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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
MARK ONE
[ X ] Annual Report Pursuant to Section 13 or 15(d) of the Securities Act of
1934
For the Fiscal Year Ended December 31, 1998
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 For the transition period from to
COMMISSION FILE NUMBER 1-13782
WESTINGHOUSE AIR BRAKE COMPANY
(Exact name of registrant as specified in its charter)
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DELAWARE 25-1615902
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
1001 AIR BRAKE AVENUE (412) 825-1000
WILMERDING, PENNSYLVANIA 15148 (Registrant's telephone number)
(Address of principal executive offices,
including zip code)
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SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
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TITLE OF CLASS NAME OF EXCHANGE ON WHICH REGISTERED
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COMMON STOCK, PAR VALUE $.01 PER SHARE NEW YORK STOCK EXCHANGE
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Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months and (2) has been subject to such filing requirements for
at least the past 90 days. Yes X No _____
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
As of February 24, 1999, 33,926,819 shares of Common Stock of the registrant
were issued and outstanding, of which 8,533,691 shares were unallocated ESOP
shares. The registrant estimates that as of February 24, 1999, the aggregate
market value of the voting shares held by non-affiliates of the registrant was
approximately $294.3 million based on the closing price on the New York Stock
Exchange for such stock.
DOCUMENTS INCORPORATED BY REFERENCE:
Portions of the Proxy Statement for the registrant's Annual Meeting of
Stockholders to be held on May 19, 1999 are incorporated by reference into Part
III of this Form 10-K.
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TABLE OF CONTENTS
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PART I
Item 1. Business.................................................... 2
Item 2. Properties.................................................. 9
Item 3. Legal Proceedings........................................... 10
Item 4. Submission of Matters to a Vote of Security Holders......... 10
Executive Officers of the Company........................... 10
PART II
Item 5. Market for Registrant's Common Stock and Related Stockholder
Matters................................................... 11
Item 6. Selected Financial Data..................................... 12
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations................................. 13
Item Quantitative and Qualitative Disclosures About Market
7A. Risk...................................................... 21
Item 8. Financial Statements and Supplementary Data................. 21
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure.................................. 21
PART III
Item Directors and Executive Officers of the Registrant..........
10. 21
Item Executive Compensation......................................
11. 21
Item Security Ownership of Certain Beneficial Owners and
12. Management................................................ 21
Item Certain Relationships and Related Transactions..............
13. 21
PART IV
Item Exhibits, Financial Statement Schedules, and Reports on Form
14. 8-K....................................................... 22
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PART I
ITEM 1. BUSINESS
GENERAL
Westinghouse Air Brake Company is North America's largest manufacturer of
value-added equipment for locomotives, railway freight cars and passenger
transit vehicles. We believe that we maintain a market share in North America in
excess of 50% for our primary braking related equipment and a significant market
share in North America for our other principal products. We also sell our
products in Europe, Africa, Australia, South America and Asia. Our major
products are intended to enhance safety, improve productivity and reduce
maintenance costs for our customers. Our major product offerings include
electronic controls and monitors, air brakes, couplers, door controls, draft
gears and brake shoes. We aggressively pursue technological advances with
respect to both new product development and product enhancements.
All references to "we", "our", "us", the "Company" and "WABCO" refer to
Westinghouse Air Brake Company, a Delaware corporation, and its subsidiaries.
INDUSTRY OVERVIEW
Rail traffic, in terms of both freight and passengers, is a key factor
underlying the demand for the Company's products. Government investment in
public rail transportation also plays a significant role. Additionally,
railroads continuously seek to increase the efficiency and productivity of their
rail operations in order to improve profitability. We design an array of
products to meet this goal and believe that through our products and service
offerings, we are well positioned to contribute to and benefit from the railroad
industry's drive to improve efficiency and productivity. For example, our end of
train device, automated single car tester and electro-pneumatic brake all
provide significant cost saving opportunities for our customers.
Demand for North American locomotive and freight car products remains strong due
to:
-- continued growth in revenue ton-miles in the United States (defined as
weight times distance traveled by Class 1 railroads), of 1,296 billion in
1997 as compared to 1,067 billion in 1992;
-- continued strong delivery of new freight cars:
-- aging freight car fleet, with an average age of 17.8 years in 1997 with
approximately 25% over 25 years old; and
-- the desire of railroads to gain efficiency improvements from larger, more
efficient aluminum cars;
-- aging locomotive fleet, with more than 52% of the fleet over 17 years old;
and
-- newer AC locomotives, which are more powerful and efficient than DC
locomotives.
Demand for passenger transit original equipment manufacturer ("OEM") and
aftermarket products is driven by:
-- replacement, building and/or expansion programs by transit authorities;
these programs are funded in part by federal and state governments,
including the recently reauthorized Intermodal Surface Transportation and
Efficiency Act (providing up to $42 billion to be made available, subject
to appropriations, for transit-related infrastructure between 1998 and
2003); and
-- aging United States passenger transit car fleet, with an average age of
21.6 years in 1997 as compared to 19.3 years in 1995.
BUSINESS SEGMENTS AND PRODUCTS
Approximately half of our net sales in 1998 were derived from products sold
directly to North American OEMs of locomotives, railway freight cars and
passenger transit vehicles. The balance of our net sales were generated from the
sale of replacement parts, repair services and upgrade work purchased by
operators of rail vehicles such as railroads, transit authorities, utilities and
leasing companies (collectively, "end-users" or the "aftermarket"). We believe
that our substantial installed base of OEM products is a significant competitive
advantage in providing products and services in the aftermarket in that end-
users will likely purchase our high quality replacement products especially when
they are safety and performance related. We believe that we are less adversely
affected than our competitors by fluctuations in domestic demand for new
railroad vehicles because of our substantial aftermarket and international
sales.
Through our business segments, we also provide outsourced value-added services
to the railroad and passenger transit aftermarkets, operating 15 service and
upgrade sites in North America and the United
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Kingdom. Our service and upgrade centers enable us to capitalize on the
increased outsourcing of repair business by railroads and transit authorities.
Our acquisition in April 1998 of RFS (E), Ltd., a United Kingdom refurbisher of
locomotives and freight cars, and the October 1998 acquisition of the railroad
service center business of Comet Industries, Inc., have significantly increased
our repair and service offerings.
Our products and services are delivered through three principal business
segments. Within each group, our new product development programs provide us
with an array of product upgrades that strengthen our OEM and aftermarket sales.
Our products and services, by business group, include:
RAILROAD GROUP -- Includes products geared to the production of freight cars and
locomotives, including braking control equipment and train coupler systems.
Revenues are derived principally from OEM and aftermarket sales and to a lesser
extent, repairs and services. Revenues from these products, as a percentage of
total consolidated revenues, have decreased from 65% in 1996 to 58% in 1998.
Specific product lines within the Railroad Group are:
-- FREIGHT CAR -- We manufacture, sell and service air brake equipment, brake
valves, draft gears, hand brakes and slack adjusters for freight cars. Net
sales for typical freight cars can vary considerably based upon the type
and purpose of the freight platform with articulated or intermodal cars
generally having the highest WABCO product content. The Company's
traditional freight products include the ABDX Freight Brake Valve, the Mark
Series draft gears, hand brakes and slack adjusters, and SAC-1(TM)
Articulated Coupler.
-- LOCOMOTIVE -- We manufacture, sell and service air brake equipment,
compressors, air dryers, slack adjusters, brake cylinders, and monitoring
and control equipment. Historically, our most significant locomotive
products have been the 26-C and 30-A pneumatic control equipment and
air-cooled compressors.
-- ELECTRONICS -- We manufacture, sell and service high-quality electronics
for the railroads in the form of on-board systems and braking for
locomotives and freight cars. We are an industry leader in insulating or
"hardening" electronic components to protect them from severe conditions,
including extreme temperatures and high/shock vibration environments. Our
new product development effort has focused on electronic technology for
brakes and controls, and over the past several years, we introduced a
number of significant new products including the EPIC(R) Electronic Brake,
PowerLink(TM), compressor aftercoolers, Train Trax(TM), Trainlink(TM),
Train Sentry III(R), Fuellink(TM) and Armadillo(TM). Our acquisition of
Rockwell's Railroad Electronics division ("Rockwell") in October 1998
significantly strengthened our capabilities by expanding our freight
electronic air brake capability and broadening our electronics product line
to display and positioning systems, data communications and monitoring
products, all in line with the railroads' desire to increase productivity
and safety by the application of electronic equipment.
TRANSIT GROUP -- Includes products for passenger transit vehicles (typically
subways, rail and busses). Revenues are derived primarily from OEM and
aftermarket sales. Revenues from these products, as a percentage of total
consolidated revenues, increased to 32% in 1998 from 22% in 1996.
We manufacture, sell and service electronic brake equipment, pneumatic control
equipment, air compressors, tread brakes and disc brakes, couplers, collection
equipment, overhead electrification, monitoring systems, wheels, climate control
and door equipment and other components for passenger transit vehicles. In 1997,
we received contracts valued at $150 million to provide equipment for 1,080
passenger transit cars for the Metropolitan Transportation Authority/New York
City Transit (the "MTA"). We expect deliveries to commence in the second half of
1999.
