and (iii) an explanation of the Plan's claim review
procedure. Such notice shall state that the Participant or Beneficiary is
entitled to request a review in writing, by the Administrator, of the decision
denying the claim. The claim will be reviewed by
11
<PAGE> 15
the Administrator who may, but need not, grant the claimant a hearing. On
review, the claimant may have legal representation, examine pertinent documents
and submit issues and comments in writing. The decision on review will be made
within 120 days following the request, will be provided in writing to the
claimant and will be final and binding on all parties concerned.
Section 7.6. EXPENSES. All expenses of the Plan shall be
paid by the Corporation from funds other than those deemed invested as provided
in Section 5.3.
ARTICLE VIII. MISCELLANEOUS
Section 8.1. APPLICABLE LAW. All questions arising in respect
of the Plan, including those pertaining to its validity, interpretation and
administration, shall be governed, controlled and determined in accordance with
the applicable provisions of federal law and, to the extent not preempted by
federal law, the laws of the State of Ohio.
Section 8.2. INTERESTS NOT TRANSFERABLE. No person shall have
any right to commute, encumber, pledge or dispose of any interest herein or
right to receive payments hereunder, nor shall such interests or payments be
subject to seizure, attachment or garnishment for the payments of any debts,
judgments, alimony or separate maintenance obligations or be transferable by
operation of law in the event of bankruptcy, insolvency or otherwise, all
payments and rights hereunder being expressly declared to be nonassignable and
nontransferable.
Section 8.3. SEVERABILITY. Each section, subsection and lesser
section of this Plan constitutes a separate and distinct undertaking, covenant
and/or provision hereof. Whenever possible, each provision of this Plan shall be
interpreted in such manner as to be effective and valid under applicable law. In
the event that any provision of this Plan shall finally be determined to be
unlawful, such provision shall be deemed severed from this Plan, but every other
provision of this Plan shall remain in full force and effect, and in
substitution for any such provision held unlawful, there shall be substituted a
provision of similar import reflecting the original intention of the parties
hereto to the extent permissible under law.
Section 8.4. WITHHOLDING OF TAXES. The Corporation may
withhold or cause to be withheld from any amounts payable under this Plan all
federal, state, local and other taxes as shall be legally required.
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<PAGE> 16
IN WITNESS WHEREOF, Sinter Metals, Inc. has caused this
instrument to be executed in its name as of the date first above written.
SINTER METALS, INC.
By:
----------------------------------
Its:
----------------------------------
Attest:
- -------------------------------
13
<PAGE> 1
Exhibit 10.10
-------------
SINTER METALS, INC.
DEFERRED COMPENSATION PLAN
<PAGE> 2
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Page
----
<S> <C> <C>
ARTICLE I. PURPOSE............................................................................................. 1
ARTICLE II. DEFINITIONS AND CONSTRUCTION....................................................................... 1
Section 2.1. Definitions....................................................................... 1
Section 2.2. Construction...................................................................... 5
ARTICLE III. PARTICIPATION AND DEFERRALS....................................................................... 5
Section 3.1. Eligibility and Participation..................................................... 5
(a) Eligibility..................................................................... 5
(b) Participation................................................................... 5
(c) Initial Year of Participation................................................... 5
(d) Termination of Participation.................................................... 6
Section 3.2. Ineligible Participant ........................................................... 6
Section 3.3 Amount of Deferral................................................................ 6
Section 3.4. Matching Amounts.................................................................. 6
Section 3.5. Modification of Deferral
Commitments............................................................................ 6
ARTICLE IV. PARTICIPANTS' ACCOUNTS............................................................................. 7
Section 4.1. Establishment of Accounts......................................................... 7
Section 4.2. Elective Deferred Compensation.................................................... 7
Section 4.3. Determination of Accounts......................................................... 7
(a) Determination of Accounts........................................................ 7
(b) Accounting....................................................................... 7
Section 4.4. Adjustments to Accounts........................................................... 7
Section 4.5. Statement of Accounts............................................................. 8
Section 4.6. Vesting of Accounts............................................................... 8
ARTICLE V. FINANCING OF BENEFITS............................................................................... 8
Section 5.1. Contributions..................................................................... 8
Section 5.2. Establishment of Accounts......................................................... 9
Section 5.3. Investments....................................................................... 9
Section 5.4. Claims of the Corporation's Creditors............................................. 9
Section 5.5. Notification of Insolvency........................................................ 9
ARTICLE VI. DISTRIBUTION OF BENEFITS........................................................................... 10
Section 6.1. Settlement Date................................................................... 10
Section 6.2. Amount to be Distributed.......................................................... 10
Section 6.3. Time of Distribution.............................................................. 10
Section 6.4. Form of Distribution.............................................................. 10
Section 6.5. Beneficiary Designation........................................................... 11
Section 6.6. Facility of Payment............................................................... 11
Section 6.7. Hardship Distributions............................................................ 12
ARTICLE VII. ADMINISTRATION, AMENDMENT AND TERMINATION......................................................... 12
Section 7.1. Administration.................................................................... 12
Section 7.2. Plan Administrator................................................................ 12
Section 7.3. Amendment, Termination and Withdrawal............................................. 13
Section 7.4. Successors........................................................................ 13
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C> <C>
Section 7.5. Claims.................................................................... 13
Section 7.6. Expenses.................................................................. 13
ARTICLE VIII. MISCELLANEOUS.................................................................................... 13
Section 8.1. No Guarantee of Employment................................................ 13
Section 8.2. Applicable Law............................................................ 14
Section 8.3. Interests Not Transferable................................................ 14
Section 8.4. Severability.............................................................. 14
Section 8.5. Withholding of Taxes...................................................... 14
Section 8.6. Top-Hat Plan.............................................................. 14
</TABLE>
ii
<PAGE> 4
SINTER METALS, INC.
DEFERRED COMPENSATION PLAN
The Sinter Metals, Inc. Deferred Compensation Plan is made
and executed as of the ___ day of July, 1996 and is effective as of July 29,
1996.
ARTICLE I. PURPOSE
The SINTER METALS, INC. DEFERRED COMPENSATION PLAN (the
"Plan") is hereby established by Sinter Metals, Inc. to allow designated
management and highly compensated employees to defer a portion of their current
salary. It is intended that the Plan will aid in attracting and retaining
employees of exceptional ability by providing these benefits. The terms and
conditions of the Plan are set forth below.
ARTICLE II. DEFINITIONS AND CONSTRUCTION
Section 2.1. DEFINITIONS. Whenever the following terms are
used in this Plan they shall have the meanings specified below unless the
context clearly indicates to the contrary:
(a) "Account": The bookkeeping account maintained for each
Participant showing his interest under the Plan.
(b) "Accounting Date": December 31 of each year and the last
day of any calendar quarter in which a Participant's Settlement
Date occurs.