Substantially all of our principal passenger transit products are engineered to
customer specifications. Consequently, there is less standardization among these
products than there is with the Railroad Group products. Because the market for
OEM orders has been at a cyclical low during the past several years, we believe
the OEM market presents an opportunity for improved growth during the next
several years.
MOLDED PRODUCTS GROUP -- We manufacture and sell brake shoes, disc brake pads
and other rubber products. Many rubber components produced by this group are
used in the manufacturing process by our other business groups. Molded Products
Group revenues represent, as a percentage of total consolidated revenues,
slightly over 10% for the last three years. Approximately 90% of Molded Products
Group's revenue are derived from aftermarket sales.
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For additional information on our business segments, see Note 17 to the "Notes
to Consolidated Financial Statements" included elsewhere in this report.
STRATEGY
We are committed to enhancing our position as a producer of value-added
equipment for the rail industry and will continue to seek ways to increase our
content per rail vehicle. Building on our leading market share, strong
aftermarket presence and technological leadership, we are pursuing a strategy
involving five key elements:
Expand Technology-Driven New Product
Development and Product Lines
-- We plan to continue to emphasize research and development to create new and
improved products to increase our market share and profitability.
-- We are focusing on technological advances, especially in the areas of
electronics, braking products and other on-board systems as a means of new
product growth.
Increase Repair and Upgrade Services
-- By continuing to leverage our broad product offering and our large
installed product base, we intend to expand our presence in the repair and
upgrade services market.
-- We believe our services are more cost effective than, and we offer product
upgrades not available in, most independent repair shops.
-- To capitalize on the growing aftermarket, we are developing and marketing
retrofit and upgrade products that serve as a platform for offering
additional installation, replacement parts and repair services to
customers.
Grow International Presence
-- We believe that international sales represent a significant opportunity for
further growth.
-- Our net sales outside of the United States and Canada comprised
approximately 17% of our net sales for the year ended December 31, 1998,
compared to 4% in 1995 (See Note 17 to "Notes to Consolidated Financial
Statements"). We intend to increase our existing international sales by:
-- acquisitions,
-- direct sales of products through our subsidiaries and licensees; and
-- forming joint ventures with railway suppliers having a strong presence in
their local markets.
Pursue Strategic Acquisitions
-- We intend to pursue strategic acquisitions that expand our product lines,
increase our aftermarket business, increase international sales and
increase our technical capabilities.
-- An integral component of our acquisition strategy is to realize revenue
growth and cost savings through the integration of the acquired business.
Further Improve Manufacturing Efficiency and
Quality
We intend to retain what we consider to be a leading position as a low-cost
producer in the industry while maintaining world-class product quality,
technology and customer responsiveness. We are dedicated to continuous
improvement across all phases of our business through:
-- our proven Kaizen employee-directed initiatives (a Japanese-developed team
concept used to continuously improve quality, lead time and productivity
and to reduce costs); and
-- our total Quality Improvement Program (an ongoing program to continuously
improve the manufacturing process by encouraging feedback from work
"teams", continuing worker training, statistical engineering, monitoring
systems and evaluation of the process); and
-- the WABCO Performance System model to identify 'lean manufacturing'
principles and roadmap to drive customer satisfaction and enterprise value
to world class levels.
These efforts enable us to streamline processes, improve product quality and
customer satisfaction, reduce product cycle times and respond more rapidly to
market developments. We believe our management and employees are appropriately
incentivized to carry out our strategy. Management owns approximately 31% of our
Common Stock and our employees own Common Stock through an Employee Stock
Ownership Plan ("ESOP").
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BACKLOG
As of December 31, 1998, the Company had a total backlog of firm orders with an
aggregate sales price of approximately $460.9 million, compared to $376.3
million as of December 31, 1997. Of the December 31, 1998 amount, $325.0 million
was attributable to passenger transit products, including products for cars
deliverable to the MTA, and the balance was attributable to railway and other
products. Other than the transit market, backlog is not a significant component
of the Company's business, and management believes it is not an important
indicator of future business performance. Because of the Company's quick
turnaround time, the Company's locomotive and freight customers tend to order
products from the Company on an as-needed basis.
With respect to OEM passenger transit products, there is a longer lead-time for
car deliveries and, accordingly, the Company carries a larger backlog of orders.
The Company's contracts are subject to standard industry cancellation
provisions, including cancellations on short notice or upon completion of
designated stages, including, without limitation, contracts relating to the MTA.
Substantial scope-of-work adjustments are common. For these and other reasons,
work in the Company's backlog may be delayed or cancelled and backlog should not
be relied upon as an indicator of the Company's future performance.
The railroad industry, in general, has historically been subject to fluctuations
due to overall economic conditions and the level of use of alternate methods of
transportation. Based upon widely available industry data concerning freight and
locomotive OEM backlog and projected 1999 freight car deliveries (that indicate
a possible decline from 1998 production), the Company believes demand for its
products will remain reasonably strong for the foreseeable future.
ENGINEERING AND DEVELOPMENT
In furtherance of its strategy of using technology to develop new products, the
Company is actively engaged in a variety of engineering and development
activities. For the fiscal years ended December 31, 1998, 1997 and 1996, the
Company incurred costs of approximately $30.4 million, $24.4 million, and $18.2
million, respectively, on product development and improvement activities
(exclusive of manufacturing support). Such expenditures represented 4.5%, 4.3%,
and 4.0% of net sales for the same periods, respectively. From time to time, the
Company conducts specific research projects in conjunction with universities,
customers and other railroad product suppliers.
The Company's engineering and development program is largely focused upon new
braking technologies, with an emphasis on the application of electronics to
traditional pneumatic equipment. Electronic actuation of braking has long been a
part of the Company's transit product line but interchangeability, connectivity
and durability have presented problems to the industry in establishing
electronics in freight railway applications. Efforts are under way to develop
the major components of both hard-wired and radio-activated braking equipment.
INTELLECTUAL PROPERTY
The Company has numerous U.S. patents, patent applications pending and
trademarks as well as foreign patents and trademarks throughout the world. The
Company also relies on a combination of trade secrets and other intellectual
property laws, nondisclosure agreements and other protective measures to
establish and protect its proprietary rights in its intellectual property.
Certain trademarks, among them the name WABCO(R), were acquired or licensed by
the Company from American Standard Inc. in 1990 pursuant to its acquisition of
the North American operations of the Railway Products Group of American Standard
(the "1990 Acquisition").
The Company is a party, as licensor and licensee, to a variety of license
agreements. The Company does not believe that any single agreement, other than
the SAB License discussed in the following paragraph, is of material importance
to its business as a whole.
The Company and SAB WABCO Holdings B.V. ("SAB WABCO") entered into a license
agreement (the "SAB License") on December 31, 1993, pursuant to which SAB WABCO
granted the Company a license to the intellectual property and know-how related
to the manufacturing and marketing of certain disc brakes, tread brakes and low
noise and resilient wheel products. SAB WABCO is a Swedish corporation that was
a former affiliate of the Company, both having been owned by the same parent
prior to 1990. The Company is authorized to manufacture and sell the licensed
products in North America (including to OEM manufacturers located outside North
America if such licensed products are incorporated into a final
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product to be sold in North America). SAB WABCO has a right of first refusal to
supply the Company with bought-in components of the licensed products on
commercially competitive terms. To the extent SAB WABCO files additional patent
or trademark applications, or develops additional know-how in connection with
the licensed products, such additional intellectual property and know-how are
also subject to the SAB License. The Company may, at its expense, request the
service of SAB WABCO in manufacturing, installing, testing and maintaining the
licensed products and providing customer support. SAB WABCO is entitled to a
free, nonexclusive license of the use of any improvements to the licensed
products developed by the Company. If any such improvements are patented by the
Company, SAB WABCO has the right to request the transfer of such patents upon
payment of reasonable compensation therefor; in such cases, the Company is
entitled to a free, nonexclusive license to use the patented product. The
Company is required to pay a lump sum fee for certain licensed products as well
as royalties based on specified percentages of sales. The license expires
December 31, 2003, but may be renewed for additional one-year terms.
In connection with the Company's recapitalization in January 1995, the Company
and SAB WABCO agreed (i) to use their best efforts to negotiate an agreement to
distribute each other's products, (ii) to explore the feasibility of a joint
venture to expand into regions where neither is currently represented, (iii)
that the SAB License will be amended to include additional disc brake and tread
brake technology, (iv) that SAB WABCO will in the future grant to the Company a
license for the manufacture and sale of electronic brake equipment that it
designs, (v) that SAB WABCO will grant to the Company the right to purchase SAB
WABCO's option on 40% of the shares in SAB WABCO de Brasil, and (vi) that the
Company will have a right of first refusal to purchase SAB WABCO if prior to
December 31, 1999 the current owner decides to sell more than 50% of its
interest in SAB WABCO to a third party, subject to certain exceptions. There is
no assurance that the Company and SAB WABCO will reach agreement on issues
relating to future cooperation or that the Company will be able to acquire SAB
WABCO. Accordingly, the Company and SAB WABCO could be competitors in
international markets.