(c) "Accounting Period": The period beginning on the day
immediately following an Accounting Date and ending on the next
following Accounting Date.
(d) "Administrator": The committee established pursuant to
the provisions of Section 7.1.
(e) "Base Salary": The base earnings paid by the Corporation
to a Participant without regard to any increases or decreases in
base earnings as a result of an election to defer base earnings
under this Plan, or an election between benefits or cash provided
under a plan of the Corporation maintained pursuant to Section
125 or 401(k) of the Code.
(f) "Beneficiary": The person or persons (natural or
otherwise), within the meaning of Section 6.5, who are entitled
to receive distribution of the Participant's Account balance in
the event of the Participant's death.
<PAGE> 5
(g) "Board": The Board of Directors of the Corporation.
(h) "Bonus": Any bonus paid by the Corporation to a
Participant without regard to any decreases as a result of an
election to defer all or any portion of a bonus under this Plan,
or an election between benefits or cash provided under a plan of
the Corporation maintained pursuant to Section 125 or 401(k) of
the Code.
(i) "Change in Control": Shall have occurred on the date on
which any of the following events is effective:
(A) The Corporation shall merge into itself, or be
merged or consolidated with, another corporation and as a
result of such merger or consolidation less than 70% of the
outstanding voting securities of the surviving or resulting
corporation shall be owned in the aggregate by the former
shareholders of the Corporation as the same shall have
existed immediately prior to such merger or consolidation;
(B) The Corporation shall sell or transfer to one or
more persons, corporations or entities, in a single
transaction or a series of related transactions, more than
one-half of the assets accounted for on the statement of
financial position contained in the Corporation's most
recent Annual Report as "properties" or "investments in
associated companies" (or such replacements for these
accounts as may be adopted from time to time) unless, by the
affirmative vote of two-thirds of the members of the Board,
the transaction or transactions are exempted from the
operation of this provision based on a good faith finding
that the transaction or transactions are not within the
intended scope of this definition for purposes of this
instrument;
(C) A person, within the meaning of Section 3(a)(9) or
of Section 13(d)(3) (as in effect on the date hereof) of the
Securities Exchange Act of 1934, shall become the beneficial
owner (as defined in Rule 13d-3 of the Securities and
Exchange Commission pursuant to the Securities Exchange Act
of 1934) of 25% or more of the outstanding voting securities
of the Corporation (whether directly or indirectly); or
(D) During any period of three consecutive years,
individuals who at the beginning of any such period
constitute the Board of the Corporation cease, for any
reason, to constitute at least a majority thereof, unless
the election, or the nomination for election by the
shareholders of the Corporation, of each Director first
elected during any such period was approved by a
2
<PAGE> 6
vote of at least one-third of the Directors of the
Corporation who are Directors of the Corporation on
the date of the beginning of any such period.
(j)"Common Shares": The Class A common shares, par
value 1/100th of one cent per share, of the Corporation.
(k) "Code": The Internal Revenue Code of 1986, as
amended from time to time; any reference to a provision of the Code
shall also include any successor provision thereto.
(l) "Committee": The Compensation Committee of the
Board.
(m) "Compensation": The amount of Base Salary plus
Bonuses paid for the Plan Year by the Corporation to a Participant.
(n) "Corporation": Sinter Metals, Inc. or any
successor or successors thereto.
(o) "Deferral Commitment": An agreement by a
Participant to have a specified percentage or dollar amount of his
Compensation deferred under the Plan. Such agreement shall be
effective until revoked or replaced by a subsequent effective
Deferral Commitment.
(p) "Deferral Period": Means the Plan Year for which a
Participant has elected to defer a portion of his Compensation.
(q) "Disability": The occurrence, while a Participant
is an Employee, of a physical or mental incapacity which is likely
to be permanent and which prevents a Participant from engaging in
any occupation or performing any work for compensation or profit
for which he is qualified by education, training or experience, as
determined by the Administrator in its sole discretion on the basis
of medical evidence certified by a physician or physicians
designated by it.
(r) "Effective Date": July 29, 1996.
(s) "Employee": The Chief Executive Officer of the
Corporation and any other employee of the Corporation who is, as
determined by the Chief Executive Officer, a member of a "select
group of management or highly compensated employees" of the
Corporation, within the meaning of Sections 201, 301 and 401 of
ERISA, and who is designated by the Chief Executive Officer as an
Employee eligible to participate in the Plan.
(t) "ERISA": The Employee Retirement Income Security
Act of 1974, as amended from time to time; any reference to
3
<PAGE> 7
a provision of ERISA shall also include any successor provision
thereto.
(u) "Financial Hardship": An unforeseeable financial
emergency of the Participant, determined by the Administrator on
the basis of information supplied by the Participant, arising from
an illness, disability, casualty loss, sudden financial reversal or
other such unforeseeable occurrence, but not including foreseeable
events such as the purchase of a house or education expenses for
children.
(v) "Investment Preference Request": Shall have the
meaning assigned thereto in Section 5.3(a) hereof.
(w) "Matching Amount": The amount credited to a
Participant's Matching Account under Section 3.4.
(x) "Money Market Fund": The money market fund
selected by the Committee.
(y) "Participant": An Employee participating in the
Plan in accordance with the provisions of Section 3.1 or a former
Employee retaining benefits under the Plan that have not been fully
paid.
(z) "Participation Agreement": The Agreement submitted
by a Participant to the Administrator with respect to one or more
Deferral Commitments.
(aa) "Plan": The Plan set forth in this instrument as
it may, from time to time, be amended.
(ab) "Plan Year": The 12-month period beginning
January 1 through December 31; provided that the first plan year
shall begin on July 29, 1996 and end on December 31, 1996.
(ac) "Retirement": Termination of employment with the
Corporation on or after attainment of age 65.
(ad) "Settlement Date": The earlier of the date on
which a Participant terminates employment with the Corporation or
the date on which a Change in Control occurs. Leaves of absence
granted by the Corporation will not be considered as termination of
employment during the term of such leave. Settlement Date shall
also include with respect to any Deferral Period the date prior or
subsequent to termination of employment selected by a Participant
in a Participation Agreement for distribution of all or a portion
of the amounts deferred during such Deferral Period.
(ae) "Trust": Shall have the meaning assigned thereto
in Section 5.1(a) hereof.
4
<PAGE> 8
(af) "Trust Account": Shall have the meaning assigned
thereto in Section 5.2 hereof.
(ag) "Trust Agreement": Shall mean the Trust Agreement
entered into between the Corporation and the Trustee in connection
with the Plan.
(ah) "Trust Fund": Shall have the meaning assigned
thereto in Section 5.2 hereof.
(ai) "Trustee": Such person or entity as may be chosen
by the Corporation from time to time to act as trustee under the
Trust Agreement, together with the successors of such person or
entity as may be provided in the Trust Agreement.