CUSTOMERS
A few customers within each business segment represent a significant portion of
the Company's net sales; however, no one customer represented more than 10% of
the Company's consolidated revenues in 1998. The loss of a few key customers
within the Company's Railroad and Transit Group could have an adverse effect on
the Company's financial condition, results of operations and liquidity.
COMPETITION
The Company operates in a competitive marketplace. Price competition is strong
and the existence of cost conscious purchasers of a limited number has
historically limited WABCO's ability to increase prices. In addition to price,
competition is based on product performance and technological leadership,
quality, reliability of delivery and customer service and support. The Company's
principal competitors vary to some extent across its principal product lines.
However, within North America, New York Air Brake Company, a subsidiary of the
German air brake producer Knorr-Bremse AG (collectively, "NYAB/ Knorr"), is the
Company's principal overall OEM competitor. The Company's competition for
locomotive, freight and passenger transit service and repair business is
primarily from the railroads' and passenger transit authorities' in-house
operations and NYAB/Knorr.
EMPLOYEES
As of December 31, 1998, we employed approximately 4,300 employees,
approximately 1,200 of whom were unionized. The majority of employees subject to
collective bargaining agreements are within North America and these agreements
are generally effective through 2001 and 2002.
The majority of non-union employees in the United States (approximately 2,000
employees) participate in the ESOP.
REGULATION
In the course of its operations, the Company is subject to various regulations,
agencies and entities. In the United States, these include principally the
Federal Railroad Administration ("FRA") and the Association of American
Railroads ("AAR").
The FRA administers and enforces federal laws and regulations relating to
railroad safety. These regulations govern equipment and safety standards for
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freight cars and other rail equipment used in interstate commerce.
The AAR promulgates a wide variety of rules and regulations governing safety and
design of equipment, relationships among railroads with respect to railcars in
interchange and other matters. The AAR also certifies railcar builders and
component manufacturers that provide equipment for use on railroads in the
United States. New products generally must undergo AAR testing and approval
processes.
As a result of these regulations and regulations in other countries in which the
Company derives its revenues, we must maintain certain certifications as a
component manufacturer and for products we sell.
ENVIRONMENTAL MATTERS
We are subject to a variety of environmental laws and regulations governing
discharges to air and water, the handling, storage and disposal of hazardous or
solid waste materials and the remediation of contamination associated with
releases of hazardous substances. The Company believes its operations currently
comply in all material respects with all of the various environmental laws and
regulations applicable to our business; however, there can be no assurance that
environmental requirements will not change in the future or that we will not
incur significant costs to comply with such requirements.
Under the terms of the purchase agreement and related documents for the 1990
Acquisition, American Standard indemnified the Company for certain items
including environmental claims. American Standard has indemnified the Company
for any claims, losses, costs and expenses arising from (i) claims made in
connection with any of the environmental matters disclosed by American Standard
to the Company at the time of the 1990 Acquisition, (ii) any pollution or threat
to human health or the environment related to American Standard's (or any
previous owner's or operator's) ownership or operation of the properties
acquired by WABCO in the 1990 Acquisition, which pollution or threat was caused
or arises out of conditions existing prior to the 1990 Acquisition (limited to
environmental laws in effect as of December 31, 1991), and (iii) any material
claim ("Environmental Claim") alleging potential liability for the release of
pollutants or the violation of any federal, state or local laws or regulations
relating to pollution or protection of human health or the environment, for
which American Standard has retained liability. Such indemnity covers
investigatory costs only if the investigation is undertaken pursuant to a larger
Environmental Claim and to the extent of American Standard's pro-rata liability
for such larger Environmental Claim. American Standard has no obligation to
indemnify for investigatory costs incurred by the Company independently or
otherwise unrelated to an indemnifiable event. American Standard's
indemnification obligations are limited to aggregate amounts in excess of
$500,000. The Company has exceeded this deductible.
In addition, American Standard's indemnification obligation with respect to
friction product related claims only extends to 50% of the amount claimed, up to
a maximum of $14 million (provided liability is asserted directly and solely
against the Company's friction products subsidiary, RFPC).
The indemnification obligations with respect to third party claims survive until
2000, except those claims which are timely asserted continue until resolved. If
American Standard should be unable to meet its obligations under this indemnity,
the Company will be responsible for such items. In the opinion of management,
American Standard has the present ability to meet its indemnification
obligations.
The Company, through RFPC, has been named, along with other parties, as a
potentially responsible party under the North Carolina Inactive Sites Response
Act because of an alleged release or threat of release of hazardous substances
at the "Old James Landfill" site in Laurinburg, NC. The Company believes that
any cleanup costs for which it may be held responsible are covered by (i) the
American Standard indemnity discussed above and (ii) an insurance policy for
environmental claims provided by Manville Corporation, the former 50% owner of
RFPC, in connection with the Company's 1992 acquisition of Manville
Corporation's interest in RFPC. Pursuant to the terms of the purchase agreement
for the acquisition of Manville Corporation's interest in RFPC, Rocky Mountain
International Insurance, Ltd., an affiliate of Manville Corporation, provided an
insurance policy to cover any claims, losses, costs and expenses relating to,
among other things, environmental liabilities arising from conditions existing
at the former Manville site used by RFPC prior to the acquisition (limited to
environmental laws in effect as of July 1992).
This insurance policy is the sole remedy for the Company with respect to covered
claims. The insurance policy survives until July 2002. Active claims for
conditions existing prior to July 1992 will con-
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tinue to be covered beyond July 2002. The aggregate limit of coverage under the
insurance policy provided by Manville Corporation is $12.5 million. The Company
has submitted claims and has received recoveries under the policy for costs of
clean up imposed on or incurred by the Company in connection with the "Old James
Landfill", and Rocky Mountain has acknowledged coverage under the policy,
subject to the stated policy exclusions. In addition to the insurance policy
provided by Manville Corporation, American Standard's indemnification
obligations described above cover 50% of RFPC-related claims. In January 1998,
the Company discovered petroleum contaminated soils in the vicinity of the
oil-water separator at the Laurinburg facility. The Company has filed a notice
of claim requesting coverage under the insurance policy for clean up costs
associated with removal of the contaminated soils, which were less than $30,000.
The Company believes that the indemnification agreements and insurance policy
referred to above are adequate to cover any potential liabilities during their
respective terms arising in connection with the above-described environmental
conditions. None of the insurance or indemnification agreements is currently the
subject of any dispute.
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ITEM 2. PROPERTIES
The following table provides certain summary information with respect to the
principal facilities owned or leased by the Company. The Company believes that
its facilities and equipment are in good condition and that, together with
scheduled capital improvements, they are adequate for its present and
immediately projected needs. The Greensburg, PA, Germantown, MD, Niles, IL and
Chicago, IL properties are subject to mortgages to secure the Company's
indebtedness under the Credit Agreement. The Company's corporate headquarters
are located in the Wilmerding, PA site.
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APPROXIMATE
LOCATION PRIMARY USE PRIMARY SEGMENT OWN/LEASE SQUARE FEET
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DOMESTIC
Wilmerding, PA Manufacturing/Service Railroad Group Own 850,000(1)
Chicago, IL Manufacturing Railroad Group Own 111,500
Germantown, MD Manufacturing/Service Railroad Group Own 80,000
Kansas City, MO Service Center Railroad Group Lease 55,891
Bossier City, LA Service Center Railroad Group Lease 40,000
Carson City, NV Service Center Railroad Group Lease 22,000
Columbia, SC Service Center Railroad Group Lease 12,250
Chicago, IL Service Center Railroad Group Lease 19,200
Niles, IL Manufacturing Transit Group Own 355,300
Spartanburg, SC Manufacturing/Service Transit Group Lease 183,600
Plattsburgh, NY Manufacturing Transit Group Lease 64,000
Elmsford, NY Service Center Transit Group Lease 28,000
Sun Valley, CA Service Center Transit Group Lease 4,000
Atlanta, GA Service Center Transit Group Lease 1,200
Laurinburg, NC Manufacturing Molded Products Group Own 105,000
Greensburg, PA Manufacturing Molded Products Group Own 97,830
Ball Ground, GA Manufacturing Molded Products Group Lease 30,000
INTERNATIONAL
Doncaster, UK Manufacturing/Service Railroad Group Own 330,000
Stoney Creek, Ontario Manufacturing/Service Railroad Group Own 189,170
Wallaceburg, Ontario Foundry Railroad Group Own 127,555
Burlington, Ontario Manufacturing Railroad Group Own 46,209
Burlington, Ontario Manufacturing Railroad Group Own 28,165
Winnipeg, Manitoba Service Center Railroad Group Lease 20,000
St-Laurent, Quebec Manufacturing Transit Group Own 106,000
Sassuolo, Italy Manufacturing Transit Group Lease 30,000
Burton on Trent, UK Manufacturing Transit Group Lease 18,000
Etobicoke, Ontario Service Center Transit Group Lease 3,800
Wetherill Park, NSW Manufacturing Molded Products Group Lease 73,141
Schweighouse, France Manufacturing Molded Products Group Lease 30,000
Tottenham, VIC Manufacturing Molded Products Group Lease 26,910
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(1) Approximately 250,000 square feet are currently used in connection with the
Company's operations.