Section 2.2. CONSTRUCTION. The masculine gender,
where appearing in the Plan, shall be deemed to include the feminine gender, and
the singular may include the plural, unless the context clearly indicates to the
contrary. The words "hereof," "herein," "hereunder," and other similar compounds
of the word "here" shall mean and refer to the entire Plan, and not to any
particular provision or Section.
ARTICLE III. PARTICIPATION AND DEFERRALS
Section 3.1. ELIGIBILITY AND PARTICIPATION.
(a) ELIGIBILITY. Eligibility to participate in the Plan for
any Deferral Period is limited to those management and/or highly
compensated Employees of the Corporation who are the Chief Executive
Officer of the Corporation, or who are designated, from time to time,
by the Chief Executive Officer.
(b) PARTICIPATION. An eligible Employee may elect to
participate in the Plan with respect to any Deferral Period by
submitting a Participation Agreement to the Administrator by the last
business day immediately preceding the applicable Deferral Period.
(c) INITIAL YEAR OF PARTICIPATION. In the event that an
individual first becomes eligible to participate during a Deferral
Period and wishes to elect a Deferral Commitment with respect to the
Compensation earned by and payable to the individual during such
Deferral Period, a Participation Agreement must be submitted to the
Administrator no later than 30 days after such individual first becomes
eligible. Any Deferral Commitments elected in such Participation
Agreement shall be effective only with regard to Compensation earned
following the submission of the Participation Agreement to the
Administrator. If an eligible Employee does not submit a Participation
Agreement within such period of time, such individual will not be
5
<PAGE> 9
eligible to participate in the Plan until the first day of a Deferral
Period subsequent to the Deferral Period in which the individual
initially became eligible to participate.
(d) TERMINATION OF PARTICIPATION. Participation in the Plan
shall continue as long as the Participant is eligible to receive
benefits under the Plan.
Section 3.2. INELIGIBLE PARTICIPANT. Notwithstanding any other
provisions of this Plan to the contrary, if the Administrator determines that
any Participant may not qualify as a "management or highly compensated employee"
within the meaning of ERISA, or regulations thereunder, the Administrator may
determine, in its sole discretion, that such Participant shall cease to be
eligible to participate in this Plan. Upon such determination, the Corporation
shall make an immediate lump sum payment to the Participant equal to the amount
credited to his Account. Upon such payment no benefit shall thereafter be
payable under this Plan either to the Participant or any Beneficiary of the
Participant, and all of the Participant's elections as to the time and manner of
payment of his Account will be deemed to be cancelled.
Section 3.3 AMOUNT OF DEFERRAL. With respect to each Plan
Year, a Participant may elect to defer a specified dollar amount or percentage
of his or her Base Salary, PROVIDED, HOWEVER, that such specified dollar amount
or percentage does not exceed 6% of such Participant's Base Salary for the Plan
Year. A Participant may choose to have amounts deferred under this Plan deducted
from his Base Salary, Bonus or a combination of both. For the first Plan Year, a
Participant may elect to defer all or any portion of his or her Base Salary
earned or payable after the later of the effective date of the Participation
Agreement or the date of filing the Participation Agreement with the
Administrator, provided the total deferred amount for such Plan Year does not
exceed the annual limitation under this Section 3.3 computed for the calendar
year. A Participant may change the dollar amount or percentage of his or her
Base Salary to be deferred by filing a written notice thereof with the
Administrator. Any such change shall be effective as of the first day of the
Plan Year immediately succeeding the Plan Year in which such notice is filed
with the Administrator.
Section 3.4. MATCHING AMOUNTS. The Corporation shall provide
Matching Amounts under this Plan with respect to each Participant in an amount
equal to one-half the amount elected by the Participant for the Plan Year but
not exceeding 3% of such Participant's Base Salary for the Plan Year. Matching
Amounts shall be credited as of the time that matching contributions are made to
the Corporation's Savings Plan.
Section 3.5. MODIFICATION OF DEFERRAL COMMITMENTS. A
Deferral Commitment shall be irrevocable, except that the Administrator may, in
its sole discretion, permit a Participant
6
<PAGE> 10
to terminate, prospectively, any Deferral Commitment for a Deferral Period. If a
Participant terminates a Deferral Commitment during a Deferral Period, such
Participant will not be permitted to enter into a new Deferral Commitment until
the following Deferral Period.
ARTICLE IV. PARTICIPANTS' ACCOUNTS
Section 4.1. ESTABLISHMENT OF ACCOUNTS. The Corporation,
through its accounting records, shall establish an Account for each Participant.
In addition, the Corporation may establish one or more subaccounts of a
Participant's Account, if the Corporation determines that such subaccounts are
necessary or appropriate in administering the Plan.
Section 4.2. ELECTIVE DEFERRED COMPENSATION. A Participant's
Compensation that is deferred pursuant to a Deferral Commitment shall be
credited to the Participant's Account within thirty days following the date the
corresponding non-deferred portion of his Compensation would have been paid to
the Participant. Any Matching Amount provided pursuant to Section 3.4 shall be
credited at the time designated by the Corporation. Any withholding of taxes or
other amounts with respect to deferred Compensation which is required by
federal, state or local law shall be withheld from the Participant's
non-deferred Compensation.
Section 4.3. DETERMINATION OF ACCOUNTS.
(a) DETERMINATION OF ACCOUNTS. The amount credited to each
Participant's Account as of a particular date shall equal the deemed
balance of such Account as of such date. The balance in the Account
shall equal the amount credited pursuant to Section 4.2, and shall be
adjusted in the manner provided in Section 4.4.
(b) ACCOUNTING. The Corporation, through its accounting
records, shall maintain a separate and distinct record of the amount in
each Account as adjusted to reflect income, gains, losses, withdrawals
and distributions.
Section 4.4. ADJUSTMENTS TO ACCOUNTS.
(a) Each Participant's Account shall be debited with the
amount of any distributions under the Plan to or on behalf of the
Participant or, in the event of his death, his Beneficiary during the
Accounting Period ending on such Accounting Date.
(b) The Participant's Account shall next be credited or
debited, as the case may be, with an income (loss) factor equal to an
amount determined by multiplying (i) the balance credited to the
Participant's Account as of the immediately
7
<PAGE> 11
preceding Accounting Date (as adjusted pursuant to Section 4.4(a) for
the current Accounting Date) by (ii) the rate of return for the
Accounting Period ending on such Accounting Date on deemed investments
provided for in Section 5.3.
Section 4.5. STATEMENT OF ACCOUNTS. As soon as practicable
after the end of each calendar quarter, a statement shall be furnished to each
Participant or, in the event of his death, to his Beneficiary showing the status
of his Account as of the end of such quarter, any changes in his Account since
the end of the immediately preceding calendar quarter, and such other
information as the Administrator shall determine.
Section 4.6. VESTING OF ACCOUNTS. Subject to Section 5.1, each
Participant shall at all times have a nonforfeitable interest in the portion of
his Account balance attributable to the deferrals elected under Section 3.3.