The above information does not include certain facilities scheduled to be closed
during 1999. Leases on the above facilities are long-term and generally include
options to renew.
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ITEM 3. LEGAL PROCEEDINGS
There are various pending lawsuits and claims arising out of the conduct of the
Company's business. These include claims by employees of third parties who
allege they were exposed to asbestos while handling American Standard products
manufactured prior to the 1990 Acquisition. American Standard discontinued the
use of asbestos in its products in 1980. American Standard has indemnified the
Company against these claims and is defending them. Under the terms of the
purchase agreement and related documents for the 1990 Acquisition, American
Standard has indemnified the Company for any claims, losses, costs and expenses
arising from, among other things, product liability claims by third parties,
intellectual property infringement actions and any other claims or proceedings,
in each case to the extent they related to events occurring, products sold or
services rendered prior to the 1990 Acquisition and affect the properties
acquired by the Company. American Standard's indemnification obligations are
limited to aggregate amounts in excess of $500,000 and, as described in Item 1,
this deductible has already been exceeded. In addition, American Standard's
indemnification obligation with respect to RFPC-related claims only extends to
50% of the amount claimed, up to a maximum of $14 million (provided liability is
asserted directly and solely against RFPC). The indemnification obligations with
respect to third party claims survive until 2000. An insurance policy provided
by Manville Corporation, the former 50% owner of RFPC, covers the other 50% of
RFPC related claims up to a maximum of $12.5 million.
On February 12, 1999, GE Harris Railway Electronics, LLC and GE Harris Railway
Electronic Services, LLC (collectively, "GE Harris") brought suit against the
Company for alleged patent infringement and unfair competition related to a
communications system installed in one of the Company's products. GE Harris is
seeking to prohibit the Company from future infringement and is seeking an
unspecified amount of money damages to recover, in part, royalties. While this
lawsuit is in the earliest stages, the Company believes the technology developed
by the Company does not infringe on the GE Harris patents. The Company plans to
contest the infringement claims vigorously, in order to present alternative
product lines to customers in the rail industry.
From time to time the Company is involved in litigation relating to claims
arising out of its operations in the ordinary course of business. As of the date
hereof, the Company is involved in no litigation that the Company believes will
have a material adverse effect on its financial condition, results of
operations, or liquidity. The Company historically has not been required to pay
any material liability claims.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders of the Company during
the fiscal quarter ended December 31, 1998.
EXECUTIVE OFFICERS OF THE COMPANY
The following table sets forth certain information with respect to executive
officers of the Company as of March 2, 1999.
<TABLE>
<CAPTION>
NAME AGE OFFICE WITH THE COMPANY
<S> <C> <C>
- ----------------------------------------------------
William E. Kassling 55 Director, Chairman and
Chief Executive Officer
Gregory T. H. Davies 52 Director, President and
Chief Operating Officer
Robert J. Brooks 54 Director and Chief
Financial Officer
Emilio A. Fernandez 54 Director and Vice
Chairman
John M. Meister 51 Executive Vice
President and General
Manager, Transit
Product Group
Timothy J. Logan 46 Vice President,
International
George A. Socher 50 Vice President and
Corporate Controller
Kevin P. Conner 41 Vice President, Human
Resources
Alvaro Garcia-Tunon 46 Vice President and
Treasurer
- ----------------------------------------------------
</TABLE>
WILLIAM E. KASSLING has been a director, Chairman and Chief Executive Officer of
the Company since the 1990 Acquisition. Mr. Kassling was also President of WABCO
from 1990 through February 1998. From 1984 until 1990 he headed the Railway
Products Group of American Standard Inc. Between 1980 and 1984 he headed
American Standard's Building Specialties Group and between 1978 and 1980 he
headed Business Planning for American Standard. Mr. Kassling is a director of
Aearo Corporation, Scientific Atlanta, Inc. and Commercial Intertech, Inc.
10
<PAGE> 12
GREGORY T. H. DAVIES joined the Company in March 1998 as President and Chief
Operating Officer and in February 1999 became a director. Mr. Davies was
formerly with Danaher Corporation since 1988, where he was Vice President and
Group Executive responsible for its Jacobs Vehicle Systems, Delta Consolidated
Industries and A.L. Hyde Corporation operating units. Prior to that, he held
executive positions at Cummins Engine Company and Ford Motor Company.
ROBERT J. BROOKS has been a director and Chief Financial Officer of the Company
since the 1990 Acquisition. From 1986 until 1990 he served as worldwide Vice
President, Finance for the Railway Products Group of American Standard. Mr.
Brooks is a director of Crucible Materials Corp.
EMILIO A. FERNANDEZ was named Vice Chairman in March 1998. He has been a
Director and was Executive Vice President of the Company since the Company's
January 1995 acquisition of Pulse Electronics, Inc. which he co-founded in 1975.
From 1996 to February 1998 he was Executive Vice President -- Integrated Railway
Systems. Mr. Fernandez is a director of PMI, Inc., a private corporation.
JOHN M. MEISTER has been Vice President and General Manager of the Company's
Passenger Transit Unit since the 1990 Acquisition. In 1997, he was appointed to
the newly created position of Executive Vice President and General Manager,
Transit Products Group. From 1985 until 1990 he was General Manager of the
passenger transit business unit for the Railway Products Group of American
Standard.
TIMOTHY J. LOGAN has been Vice President, International since August 1996.
Previously, from 1987 until August 1996, Mr. Logan was Vice President,
International Operations for Ajax Magnethermic Corporation and from 1983 until
1987 he was President of Ajax Magnethermic Canada, Ltd.
GEORGE A. SOCHER has been Vice President and Corporate Controller of the Company
since July 1995. From 1994 until June 1995, Mr. Socher was Corporate Controller
and Chief Accounting Officer of Sulcus Computer Corp. From 1988 until 1994 he
was Corporate Controller of Stuart Medical Inc.
KEVIN P. CONNER has been Vice President of Human Resources of the Company since
the 1990 Acquisition. From 1986 until 1990, Mr. Conner was Vice President of
Human Resources of the Railway Products Group of American Standard.
ALVARO GARCIA-TUNON has been Vice President and Treasurer of the Company since
August 1995. From 1990 until August 1995 Mr. Garcia-Tunon was Vice President of
Business Development of Pulse Electronics, Inc.
The executive officers are elected annually by the Board of Directors of the
Company.
PART II
ITEM 5. MARKET FOR REGISTRANT'S
COMMON STOCK AND RELATED STOCKHOLDER MATTERS
The Common Stock of the Company is listed on the New York Stock Exchange. As of
February 24, 1999, there were 33,937,528 shares of Common Stock outstanding held
by 335 holders of record. The high and low sales price of the shares and
dividends paid per share were as follows:
<TABLE>
<CAPTION>
QUARTER HIGH LOW DIVIDEND
<S> <C> <C> <C>
- ----------------------------------------------------
1998
Fourth $24.8125 $19.250 $.01
Third 26.7500 17.125 .01
Second 29.8125 24.000 .01
First 29.8125 23.000 .01
- ----------------------------------------------------
1997
Fourth $ 27.875 $21.875 $.01
Third 23.125 17.875 .01
Second 20.000 12.750 .01
First 14.250 12.250 .01
- ----------------------------------------------------
</TABLE>
The Company's Credit Agreement restricts the ability to make dividend payments.
See "Management's Discussion and Analysis of Financial Condition and Results of
Operations" and Note 5 to the "Notes to Consolidated Financial Statements."
11
<PAGE> 13
ITEM 6. SELECTED FINANCIAL DATA
The following table sets forth certain selected consolidated financial
information of the Company and has been derived from financial statements
audited by Arthur Andersen LLP, independent public accountants. This financial
information should be read in conjunction with, and is qualified by reference
to, "Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the Consolidated Financial Statements of the Company and the
Notes thereto included elsewhere in this Form 10-K.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
-----------------------------------------------------
IN THOUSANDS, EXCEPT PER SHARE AMOUNTS 1998 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------
INCOME STATEMENT DATA
Net sales................................. $670,909 $564,441 $453,512 $ 424,959 $347,469
Cost of sales............................. 451,730 378,323 300,163 278,901 229,544
-----------------------------------------------------
Gross profit............................ 219,179 186,118 153,349 146,058 117,925
Operating expenses........................ 114,513 96,143 73,631 56,756 44,287
-----------------------------------------------------
Income from operations.................. 104,666 89,975 79,718 89,302 73,638
Interest expense and other, net........... 32,136 29,385 26,070 30,793 11,184
-----------------------------------------------------
Income before taxes and extraordinary
item................................. 72,530 60,590 53,648 58,509 62,454
Income taxes.............................. 27,561 23,327 20,923 23,402 25,613
-----------------------------------------------------
Income before extraordinary item........ 44,969 37,263 32,725 35,107 36,841
(Loss) on early extinguishment of debt.... (3,315) (1,382)
-----------------------------------------------------
Net income.............................. $ 41,654 $ 37,263 $ 32,725 $ 33,725 $ 36,841
=====================================================
DILUTED EARNINGS PER COMMON SHARE
Income before extraordinary item.......... $ 1.75 $ 1.42 $ 1.15 $ 1.32 $ .92
Loss on early extinguishment of debt...... (.13) (.05)
-----------------------------------------------------
Net income.............................. $ 1.62 $ 1.42 $ 1.15 $ 1.27 $ .92
=====================================================
Cash dividends per share.................. $ .04 $ .04 $ .04 $ .01 --
Weighted average diluted shares
outstanding............................. 25,708 26,173 28,473 26,639 40,000
-----------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
AS OF DECEMBER 31
-----------------------------------------------------
1998 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C>
-----------------------------------------------------
BALANCE SHEET DATA
Working capital........................... $ 95,411 $ 48,719 $ 48,176 $ 36,674 $ 46,640
Property, plant and equipment, net........ 124,981 108,367 95,844 72,758 67,346
Total assets.............................. 596,184 410,879 363,236 263,407 187,728
Total debt................................ 467,817 364,934 341,690 305,935 78,060
Shareholders' equity (deficit)............ (33,853) (79,263) (76,195) (108,698) 46,797
- -------------------------------------------------------------------------------------------------
</TABLE>
12
<PAGE> 14
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
OVERVIEW
Westinghouse Air Brake Company was formed in 1990 through the acquisition of the
Railway Products Group of American Standard Inc. The Company is North America's
largest manufacturer of value-added equipment for locomotives, railway freight
cars and passenger transit vehicles. The Company's primary manufacturing
operations are in the United States and Canada and revenues have historically
been predominantly from North America. In recent years, the proportion of
international sales has increased significantly, in line with the Company's
strategy to expand its business outside North America.
The Company's customer base consists of freight transportation companies,
locomotive and freight car original equipment manufacturers, transit car
builders and public transit systems.
The Company's business is comprised of three principal business segments:
Railroad, Transit and Molded Products. See Note 17 to the "Notes to Consolidated
Financial Statements".
The Company's strategy for growth is focused on using technological advancements
to develop new products, expanding the range of aftermarket products and
services and penetrating international markets. In addition, management
continually evaluates acquisition opportunities that meet the Company's criteria
and complement the Company's operating strategies and product offerings.
The Company has completed a number of strategic acquisitions since 1995. The
following is a summary of these acquisitions:
-- In October 1998, the Company purchased the railroad electronics business
from Rockwell Collins, Inc. ("Rockwell") for a total purchase price of
approximately $80.0 million.
-- In October 1998, the Company purchased the air brake repair business of
Comet Industries, Inc. ("Comet") for a total purchase price of
approximately $13.2 million.
-- In July 1998, the Company acquired the assets of Lokring Corporation
("Lokring") for a total purchase price of $5.1 million. The acquired
products include a fitting that connects non-welded joints.
-- In April 1998, the Company completed the acquisition of the transit coupler
product line of Hadady Corporation ("Hadady") for a total purchase price of
$4.6 million, which included amounts for designs and drawings.
-- In April 1998, the Company acquired the railway repair business in the
United Kingdom of RFS(E) Limited ("RFS(E)") for a total purchase price of
approximately $10.0 million.
-- In October 1997, the Company purchased the rail products business and
related assets of Sloan Valve Company ("Sloan") for $2.5 million. The
acquired products included slack adjusters, angle cocks and retainer
valves.
-- During July 1997, the Company acquired 100% of the stock of HP s.r.l.
("HP") for a total purchase price of $5.8 million, which included the
assumption of $2.3 million in debt. HP s.r.l. is a leading supplier of door
controls for transit rail cars and buses in the Italian market.
-- In May 1997, the Company purchased Stone Safety Services Corporation and
Stone U.K. Limited (collectively, "Stone"). Stone is one of the world's
leading suppliers of air conditioning equipment for the transit industry
with an established product base in North America, Europe and the Far East.
In connection with this acquisition, in June 1997, the Company acquired the
heavy rail air conditioning business of Thermo King Corporation ("Thermo
King"). The aggregate purchase price for these acquisitions was
approximately $7.7 million.
-- In September 1996, the Company acquired the Vapor Group ("Vapor"), a
passenger transit door manufacturer in the United States and Europe, for
$63.9 million.
-- In January 1996, the Company acquired Futuris Industrial Products Pty. Ltd.
("Futuris") an Australian friction products manufacturer, for approximately
$15.0 million.
-- In January 1995, the Company acquired Pulse Electronics ("Pulse"), a
privately-held manufacturer of end-of-train monitors and other electronic
products for the railway industry for $54.9 million.
Also in March 1997, an agreement was reached with one of the Company's major
shareholders, Scandina-
13
<PAGE> 15
vian Incentive Holding B.V. ("SIH"), whereby the Company repurchased 4 million
shares of its common stock held by SIH for $44 million, or $11 per share. In
conjunction with this transaction, SIH also sold its remaining 6 million shares
of the Company's Common Stock to Vestar Equity Partners, L.P. ("Vestar"),
Charlesbank Capital Partners, LLC, f/k/a Harvard Private Capital Holdings, Inc.
("Charles"), American Industrial Partners Capital Fund II, L.P. ("AIP") and
certain members of senior management.
FISCAL YEAR 1998 COMPARED TO
FISCAL YEAR 1997
Summary Results of Operations
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31
DOLLARS IN MILLIONS, --------------- PERCENT
EXCEPT PER SHARE 1998 1997 CHANGE
<S> <C> <C> <C>
- ------------------------------------------------
Income before
extraordinary item $ 45.0 $ 37.3 20.6
Extraordinary item,
net of tax 3.3 -- nm
Net income 41.7 37.3 11.8
Diluted earnings per
share, before
extraordinary item 1.75 1.42 20.7
Diluted earnings per
share 1.62 1.42 14.1
Net sales 670.9 564.4 18.9
Income from
operations 104.7 90.0 16.3
Earnings before
interest, taxes,
depreciation and
amortization 129.0 114.9 12.3
Gross profit margin 32.7% 33.0% nm
- ------------------------------------------------
</TABLE>
nm-not meaningful
Income before extraordinary item for 1998 increased $7.7 million, or 20.6%,
compared with the same period a year ago. Because of the $3.3 million
extraordinary charge to write-off certain previously capitalized debt issuance
costs, net income increased only $4.4 million compared to 1997. Diluted earnings
per share before extraordinary item increased 20.7% to $1.75 and diluted
earnings per share increased 14.1% to $1.62. Income from operations and earnings
before interest, taxes, depreciation and amortization increased in the
comparison primarily due to revenue growth and related gross profit.
A number of events have occurred over the comparative period that impacted the
Company's results of operations and financial condition including:
-- The Company completed several acquisitions that complement and enhance the
mix of existing products and markets. Acquisitions completed during this
timeframe were Rockwell, Comet, Lokring, Hadady, RFS(E), Sloan, H.P., Stone
and Thermo King. Aggregate incremental revenues from all of the above
acquisitions was $63.7 million in 1998.
-- In June 1998, the Company refinanced its credit agreement and subsequently
amended the agreement in October 1998. This resulted in a write off of
previously deferred financing costs of approximately $3.3 million, net of
tax, ($.13 per share) which has been reported as an extraordinary item.
-- In March 1997, the Company repurchased 4 million shares of its common stock
held by a major shareholder for $44 million plus $2 million in related
fees.
Net Sales
The following table sets forth the Company's net sales by business segment:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31
-------------------
DOLLARS IN THOUSANDS 1998 1997
<S> <C> <C>
- ---------------------------------------------
Railroad Group $388,797 $310,295
Transit Group 211,801 189,541
Molded Products Group 70,311 64,605
-------------------
Net sales $670,909 $564,441
- ---------------------------------------------
</TABLE>
Net sales for 1998 increased $106.5 million, or 18.9%, to $670.9 million. This
increase was primarily attributable to incremental revenue in 1998 of
approximately $43.2 million from the acquisitions referred to above within the
Railroad Group. Increased sales volumes in the Railroad Group also reflect a
strong OEM market for freight cars, with approximately 76,000 freight cars
delivered in 1998 compared to 50,000 in 1997. These increases were partially
offset by lower sales in the electronics portion of the Railroad Group, where in
the prior year period, product sales benefited from a federal mandate that
certain monitoring equipment be installed in trains by July 1997. Incremental
revenue in 1998 for the acquisitions referred to above, of approximately $20.5
million, was the primary reason for the increase in revenues in the Transit
Group. The
14
<PAGE> 16
Company anticipates new freight car deliveries in 1999 to be lower than that of
1998; however, railroad OEM and aftermarket sales are expected to be reasonably
strong for the foreseeable future.
Gross Profit
Gross profit increased 17.8% to $219.2 million in 1998 compared to $186.1
million in 1997. Gross margin, as a percentage of sales, was 32.7% compared to
33.0%. Gross margin is dependent on a number of factors including sales volume
and product mix. Incremental revenue from recent acquisitions at lower margins
as compared to the Company's historical results, was the primary reason for the
lower margins in the period-to-period comparison. These lower margins were
partially offset by favorable margins on increased sales in the Railroad and
Molded Product Groups.