Matching contributions made on behalf of a Participant for a particular Plan
Year shall vest one-third upon the Participant's completion of one year of
employment with the Corporation following such year, and one-third upon the
Participant's completion of two years of employment with the Corporation
following such year and one-third upon the Participant's completion of three
years of employment with the Corporation following such year, PROVIDED, HOWEVER,
that Matching Contributions shall fully vest upon the Retirement of a
Participant if such Participant has participated in the Plan for at least five
Plan Years.
ARTICLE V. FINANCING OF BENEFITS
Section 5.1. CONTRIBUTIONS. (a) The Corporation shall from
time to time transfer to the Trustee to be held under the Trust Agreement in a
trust (the "Trust") cash funds equal to the amount by which Participants elect
to have their Compensation reduced pursuant to this Plan. All such transfers
shall be made within thirty days following the date the corresponding
non-deferred portion of his Compensation would have been paid to the
Participant. Any Matching Amount provided pursuant to Section 3.4 shall be
credited at the time designated by the Corporation consistent with Section 3.4.
(b) Following any initial filing of a written election with
the Administrator pursuant to Section 3.1 hereof by a Participant who has
previously entered into a deferred compensation agreement or arrangement with
the Corporation, the Corporation shall transfer to the Trustee to be held in the
Trust for the account of such Participant pursuant to Section 5.2 hereof cash
funds equal to the amounts previously deferred pursuant to such deferred
compensation agreement or arrangements together with an amount equal to any
interest credited thereon in
8
<PAGE> 12
accordance with such deferred compensation agreement or arrangement to the date
of such transfer.
(c) Except as provided with respect to the creditors of the
Corporation in Sections 5.4 and 5.5 hereof, all contributions and other
transfers by the Corporation to the Trust pursuant to Sections 5.1(a) and (b)
hereof shall be irrevocable and (except as so provided) the Corporation shall
have no right to the return of any funds so contributed or transferred to the
Trust or any earnings thereon.
Section 5.2. ESTABLISHMENT OF ACCOUNTS. The Trustee shall
establish a separate account under the Trust (a "Trust Account") for any
Participant who elects to have his Compensation reduced pursuant to this Plan.
As of December 31 of each year and on such other dates as the Committee may
direct, the fair market value of the assets of the Trust allocated to all Trust
Accounts (the "Trust Fund") shall be determined by the Trustee.
Section 5.3. INVESTMENTS. (a) The assets of the Trust Fund
shall be held by the Trustee in the name of the Trust. As amounts are received
by the Trustee, it shall invest the funds pursuant to the Trust Agreement, which
shall authorize the Trustee to invest Trust Account assets attributable to a
Participant's Compensation that is deferred pursuant to a Deferral Commitment in
Common Shares or in the Money Market Fund pending investment in Common Shares.
The Administrator may, but is under no obligation to, deem the amounts credited
to a Participant's Account to be invested in Common Shares or in the Money
Market Fund pending investment in Common Shares, or the Administrator may,
instead, in its sole discretion, deem such Account to be invested in any deemed
investment funds selected by the Administrator. Earnings on any amounts deemed
to have been invested in any deemed investment fund shall be deemed to have been
reinvested in such fund.
(b) The portion of a Participant's Account attributable to any
Matching Amount provided pursuant to Section 3.4 shall be deemed to be invested
in Common Shares or in the Money Market Fund pending investment in Common
Shares.
Section 5.4. CLAIMS OF THE CORPORATION'S CREDITORS. All
assets held in the Trust pursuant to the Plan, and any payment to be made by the
Trustee pursuant to the Plan and Trust Agreement, shall be subject to the claims
of the general creditors of the Corporation, including judgment creditors and
bankruptcy creditors. The rights of a Participant or his Beneficiary to any
assets of the Trust Fund shall be no greater than the rights of an unsecured
creditor of the Corporation.
Section 5.5. NOTIFICATION OF INSOLVENCY. The Board of
Directors of the Corporation and the Chief Executive Officer of the Corporation
shall have the duty to immediately notify the Trustee if the Corporation becomes
Insolvent (as hereinafter
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<PAGE> 13
defined). The Trustee shall not make any payments from the Trust Fund to any
Participant or any Beneficiary under the Plan after such notification is
received or at any time after the Trustee has knowledge of such Insolvency.
Under any such circumstance, the Trustee shall deliver any property held in the
Trust Fund only as a court of competent jurisdiction may direct to satisfy the
claims of the Corporation's creditors. For purposes of this Plan, the
Corporation shall be deemed to be "Insolvent" if the Corporation is subject to a
pending voluntary or involuntary proceedings as a debtor under the United States
Bankruptcy Code, as amended, or is unable to pay its debts as they become due.
ARTICLE VI. DISTRIBUTION OF BENEFITS
Section 6.1. SETTLEMENT DATE. A Participant or, in the event
of his death, his Beneficiary, shall be entitled to distribution of the balance
of his Account, as provided in this Article VI, following his Settlement Date or
Dates.
Section 6.2. AMOUNT TO BE DISTRIBUTED. The amount to which a
Participant or, in the event of his death, his Beneficiary is entitled in
accordance with the following provisions of this Article shall be based on the
Participant's adjusted account balance determined as of the Accounting Date
coincident with or next following his Settlement Date or Dates.
Section 6.3. TIME OF DISTRIBUTION. Distribution of a
Participant's Account shall commence upon the earlier of (1) the date of a
Participant's termination of employment, retirement, disability or death or (ii)
the occurrence of a Change of Control of the Corporation. Any benefits paid to
the Participant as a distribution shall reduce the Participant's Account.
Notwithstanding the foregoing, if elected by the Participant, the distribution
of all or a portion of the Participant's Account may commence on a date between
the Settlement Date and the date the Participant attains age sixty-five.
Section 6.4. FORM OF DISTRIBUTION. As soon as practicable
after the end of the Accounting Period in which a Participant's Settlement Date
occurs, but in no event later than thirty days following the end of such
Accounting Period, the Corporation shall commence distribution or cause
distribution to be commenced, to the Participant or, in the event of his death,
to his Beneficiary, of the balance of the Participant's Account, as determined
under Section 6.2, under one of the forms provided in this Section.
Distributions shall be in cash or in Common Shares (to the extent that a portion
of the Participant's Account is deemed to be invested in Common Shares), or any
combination thereof, as elected by the Participant.
Distribution of a Participant's Account with respect to any
Deferral Period shall be made in one of the following forms
10
<PAGE> 14
as elected by the Participant by written notice filed with the Administrator not
later than the day before the Deferral Period in which Compensation is deferred:
(a) by a single lump sum payment; or
(b) by payment in five (5) annual installments; or
(c) by payment in ten (10) annual installments.