Operating Expenses
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31
------------------ PERCENT
DOLLARS IN THOUSANDS 1998 1997 CHANGE
<S> <C> <C> <C>
- ---------------------------------------------------
Selling and marketing $ 30,711 $25,364 21.1
General and
administrative 45,337 38,153 18.8
Engineering 30,436 24,386 24.8
Amortization 8,029 8,240 (2.6)
------------------
Total $114,513 $96,143 19.1
- ---------------------------------------------------
</TABLE>
Total operating expenses as a percentage of net sales were 17.1% in 1998
compared with 17.0% in 1997. Total operating expenses increased in 1998 by $18.4
million in the period-to-period comparison. Incremental expenses from acquired
businesses totaled $10.2 million or 55% of the increase. In addition, higher
operating expenses reflect costs associated with computer system upgrades which
includes Year 2000 compliant computer software of approximately $3.5 million and
additional engineering efforts associated with new product development. The
Company anticipates cost savings in 1999 from the consolidation of several
facilities and a related net reduction of employees as recently acquired
businesses are integrated into the Company's core operations.
Income from Operations
Operating income totaled $104.7 million in 1998 compared with $90.0 million in
1997. Higher operating income results from higher sales volume and related
higher gross profit. As a percentage of revenue, operating income was 15.6% and
is substantially consistent with that of the prior year. Favorable volume
changes in the Railroad and the Molded Products Groups were partially offset by
lower profits, as a percentage of sales, in the Transit Group.
Interest and Other Expense
Interest expense increased $1.5 million to $31.2 million during 1998, primarily
due to financing costs of recent acquisitions, partially offset by debt
repayments.
Other expense for 1998 totaled $0.9 million primarily reflecting the effects of
changes in foreign currency exchange rates associated with a loan to a wholly
owned subsidiary of the Company. The effect of subsequent changes in exchange
rates will be reflected in future periods.
Income Taxes
The provision for income taxes increased $4.2 million to $27.6 million in 1998
compared with 1997. The effective tax rate declined to 38% in 1998 from 38.5% a
year ago, resulting from additional benefits through our Foreign Sales
Corporation and lower overall effective state tax rates.
15
<PAGE> 17
FISCAL YEAR 1997 COMPARED TO
FISCAL YEAR 1996
Summary Results of Operations
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31
DOLLARS IN MILLIONS, --------------- PERCENT
EXCEPT PER SHARE 1997 1996 CHANGE
<S> <C> <C> <C>
- ------------------------------------------------
Net income $ 37.3 $ 32.7 14.1
Diluted earnings per
share 1.42 1.15 23.5
Net sales 564.4 453.5 24.5
Income from
operations 90.0 79.7 12.9
Earnings before
interest, taxes,
depreciation and
amortization 114.9 102.0 12.6
Gross profit margin 33.0% 33.8% nm
- ------------------------------------------------
</TABLE>
nm -- not meaningful
Net income for 1997 increased $4.6 million, or 14.1% compared with 1996. Diluted
earnings per share increased 23.5% to $1.42 per diluted share. The higher
earnings base reflects the benefits associated with acquisitions and new
products and the 4 million share repurchase. Income from operations and earnings
before interest, taxes, depreciation and amortization increased in the
comparison primarily due to revenue growth and related gross profit.
Net Sales
The following table sets forth the Company's net sales by business segment:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31
-------------------
DOLLARS IN THOUSANDS 1997 1996
<S> <C> <C>
- ---------------------------------------------
Railway Group $310,295 $294,021
Transit Group 189,541 100,902
Molded Products Group 58,589 64,605
-------------------
Net sales $564,441 $453,512
- ---------------------------------------------
</TABLE>
Net sales for the year ended December 31, 1997 increased $110.9 million, or
24.5%, to $564.4 million. The Transit Group acquisitions of Vapor, Stone, Thermo
King and HP contributed $85.5 million of the increase. In addition, increased
volumes in all groups favorably affected the comparison.
Gross Profit
Gross profit increased 21.4% to $186.1 million in 1997 compared to $153.3
million in 1996. Gross margin, as a percentage of sales, was 33.0% in 1997 and
33.8% in 1996. The effect of lower margins of the recently acquired businesses
was the primary factor for the change.
Operating Expenses
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31
----------------- PERCENT
DOLLARS IN THOUSANDS 1997 1996 CHANGE
<S> <C> <C> <C>
- --------------------------------------------------
Selling and marketing $25,364 $18,643 36.1
General and
administrative 38,153 28,890 32.1
Engineering 24,386 18,244 33.7
Amortization 8,240 7,854 4.9
-----------------
Total $96,143 $73,631 30.6
- --------------------------------------------------
</TABLE>
Total operating expenses increased $22.5 million in the year-to-year comparison
primarily reflecting the effect of acquisitions completed in 1997 and 1996.
Incremental expenses in 1997 from acquired businesses totaled $15.3 million. In
addition, higher operating expenses reflect costs associated with certain
strategic initiatives including expanded international marketing activities and
additional engineering efforts associated with new product development.
Income from Operations
Operating income totaled $90.0 million in 1997 compared with $79.7 million a
year ago. Higher operating income reflects higher sales volume and related gross
profit.
Interest Expense
Interest expense increased $3.6 million to $29.7 million during 1997, primarily
due to funding costs associated with repurchases of common stock and
acquisitions, partially offset by debt repayments.
Income Taxes
The provision for income taxes increased $2.4 million to $23.3 million in 1997
compared with $20.9 million in 1996. The effective tax rate declined to 38.5% in
1997 from 39.0% in 1996, due to the establishment of a Foreign Sales Corporation
in the latter part of 1996.
16
<PAGE> 18
LIQUIDITY AND CAPITAL RESOURCES
Liquidity is provided primarily by operating cash flow and borrowings under the
Company's credit facilities. The Company's cash flow from operating activities
was approximately $42 million, $67 million and $59 million in 1998, 1997 and
1996, respectively. The decrease in operating cash flow from 1997 to 1998 is
primarily related to an increase in working capital due to higher accounts
receivables and increased inventory levels which are associated with increased
sales growth and acquired businesses which have large working capital
requirements. These additional working capital requirements have resulted in
increased borrowings under the Company's credit facilities. The Company's
acquisitions of businesses have also resulted in increased borrowing.
Based on cash flow provided by operations during 1998, forecasted 1999 results
and credit available under the credit agreement, the Company believes it will be
able to make 1999 planned capital expenditures and required debt payments.
In 1998, the Company completed the Rockwell, Comet, Lokring, RFS(E) and Hadady
acquisitions for an aggregate purchase price of $112.9 million consisting of
debt and cash. In 1997, the Company completed the Stone, Thermo King, Sloan and
HP acquisitions for an aggregate purchase price of $16.0 million, including $2.3
million of assumed debt. In 1996, the Company acquired Vapor and Futuris for an
aggregate purchase price of $78.9 million. These transactions utilized
borrowings for the purchase price. Also, in 1995, the Company acquired Pulse for
$54.9 million, consisting of $20 million in bank borrowings, a $17.0 million
note payable and the Company's Common Stock valued at $17.9 million at the time
of the acquisition.
In March 1997, SIH sold its 10 million shares of the Company's Common Stock. The
Company purchased 4 million shares at $11 per share for a total of $44 million
(plus $2 million in related fees), and investors consisting of Vestar, Charles,
AIP and certain members of the Company's management acquired the remaining 6
million shares at the same price. The Company financed the 4 million share
repurchase through borrowings under its credit facility.
Gross capital expenditures were $29.0 million, $29.6 million and $13.2 million
in 1998, 1997 and 1996, respectively. The majority of capital expenditures
reflect spending for replacement equipment as well as increased capacity and
efficiency. The Company expects capital expenditures in 1999 to approximate $25
to $30 million.
The following table sets forth the Company's outstanding indebtedness:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31
-------------------
DOLLARS IN THOUSANDS 1998 1997
<S> <C> <C>
- ---------------------------------------------
Credit Agreement
Revolving credit $105,555 $100,880
Term loan 202,500 145,500
9 3/8% Senior notes due
June 5, 2005 100,000 100,000
Unsecured credit
facility 30,000
Pulse note 16,990 16,990
Comet notes 10,200
Other 2,572 1,564
-------------------
Total 467,817 364,934
Less-current
portion 30,579 32,600
-------------------
Long-term portion $437,238 $332,334
- ---------------------------------------------
</TABLE>
Credit Agreement
In June 1998, the Company refinanced its credit facility with a consortium of
commercial banks and amended it in October 1998 in connection with the Rockwell
acquisition (as amended, the "Credit Agreement"). The Credit Agreement provides
for an aggregate credit facility of $350 million, consisting of up to $170
million of June 1998 term loans, up to $40 million of September 1998 term loans,
and up to $140 million of revolving loans. In addition, the Credit Agreement
provides for swingline loans of up to an aggregate amount of $5 million, and for
the issuance of letters of credit in an aggregate face amount of up to $50
million. Swingline loans and the issuance of letters of credit will reduce the
amount of revolving loans which may be incurred under the revolving credit
facility.
At December 31, 1998, the Company had available borrowing capacity, net of
letters of credit, of approximately $12 million. The Company repaid a portion of
its borrowings under the Credit Agreement in January 1999 with proceeds of the
offering of $75 million of 9 3/8 Senior Notes, as further described below,
resulting in increased borrowing capacity of $47 million.
Credit Agreement borrowings bear variable interest rates indexed to common
indexes such as LIBOR. The weighted-average contractual interest rate on Credit
Agreement borrowings was 6.71% on
17
<PAGE> 19
December 31, 1998. To reduce the impact of interest rate changes on a portion of
this variable-rate debt, the Company entered into interest rate swaps which
effectively convert a portion of the debt from variable to fixed-rate borrowings
during the term of the swap contracts. On December 31 1998, the notional value
of interest rate swaps outstanding totaled $50 million and effectively changed
the Company's interest rate from a variable rate to a fixed rate of 7.09%. The
interest rate swap agreements mature in 2000 and 2001.
Principal repayments of term loan borrowings are due in semi-annual installments
until maturity in December 2003. See Note 5 to "Notes to Consolidated Financial
Statements."
The Credit Agreement limits the Company with respect to declaring or making cash
dividend payments and prohibits the Company from declaring or making other
distributions whether in cash, property, securities or a combination thereof,
with respect to any shares of the Company's capital stock subject to certain
exceptions, including an exception pursuant to which the Company will be
permitted to pay cash dividends on its Common Stock in any fiscal year in an
aggregate amount up to $15 million minus the aggregate amount of prepayments of
the Pulse note during such fiscal year so long as no default in the payment of
interest or fees has occurred thereunder. The Credit Agreement contains various
other covenants and restrictions including, without limitation, the following: a
limitation on the incurrence of additional indebtedness; a limitation on
mergers, consolidations and sales of assets and acquisitions (other than mergers
and consolidations with certain subsidiaries, sales of assets in the ordinary
course of business, and acquisitions for which the consideration paid by the
Company does not exceed $50 million individually or $150 million in the
aggregate); a limitation on liens; a limitation on sale and leasebacks; a
limitation on investments, loans and advances; a limitation on certain debt
payments; a limitation on capital expenditures; a minimum interest expense
coverage ratio; and a maximum leverage ratio. All debt incurred under the Credit
Agreement is secured by substantially all of the assets of the Company and its
domestic subsidiaries and is guaranteed by the Company's domestic subsidiaries.
The Credit Agreement contains customary events of default, including payment
defaults, failure of representations to be true in any material respect,
covenant defaults, defaults with respect to other indebtedness of the Company,
bankruptcy, certain judgments against the Company, ERISA defaults and "change of
control" of the Company.
9 3/8% Senior Notes Due June 2005
In June 1995 the Company issued $100 million of 9 3/8% Senior Notes due June
2005 (the "Existing Notes"). In January 1999, the Company issued an additional
$75 million of 9 3/8% Senior Notes due June 2005 (the "Additional Notes"; the
Existing Notes and the Additional Notes are, collectively, the "Notes"). See
"Subsequent Event" below.
The terms of the Existing Notes and the Additional Notes are substantially the
same, and the Existing Notes and the Additional Notes were issued pursuant to
indentures that are substantially the same. The Notes bear interest at the rate
of 9 3/8% and mature in June 2005. The net proceeds of the Existing Notes were
used to prepay term loans outstanding under the then existing credit agreement.
The net proceeds of the Additional Notes were used to repay the unsecured credit
facility and to reduce revolving credit borrowings.
The Notes are senior unsecured obligations of the Company and rank pari passu in
right of payment with all existing and future indebtedness under (i) capitalized
lease obligations, (ii) the Credit Agreement, (iii) indebtedness of the Company
for money borrowed and (iv) indebtedness evidenced by notes, debentures, bonds
or other similar instruments for the payment of which the Company is responsible
or liable unless, in the case of clause (iii) or (iv), in the instrument
creating or evidencing the same or pursuant to which the same is outstanding, it
is provided that such obligations are subordinate in right of payment to the
Notes.
The indentures pursuant to which the Notes were issued contain certain
restrictive covenants which, among other things, limit the ability of the
Company and certain of its subsidiaries to incur indebtedness, pay dividends on
and redeem capital stock, create restrictions on investments in unrestricted
subsidiaries, make distributions from certain subsidiaries, use proceeds from
the sale of assets and subsidiary stock, enter into transactions with
affiliates, create liens and enter into sale/leaseback transactions. The
Company's indenture also restricts, subject to certain exceptions, the Company's
ability to consolidate and merge with, or to transfer all or substantially all
of its assets to, another person.
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Unsecured Credit Facility
In October 1998, the Company obtained a $30 million unsecured credit facility
from a group of commercial banks for the purpose of financing the Rockwell
acquisition. At December 31, 1998, the interest rate on the note was 9.75% per
annum. In January 1999, this facility was repaid with proceeds of the Additional
Note offering.
Pulse Note
As partial payment for the Pulse acquisition, the Company issued a $17.0 million
note due January 31, 2004. Interest is payable semiannually and accrues at 9.5%
until February 1, 2001; and from February 1, 2001 until January 31, 2004,
interest will accrue at the prime rate charged by Chase Manhattan Bank on
December 31, 2000 plus 1% (with a maximum adjustment of 2%).
Comet Notes
In connection with the Comet acquisition, the Company issued notes totaling
$12.2 million, of which unsecured notes totaling $6.2 million were delivered by
the Company and a note in the amount of $6 million was delivered by a subsidiary
of the Company and secured by the acquired assets. The notes bore interest at
the rate of 10% per annum and were scheduled to mature on October 8, 1999. These
notes were repaid in January 1999. See "Subsequent Event" below.
ESOP
In connection with the establishment of the ESOP in January 1995, the Company
made a $140 million loan to the ESOP (the "ESOP Loan"), which was used to
purchase 9,336,000 shares of the Company's outstanding common stock. The ESOP
Loan had an original term of 50 years, with annual payments of principal and
interest of approximately $12 million. The ESOP Loan bears interest at 8.5% per
annum. The ESOP will repay the ESOP Loan using contributions from the Company.
The Company is obligated to contribute amounts sufficient to repay the ESOP
Loan. The net effect of the ESOP is that the Company's Common Stock is allocated
to employees in lieu of a retirement plan that was previously a cash-based
defined benefit plan and, accordingly, results in reduced annual cash outlays by
an estimated $3 to $4 million.
Subsequent Event
In January 1999, the Company issued the Additional Notes at a premium resulting
in an effective rate of 8.5%. As a result of the issuance and payoff of the
unsecured credit facility, the Company will write off previously capitalized
debt issuance costs of approximately $.02 per diluted share in the first quarter
of 1999.
Management believes, based upon current levels of operations and forecasted
earnings, that cash flow from operations, together with borrowings under the
Credit Agreement, will be adequate to make payments of principal and interest on
debt, including the Notes, to make required contributions to the ESOP, to permit
anticipated capital expenditures, and to fund working capital requirements and
other cash needs for the foreseeable future, including 1999. The issuance of the
Additional Notes increased the Company's liquidity by reducing its outstanding
revolving credit borrowings and thereby increasing its available borrowing
capacity.
Nevertheless, the Company will remain leveraged to a significant extent and its
debt service obligations will continue to be substantial. The debt of the
Company requires the dedication of a substantial portion of future cash flows to
the payment of principal and interest on indebtedness, thereby reducing funds
available for capital expenditures and future business opportunities that the
Company believes are available. Cash flow and liquidity will be sufficient to
meet its debt service requirements. If the Company's sources of funds were to
fail to satisfy the Company's cash requirements, the Company may need to
refinance its existing debt or obtain additional financing. There is no
assurance that such new financing alternatives would be available, and, in any
case, such new financing, if available, would be expected to be more costly and
burdensome than the debt agreements currently in place. The Company intends in
1999 to reduce its indebtedness through generating operating income and by
reducing working capital requirements and other measures.
EFFECTS OF YEAR 2000
The Company has information system improvement initiatives in process that
include both new computer hardware and software applications. The new system is
substantially operational and is year 2000 compliant. The estimated cost of the
project is expected to be in the $8 to $10 million range with the majority of
costs (approximately $8 million)
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previously incurred. The majority of the expenditures incurred for hardware and
purchased software related to this project have been capitalized and are
amortized over their estimated useful lives. Other costs, such as training and
advisory consulting, are expensed as incurred. These expenditures are not
expected to have a significant impact on the Company's future results of
operations or financial condition.
The Company has identified other equipment it uses in its operations that have
non-information system characteristics and have embedded technology components,
such as those items with internal clocks. The Company will need to replace this
type of equipment but does not believe a possible year 2000 failure will have a
significant impact on the Company's operations. The estimated cost of
replacement equipment is not considered significant.
The Company has received written assurances from some of its suppliers and
customers and other providers acknowledging year 2000 issues and stating their
present intention to be compliant; however, not all customers, vendors and
providers have provided such assurances. The Company will evaluate on an ongoing
basis whether it is necessary and practical to establish contingency plans with
respect to year 2000 issues. However, if large scale systems failures occur, it
could have a significant adverse effect on the Company's financial condition,
future results of operations and liquidity.
The Company's products are generally sold with a limited warranty for defects.