The amount of each installment shall be equal to the quotient obtained by
dividing the Participant's Account balance as of the date of such installment
payment by the number of installment payments remaining to be made to or in
respect of such Participant at the time of calculation.
If a Participant fails to make an election in a timely manner
as provided in this Section 6.4, distribution shall be made in cash in ten (10)
annual installments.
Section 6.5. BENEFICIARY DESIGNATION. As used in the
Plan the term "Beneficiary" means:
(a) The last person designated as Beneficiary by
the Participant in a written notice on a form prescribed by
the Administrator;
(b) If there is no designated Beneficiary or if the
person so designated shall not survive the Participant, such
Participant's spouse; or
(c) If no such designated Beneficiary and no such
spouse is living upon the death of a Participant, or if all
such persons die prior to the full distribution of the
Participant's Account balance, then the legal representative
of the last survivor of the Participant and such persons, or,
if the Administrator shall not receive notice of the
appointment of any such legal representative within one year
after such death, the heirs-at-law of such survivor (in the
proportions in which they would inherit his intestate personal
property) shall be the Beneficiaries to whom the then
remaining balance of the Participant's Account shall be
distributed.
Any Beneficiary designation may be changed from time to time by like notice
similarly delivered. No notice given under this Section shall be effective
unless and until the Administrator actually receives such notice.
Section 6.6. FACILITY OF PAYMENT. Whenever and as often as any
Participant or his Beneficiary entitled to payments hereunder shall be under a
legal disability or, in the sole judgment of the Administrator, shall otherwise
be unable to apply
11
<PAGE> 15
such payments to his own best interests and advantage, the Administrator in the
exercise of its discretion may direct all or any portion of such payments to be
made in any one or more of the following ways: (i) directly to him; (ii) to his
legal guardian or conservator; or (iii) to his spouse or to any other person, to
be expended for his benefit; and the decision of the Administrator, shall in
each case be final and binding upon all persons in interest.
Section 6.7. HARDSHIP DISTRIBUTIONS. Upon a finding by the
Administrator that a Participant has suffered a Financial Hardship, the
Administrator may, in its sole discretion, distribute, or direct the Trustee to
distribute, to the Participant an amount which does not exceed the amount
required to meet the immediate financial needs created by the Financial Hardship
and not reasonably available from other sources of the Participant; provided,
however, that in no event shall any amount attributable to a Deferral Commitment
be distributed less than six months after the date of the applicable
Participation Agreement. No distributions pursuant to this Article 6 may be made
in excess of the value of the Participant's Account at the time of such
distribution.
ARTICLE VII. ADMINISTRATION, AMENDMENT AND TERMINATION
Section 7.1. ADMINISTRATION. The Plan shall be administered by
an Administrator consisting of one or more persons who shall be appointed by and
serve at the pleasure of the Chief Executive Officer of the Corporation. The
Administrator shall have such powers as may be necessary to discharge its duties
hereunder, including, but not by way of limitation, to construe and interpret
the Plan and determine the amount and time of payment of any benefits hereunder.
The Administrator may, from time to time, employ agents and delegate to them
such administrative duties as it sees fit, and may from time to time consult
with legal counsel who may be counsel to the Corporation. The Administrator
shall have no power to add to, subtract from or modify any of the terms of the
Plan, or to change or add to any benefits provided under the Plan, or to waive
or fail to apply any requirements of eligibility for a benefit under the Plan.
No member of the Administrator shall act in respect of his own Account. All
decisions and determinations by the Administrator shall be final and binding on
all parties. All decisions of the Administrator shall be made by the vote of the
majority, including actions in writing taken without a meeting. All elections,
notices and directions under the Plan by a Participant shall be made on such
forms as the Administrator shall prescribe.
Section 7.2. PLAN ADMINISTRATOR. The Corporation shall be
the "administrator" under the Plan for purposes of ERISA.
12
<PAGE> 16
Section 7.3. AMENDMENT, TERMINATION AND WITHDRAWAL. The Plan
may be amended from time to time or may be terminated at any time by the Board.
No amendment or termination of the Plan, however, may adversely affect the
amount or timing of payment of any person's benefits accrued under the Plan to
the date of amendment or termination without such person's written consent.
Section 7.4. SUCCESSORS. The Corporation shall require any
successor (whether direct or indirect, by purchase, merger, consolidation,
reorganization or otherwise) to all or substantially all of the business and/or
assets of the Corporation expressly to assume and to agree to perform this Plan
in the same manner and to the same extent the Corporation would be required to
perform if no such succession had taken place. This Plan shall be binding upon
and inure to the benefit of the Corporation and any successor of or to the
Corporation, including without limitation any persons acquiring directly or
indirectly all or substantially all of the business and/or assets of the
Corporation whether by sale, merger, consolidation, reorganization or otherwise
(and such successor shall thereafter be deemed the "Corporation" for the
purposes of this Plan), and the heirs, beneficiaries, executors and
administrators of each Participant.
Section 7.5. CLAIMS. The Administrator will provide to any
Participant or Beneficiary whose claim for benefits under the Plan has been
fully or partially denied a written notice setting forth (i) the specific
reasons for such denial, (ii) a designation of any additional material or
information required and (iii) an explanation of the Plan's claim review
procedure. Such notice shall state that the Participant or Beneficiary is
entitled to request a review in writing, by the Administrator, of the decision
denying the claim. The claim will be reviewed by the Administrator who may, but
need not, grant the claimant a hearing. On review, the claimant may have legal
representation, examine pertinent documents and submit issues and comments in
writing. The decision on review will be made within 120 days following the
request, will be provided in writing to the claimant and will be final and
binding on all parties concerned.
Section 7.6. EXPENSES. All expenses of the Plan shall
be paid by the Corporation from funds other than those deemed invested as
provided in Section 5.3.
ARTICLE VIII. MISCELLANEOUS
Section 8.1. NO GUARANTEE OF EMPLOYMENT. Nothing contained in
the Plan shall be construed as a contract of employment between the Corporation
and any Employee, or as a right of any Employee, to be continued in the
employment of the Corporation, or as a limitation of the right of the
Corporation to discharge any of its Employees, with or without cause.
13
<PAGE> 17
Section 8.2. APPLICABLE LAW. All questions arising in respect
of the Plan, including those pertaining to its validity, interpretation and
administration, shall be governed, controlled and determined in accordance with
the applicable provisions of federal law and, to the extent not preempted by
federal law, the laws of the State of Ohio.
Section 8.3. INTERESTS NOT TRANSFERABLE. No person shall have
any right to commute, encumber, pledge or dispose of any interest herein or
right to receive payments hereunder, nor shall such interests or payments be
subject to seizure, attachment or garnishment for the payments of any debts,
judgments, alimony or separate maintenance obligations or be transferable by
operation of law in the event of bankruptcy, insolvency or otherwise, all
payments and rights hereunder being expressly declared to be nonassignable and
nontransferable.
Section 8.4. SEVERABILITY. Each section, subsection and lesser
section of this Plan constitutes a separate and distinct undertaking, covenant
and/or provision hereof. Whenever possible, each provision of this Plan shall be
interpreted in such manner as to be effective and valid under applicable law. In
the event that any provision of this Plan shall finally be determined to be
unlawful, such provision shall be deemed severed from this Plan, but every other
provision of this Plan shall remain in full force and effect, and in
substitution for any such provision held unlawful, there shall be substituted a
provision of similar import reflecting the original intention of the parties
hereto to the extent permissible under law.
Section 8.5. WITHHOLDING OF TAXES. The Corporation may
withhold or cause to be withheld from any amounts payable under this Plan all
federal, state, local and other taxes as shall be legally required.
Section 8.6. TOP-HAT PLAN. The Plan is intended to be a plan
which is unfunded and maintained primarily for the purpose of providing deferred
compensation for a select group of management or highly compensated employees
within the meaning of Sections 201, 301 and 401 of ERISA, and therefore to be
exempt from the provisions of Parts 2, 3 and 4 of Subtitle B of Title I of
ERISA. Accordingly, notwithstanding any other provision of the Plan, the Plan
will terminate and no further benefits will accrue hereunder in the event it is
determined by a court of competent jurisdiction or by an opinion of counsel
based upon a change in law that the Plan constitutes an employee pension benefit
plan within the meaning of Section 3(2) of ERISA, which is not so exempt. In
addition and notwithstanding any other provision of the Plan, in the absolute
discretion of the Committee, the amount credited to each Participant's Account
under the Plan as of the date of termination, which shall be an
14
<PAGE> 18
Accounting Date for purposes of the Plan, may be paid immediately to such
Participant in a single lump sum cash payment.
IN WITNESS WHEREOF, Sinter Metals, Inc. has caused this
instrument to be executed in its name as of the date first above written.
SINTER METALS, INC.
By:
-----------------------------------
Its:
-----------------------------------
Attest:
- -------------------------------
15
<PAGE> 1
Exhibit 21.1
------------
<TABLE>
<CAPTION>
Jurisdiction of
Name of Subsidiary Incorporation
<S> <C>
Sinter Metals GmbH Germany
Kolsva Sinterteknik, AB Sweden
Sinter Metals, Inc. - Zeeland Michigan
Powder Metal Holding, Inc. Delaware
ICM/Krebsoge, Inc. Delaware
ICM/Krebsoge, Ltd., Canada Ontario
Krebsoge Sinterholding GmbH Germany
Sintermetallwerk Krebsoge GmbH Germany
Metallwerk Unterfranken GmbH Germany
Pressmetall Krebsoge GmbH Germany
Sintermetallwerk Lubeck, GmbH Germany
Krebsoge USA, Inc. Delaware
Newmet Krebsoge Inc. Connecticut
PEAK Werkstoff GmbH Germany
Metallwerk Langensalza GmbH Germany
Krebsoge Sintermetall Germany
Sinter Metals Foreign Sales Corporation Barbados
</TABLE>
<PAGE> 1
Exhibit 23.2
CONSENT OF ARTHUR ANDERSEN LLP
------------------------------
As independent public accountants, we hereby consent to the use of our report
(and to all references to our Firm) included in or made a part of this
registration statement.
ARTHUR ANDERSEN LLP
Cleveland, Ohio,
December 23, 1996.
<PAGE> 1
Exhibit 23.3
------------
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Registration Statement of Sinter Metal, Inc. on
Form S-1 of our report dated December 19, 1996, appearing in the Prospectus,
which is part of this Registration Statement.
We also consent to the reference to us under the headings "Selected Historical
Financial Data" and "Experts" in such Prospectus.
DELOITTE & TOUCHE LLP
Detroit, Michigan
December 19, 1996
<PAGE> 1
Exhibit 23.4
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Prospectus constituting part of this
Registration Statement on Form S-1 of our report dated February 16, 1996,
except Note 26, Reconciliation with US GAAP, and Note 27, Subsequent Event,
as to which this date is December 12, 1996, relating to Krebsoge Sinterholding
GmbH. We also consent to the reference to us under the heading "Experts" and
"Selected Historical Financial Data" in such Prospectus. However, it should be
noted that Price Waterhouse GmbH has not prepared or certified such "Selected
Historical Financial Data."
PRICE WATERHOUSE GmbH
Dusseldorf, Germany
December 24, 1996
<PAGE> 1
Exhibit 23.5
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Prospectus constituting part of this
Registration Statement on Form S-1 of our report dated Febuary 17, 1995, except
Note 26, Reconciliation with US GAAP, and Note 27, Subsequent Event, as to
which this date is December 12, 1996, relating to the consolidated financial
statements of Krebsoge Sinterholding GmbH, which appears in such Prospectus.
We also consent to the reference to us under the heading "Experts" and
"Selected Historical Financial Data" in such Prospectus. However, it should be
noted that BDO Grunewalder Treuhand GmbH has not prepared or certified such
"Selected Historical Financial Data."
Dusseldorf
December 24, 1996
BDO GRUNEWALDER TREUHAND GMBH
Wirtschaftsprufungsgesellschaft
Dr. F. Nehles Dr. G. Kaulen
Wirtschaftsprufer Wirtschaftsprufer
<PAGE> 1
Exhibit 24.1
DIRECTOR OF
SINTER METALS, INC.
REGISTRATION STATEMENT ON FORM S-1
POWER OF ATTORNEY
The undersigned director of Sinter Metals, Inc., a Delaware
corporation (the "Company"), hereby constitutes and appoints Joseph W. Carreras,
Michael T. Kestner, Ian B. Hessel and Christopher M. Kelly and each of them,
with full power of substitution and resubstitution, as attorneys-in-fact or
attorney-in-fact of the undersigned, for him and in his name, place and stead,
to sign and file with the Securities and Exchange Commission under the
Securities Act of 1933 (the "Securities Act") one or more Registration
Statement(s) on Form S-1 relating to the registration of the offering for sale
of the Class A Common Stock, $0.001 par value per share of the Company, with any
and all amendments, supplements and exhibits thereto, including pre-effective
and post-effective amendments or supplements or any additional registration
statement filed pursuant to Rule 462 promulgated under the Securities Act, with
full power and authority to do and perform any and all acts and things
whatsoever that any of said attorneys or their substitutes may deem necessary or
desirable, in his or their sole discretion, with any such act or thing being
hereby ratified and approved in all respects without any further act or deed
whatsoever.
EXECUTED as of December 23, 1996.
/s/ E. Joseph Hochreiter
- ------------------------------------
/s/ E. Joseph Hochreiter
<PAGE> 2
DIRECTOR OF
SINTER METALS, INC.
REGISTRATION STATEMENT ON FORM S-1
POWER OF ATTORNEY
The undersigned director of Sinter Metals, Inc., a Delaware
corporation (the "Company"), hereby constitutes and appoints Joseph W. Carreras,
Michael T. Kestner, Ian B. Hessel and Christopher M. Kelly and each of them,
with full power of substitution and resubstitution, as attorneys-in-fact or
attorney-in-fact of the undersigned, for him and in his name, place and stead,
to sign and file with the Securities and Exchange Commission under the
Securities Act of 1933 (the "Securities Act") one or more Registration
Statement(s) on Form S-1 relating to the registration of the offering for sale
of the Class A Common Stock, $0.001 par value per share of the Company, with any
and all amendments, supplements and exhibits thereto, including pre-effective
and post-effective amendments or supplements or any additional registration
statement filed pursuant to Rule 462 promulgated under the Securities Act, with
full power and authority to do and perform any and all acts and things
whatsoever that any of said attorneys or their substitutes may deem necessary or
desirable, in his or their sole discretion, with any such act or thing being
hereby ratified and approved in all respects without any further act or deed
whatsoever.
EXECUTED as of December 23, 1996.
/s/ Charles E. Volpe
- --------------------------
Charles E. Volpe
Director
<PAGE> 3
DIRECTOR AND OFFICER OF
SINTER METALS, INC.
REGISTRATION STATEMENT ON FORM S-1
POWER OF ATTORNEY
The undersigned Chairman of the Board, director and officer of
Sinter Metals, Inc., a Delaware corporation (the "Company"), hereby constitutes
and appoints Joseph W. Carreras, Michael T. Kestner, Ian B. Hessel and
Christopher M. Kelly and each of them, with full power of substitution and
resubstitution, as attorneys-in-fact or attorney-in-fact of the undersigned, for
him and in his name, place and stead, to sign and file with the Securities and
Exchange Commission under the Securities Act of 1933 (the "Securities Act") one
or more Registration Statement(s) on Form S-1 relating to the registration of
the offering for sale of the Class A Common Stock, $0.001 par value per share of
the Company, with any and all amendments, supplements and exhibits thereto,
including pre-effective and post-effective amendments or supplements or any
additional registration statement filed pursuant to Rule 462 promulgated under
the Securities Act, with full power and authority to do and perform any and all
acts and things whatsoever that any of said attorneys or their substitutes may
deem necessary or desirable, in his or their sole discretion, with any such act
or thing being hereby ratified and approved in all respects without any further
act or deed whatsoever.
EXECUTED as of December 23, 1996.
/s/ Joseph W. Carreras
- ---------------------------------
Joseph W. Carreras
Chairman of the Board and Chief
Executive Officer
(Principal Executive Officer)
<PAGE> 4
OFFICER OF
SINTER METALS, INC.
REGISTRATION STATEMENT ON FORM S-1
POWER OF ATTORNEY
The undersigned officer of Sinter Metals, Inc., a Delaware
corporation (the "Company"), hereby constitutes and appoints Joseph W. Carreras,
Michael T. Kestner, Ian B. Hessel and Christopher M. Kelly and each of them,
with full power of substitution and resubstitution, as attorneys-in-fact or
attorney-in-fact of the undersigned, for her and in her name, place and stead,
to sign and file with the Securities and Exchange Commission under the
Securities Act of 1933 (the "Securities Act") one or more Registration
Statement(s) on Form S-1 relating to the registration of the offering for sale
of the Class A Common Stock, $0.001 par value per share of the Company, with any
and all amendments, supplements and exhibits thereto, including pre-effective
and post-effective amendments or supplements or any additional registration
statement filed pursuant to Rule 462 promulgated under the Securities Act, with
full power and authority to do and perform any and all acts and things
whatsoever that any of said attorneys or their substitutes may deem necessary or
desirable, in his or their sole discretion, with any such act or thing being
hereby ratified and approved in all respects without any further act or deed
whatsoever.
EXECUTED as of December 23, 1996.
/s/ Michael T. Kestner
- -------------------------------------
Michael T. Kestner
Vice President, Chief Financial
Officer and Secretary
(Principal Financial Officer)
<PAGE> 5
OFFICER OF
SINTER METALS, INC.
REGISTRATION STATEMENT ON FORM S-1
POWER OF ATTORNEY
The undersigned officer of Sinter Metals, Inc., a Delaware
corporation (the "Company"), hereby constitutes and appoints Joseph W. Carreras,
Michael T. Kestner, Ian B. Hessel and Christopher M. Kelly and each of them,
with full power of substitution and resubstitution, as attorneys-in-fact or
attorney-in-fact of the undersigned, for him and in his name, place and stead,
to sign and file with the Securities and Exchange Commission under the
Securities Act of 1933 (the "Securities Act") one or more Registration
Statement(s) on Form S-1 relating to the registration of the offering for sale
of the Class A Common Stock, $0.001 par value per share of the Company, with any
and all amendments, supplements and exhibits thereto, including pre-effective
and post-effective amendments or supplements or any additional registration
statement filed pursuant to Rule 462 promulgated under the Securities Act, with
full power and authority to do and perform any and all acts and things
whatsoever that any of said attorneys or their substitutes may deem necessary or
desirable, in his or their sole discretion, with any such act or thing being
hereby ratified and approved in all respects without any further act or deed
whatsoever.
EXECUTED as of December 23, 1996.
/s/ Donald L. LeVault
- --------------------------------
Donald L. LeVault
President and Director
<PAGE> 6
OFFICER OF
SINTER METALS, INC.
REGISTRATION STATEMENT ON FORM S-1
POWER OF ATTORNEY
The undersigned officer of Sinter Metals, Inc., a Delaware
corporation (the "Company"), hereby constitutes and appoints Joseph W. Carreras,
Michael T. Kestner, Ian B. Hessel and Christopher M. Kelly and each of them,
with full power of substitution and resubstitution, as attorneys-in-fact or
attorney-in-fact of the undersigned, for him and in his name, place and stead,
to sign and file with the Securities and Exchange Commission under the
Securities Act of 1933 (the "Securities Act") one or more Registration
Statement(s) on Form S-1 relating to the registration of the offering for sale
of the Class A Common Stock, $0.001 par value per share of the Company, with any
and all amendments, supplements and exhibits thereto, including pre-effective
and post-effective amendments or supplements or any additional registration
statement filed pursuant to Rule 462 promulgated under the Securities Act, with
full power and authority to do and perform any and all acts and things
whatsoever that any of said attorneys or their substitutes may deem necessary or
desirable, in his or their sole discretion, with any such act or thing being
hereby ratified and approved in all respects without any further act or deed
whatsoever.
EXECUTED as of December 23, 1996.
/s/ Ian B. Hessel
- -----------------------------------
Ian B. Hessel
Controller
(Principal Accounting Officer)
<PAGE> 7
SINTER METALS, INC.
REGISTRATION STATEMENT ON FORM S-1
POWER OF ATTORNEY
Sinter Metals, Inc., a Delaware corporation (the "Company"),
hereby constitutes and appoints Joseph W. Carreras, Michael T. Kestner, Ian B.
Hessel and Christopher M. Kelly and each of them, with full power of
substitution and resubstitution, as attorneys-in-fact or attorney-in-fact of the
Company, for it and in its name, place and stead, to sign and file with the
Securities and Exchange Commission under the Securities Act of 1933 (the
"Securities Act") one or more Registration Statement(s) on Form S-1 relating to
the registration of the offering for sale of the Class A Common Stock, $0.001
par value per share of the Company, with any and all amendments, supplements and
exhibits thereto, including pre-effective and post-effective amendments or
supplements or any additional registration statement filed pursuant to Rule 462
promulgated under the Securities Act, with full power and authority to do and
perform any and all acts and things whatsoever that any of said attorneys or
their substitutes may deem necessary or desirable, in his or their sole
discretion, with any such act or thing being hereby ratified and approved in all
respects without any further act or deed whatsoever.
EXECUTED as of December 23, 1996.
SINTER METALS, INC.
By: /s/ Joseph W. Carreras
----------------------------------------
Joseph W. Carreras
President and Chief Executive Officer
<PAGE> 1
EXHIBIT 99.1
------------
INDEMNIFICATION OF OFFICERS, DIRECTORS,
EMPLOYEES AND AGENTS; INSURANCE
(a) A corporation may indemnify any person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the corporation) by
reason of the fact that he is or was a director, officer, employee or agent of
the corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit or proceeding if he acted
in good faith and in a manner he reasonably believed to be in or not opposed to
the best interests of the corporation, and, with respect to any criminal action
or proceeding, had no reasonable cause to believe his conduct was unlawful. The
termination of any action, suit or proceeding by judgment, order, settlement,
conviction, or upon a plea of nolo contendere or its equivalent, shall not, of
itself, create a presumption that the person did not act in good faith and in a
manner which he reasonably believed to be in or not opposed to the best
interests of the corporation, and, with respect to any criminal action or
proceeding, had reasonable cause to believe that his conduct was unlawful.
(b) A corporation may indemnify any person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action or suit by or in the right of the corporation to procure a
judgment in its favor by reason of the fact that he is or was a director,
officer, employee or agent of the corporation, or is or was serving at the
request of the corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise against
expenses (including attorneys' fees) actually and reasonably incurred by him in
connection with the defense or settlement of such action or suit if he acted in
good faith and in a manner he reasonably believed to be in or not opposed to the
best interests of the corporation and except that no indemnification shall be
made in respect of any claim, issue or matter as to which such person shall have
been adjudged to be liable to the corporation unless and only to the extent that
the Court of Chancery or the court in which such action or suit was brought
shall determine upon application that, despite the adjudication of liability but
in view of all the circumstances of the case, such person is fairly and
reasonably entitled to indemnity for such expenses which the Court of Chancery
or such other court shall deem proper.
(c) To the extent that a director, officer, employee or
agent of a corporation has been successful on the merits or
<PAGE> 2
otherwise in defense of any action, suit or proceeding referred to in
subsections (a) and (b) of this section, or in defense of any claim, issue or
matter therein, he shall be indemnified against expenses (including attorneys'
fees) actually and reasonably incurred by him in connection therewith.
(d) Any indemnification under subsections (a) and (b) of this
section (unless ordered by a court) shall be made by the corporation only as
authorized in the specific case upon a determination that indemnification of the
director, officer, employee or agent is proper in the circumstances because he
has met the applicable standard of conduct set forth in subsections (a) and (b)
of this section. Such determination shall be made (1) by a majority vote of the
directors who are not parties to such action, suit or proceeding, even though
less than a quorum, or (2) if there are no such directors, or if such directors
so direct, by independent legal counsel in a written opinion, or (3) by the
stockholders.
(e) Expenses (including attorneys' fees) incurred by an
officer or director in defending any civil, criminal, administrative or
investigative action, suit or proceeding may be paid by the corporation in
advance of the final disposition of such action, suit or proceeding upon receipt
of an undertaking by or on behalf of such director or officer to repay such
amount if it shall ultimately be determined that he is not entitled to be
indemnified by the corporation as authorized in this section. Such expenses
(including attorneys' fees incurred by other employees and agents may be so paid
upon such terms and conditions, if any, as the board of directors deems
appropriate.
(f) The indemnification and advancement of expenses provided
by, or granted pursuant to, the other subsections of this section shall not be
deemed exclusive of any other rights to which those seeking indemnification or
advancement of expenses may be entitled under any bylaw, agreement, vote of
stockholders or disinterested directors or otherwise, both as to action in his
official capacity and as to action in another capacity while holding such
office.
(g) A corporation shall have power to purchase and maintain
insurance on behalf of any person who is or was a director, officer, employee or
agent of the corporation, or is or was serving at the request of the corporation
as a director, officer, employee or agent of another corporation, partnership,
2
<PAGE> 3
joint venture, trust or other enterprise against any liability asserted against
him and incurred by him in any such capacity, or arising out of his status as
such, whether or not the corporation would have the power to indemnify him
against such liability under this section.
(h) For purposes of this section, references to "the
corporation" shall include, in addition to the resulting corporation, any
constituent corporation (including any constituent of a constituent) absorbed in
a consolidation or merger which, if its separate existence had continued, would
have had power and authority to indemnify its directors, officers, and employees
or agents, so that any person who is or was a director, officer, employee or
agent of such constituent corporation, or is or was serving at the request of
such constituent corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
shall stand in the same position under this section with respect to the
resulting or surviving corporation as he would have with respect to such
constituent corporation if its separate existence had continued.
(i) For purposes of this section, references to "other
enterprises" shall include employee benefit plans; references to "fines" shall
include any excise taxes assessed on a person with respect to any employee
benefit plan; and references to "serving at the request of the corporation"
shall include any service as a director, officer, employee or agent of the
corporation which imposes duties on, or involves services by, such director,
officer, employee,or agent with respect to an employee benefit plan, its
participants or beneficiaries; and a person who acted in good faith and in a
manner he reasonably believed to be in the interest of the participants and
beneficiaries of an employee benefit plan shall be deemed to have acted in a
manner "not opposed to the best interests of the corporation" as referred to in
this section.
(j) The indemnification and advancement of expenses provided
by, or granted pursuant to, this section shall, unless otherwise provided when
authorized or ratified, continue as to a person who has ceased to be a director,
officer, employee or agent and shall insure to the benefit of the heirs,
executors and administrators of such a person.
(k) The Court of Chancery is hereby vested with exclusive
jurisdiction to hear and determine all actions for advancement of expenses or
indemnification brought under this section or under any bylaw, agreement, vote
of stockholders or disinterested directors, or otherwise. The Court of Chancery
may summarily determine a corporation's obligation to advance expenses
(including attorneys' fees).
3