The Company has reviewed its products currently in use by its customers or being
sold and does not believe that there will be material increases in warranty or
liability claims arising out of year 2000 non-compliance. However, a material
increase in such claims could have a material adverse effect on the Company's
financial condition, future results of operations and liquidity.
EFFECTS OF INFLATION; SEASONALITY
General price inflation has not had a material impact on the Company's results
of operations. Some of the Company's labor contracts contain negotiated salary
and benefit increases and others contain cost of living adjustment clauses,
which would cause the Company's cost automatically to increase if inflation were
to become significant. The Company's business is not seasonal, although the
third quarter results generally tend to be slightly lower than other quarters,
reflecting vacation and down time at its major customers during this period.
CONVERSION TO THE EURO CURRENCY
On January 1, 1999, certain members of the European Union established fixed
conversion rates between their existing currencies and the European Union's
common currency (the "Euro"). The Company conducts business in member countries.
The transition period for the introduction of the Euro is from January 1, 1999
through June 30, 2002. The Company is assessing the issues involved with the
introduction of the Euro; however, it does not expect conversion to the Euro to
have a material impact on its operations or financial results.
FORWARD LOOKING STATEMENTS
We believe that all statements other than statements of historical facts
included in this report, including certain statements under "Business" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," may constitute forward-looking statements. We have based these
forward-looking statements on our current expectations and projections about
future events. Although we believe that our assumptions made in connection with
the forward-looking statements are reasonable, we cannot assure you that our
assumptions and expectations will prove to have been correct.
These forward-looking statements are subject to various risks, uncertainties and
assumptions about us, including, among other things:
-- Interest rates;
-- Demand for services in the freight and passenger rail industry;
-- Consolidations in the rail industry;
-- Demand for our products and services;
-- Gains and losses in market share;
-- Demand for freight cars, locomotives, passenger transit cars and buses;
-- Industry demand for faster and more efficient braking equipment;
-- Continued outsourcing by our customers;
-- Governmental funding for some of our customers;
-- Future regulation/deregulation of our customers and/or the rail industry;
20
<PAGE> 22
-- General economic conditions in the markets which we compete, including
North America, South America, Europe and Australia;
-- Successful introduction of new products;
-- Successful integration of newly acquired companies;
-- Year 2000 concerns;
-- Labor relations;
-- Completion of additional acquisitions; and
-- Other factors.
The Company undertakes no obligation to publicly update or revise any
forward-looking statements, whether as a result of new information, future
events or otherwise.
RECENT ACCOUNTING PRONOUNCEMENT
In June 1998, the Financial Accounting Standards Board issued Statement of
Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging
Activities". This Statement establishes accounting and reporting standards
requiring that every derivative instrument be measured at its fair value and the
changes in fair value be recorded currently in earnings unless specific hedge
accounting criteria are met. Statement No. 133 is effective for fiscal years
beginning after June 15, 1999, and accordingly, the Company anticipates adopting
this standard January 1, 2000. Management continues to evaluate the impact this
standard will have on results of operations and financial condition.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
INTEREST RATE RISK In the ordinary course of business, WABCO is exposed to risks
that increases in interest rates may adversely affect funding costs associated
with $308 million of variable-rate debt (including the effects of interest rate
swaps), which represents 66% of total long-term debt at December 31, 1998.
Management has entered into pay-fixed, receive-variable interest rate swap
contracts that partially mitigate the impact on variable-rate debt of interest
rate increases (see Note 5 to the "Notes to Consolidated Financial Statements"
included elsewhere in this report). At December 31, 1998, an instantaneous 100
basis point increase in interest rates would reduce the Company's earnings by
$2.2 million, assuming no additional intervention strategies by management.
In January 1999, the Company converted a portion of its variable-rate debt to
fixed rate debt through the issuance of $75 million Senior Notes. As of February
28, 1999, variable-rate debt represents 52% (including the effects of interest
rate swaps) of total long-term debt.
FOREIGN CURRENCY EXCHANGE RISK The Company routinely enters into several types
of financial instruments for the purpose of managing its exposure to foreign
currency exchange rate fluctuations in countries in which the Company has
significant operations. As of December 31, 1998, the Company had no significant
instruments outstanding.
WABCO is also subject to certain risks associated with changes in foreign
currency exchange rates to the extent its operations are conducted in currencies
other than the U.S. dollar. At December 31, 1998, approximately 72% of WABCO's
net sales are in the United States, 11% in Canada and 17% in other international
locations, primarily Europe.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Financial statements and supplementary data are set forth in Item 14 of Part IV
hereof.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEMS 10 THROUGH 13.
In accordance with the provisions of General Instruction G to Form 10-K, the
information required by Item 10 (Directors and Executive Officers of the
Registrant), Item 11 (Executive Compensation), Item 12 (Security Ownership of
Certain Beneficial Owners and Management) and Item 13 (Certain Relationships and
Related Transactions) is incorporated herein by reference to the Company's
definitive Proxy Statement for its Annual Meeting of Stockholders to be held on
May 19, 1999. The definitive Proxy Statement will be filed with the Securities
and Exchange Commission not later than 120 days after December 31, 1998.
Information relating to the executive officers of the Company is set forth in
Part I.
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PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
The financial statements, financial statement schedules and exhibits listed
below are filed as part of this annual report:
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(a) (1) FINANCIAL STATEMENTS
Report of Independent Public Accountants 25
Consolidated Balance Sheet as of December 31, 1998 and 1997 26
Consolidated Statement of Operations for the three years
ended December 31, 1998, 1997 and 1996 27
Consolidated Statement of Cash Flows for the three years
ended December 31, 1998, 1997 and 1996 28
Consolidated Statement of Shareholders' Equity for the three
years ended December 31, 1998, 1997 and 1996 29
Notes to Consolidated Financial Statements 30
(2) FINANCIAL STATEMENT SCHEDULES
Report of Independent Public Accountants 43
Schedule II -- Valuation and Qualifying Accounts 44
(b) REPORTS ON FORM 8-K
None
</TABLE>
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(c) EXHIBITS
3.1 Restated Certificate of Incorporation of the Company dated
January 30, 1995, as amended March 30, 1995 2
3.2 Amended and Restated By-Laws of the Company, effective March
31, 1997 5
4.1 Form of Indenture between the Company and The Bank of New
York with respect to the public offering of $100,000,000 of
9 3/8% Senior Notes due 2005 2
4.2 Form of Note (included in Exhibit 4.1)
4.3 First Supplemental Indenture dated as of March 21, 1997
between the Company and The Bank of New York 6
4.4 Indenture dated as of January 12, 1999 by and between the
Company and The Bank of New York with respect to the private
offering of $75,000,000 of 9 3/8% Senior Notes due 2005,
Series B 1
4.5 Form of Note (included in Exhibit 4.4) 1
9 Second Amended WABCO Voting Trust/Disposition Agreement
dated as of December 13, 1995 among the Management Investors
(Schedules and Exhibits omitted) 3
10.1 Westinghouse Air Brake Company Employee Stock Ownership Plan
and Trust, effective January 31, 1995 2
10.2 ESOP Loan Agreement dated January 31, 1995 between
Westinghouse Air Brake Company Employee Stock Ownership
Trust ("ESOT") and the Company (Exhibits omitted) 2
10.3 Employee Stock Ownership Trust Agreement dated January 31,
1995 between the Company and U.S. Trust Company of
California, N.A. 2
10.4 Pledge Agreement dated January 31, 1995 between ESOT and the
Company 2
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10.5 Credit Agreement dated as of June 30, 1998, and Amended and
Restated as of October 2, 1998 among the Company, various
financial institutions, The Chase Manhattan Bank, Chase
Manhattan Bank Delaware, and The Bank of New York (Schedules
and Exhibits omitted) 1
10.6 Amended and Restated Stockholders Agreement dated as of
March 5, 1997 among the RAC Voting Trust ("Voting Trust"),
Vestar Equity Partners, L.P., Charlesbank Capital Partners
f/k/a Harvard Private Capital Holdings, Inc. ("Charles"),
American Industrial Partners Capital Fund II, L.P. ("AIP")
and the Company 6
10.7 Common Stock Registration Rights Agreement dated as of
January 31, 1995 among the Company, Scandinavian Incentive
Holding B.V. ("SIH"), Voting Trust, Vestar Capital, Pulse
Electronics, Inc., Pulse Embedded Computer Systems, Inc.,
the Pulse Shareholders and ESOT (Schedules and Exhibits
omitted) 2
10.8 Indemnification Agreement dated January 31, 1995 between the
Company and the Voting Trust trustees 2
10.9 Agreement of Sale and Purchase of the North American
Operations of the Railway Products Group, an operating
division of American Standard Inc., dated as of 1990 between
Rail Acquisition Corp. and American Standard Inc. (only
provisions on indemnification are reproduced) 2
10.10 Letter Agreement (undated) between the Company and American
Standard Inc. on environmental costs and sharing 2
10.11 Purchase Agreement dated as of June 17, 1992 among the
Company, Schuller International, Inc., Manville Corporation
and European Overseas Corporation (only provisions on
indemnification are reproduced) 2
10.12 Asset Purchase Agreement dated as of January 23, 1995 among
the Company, Pulse Acquisition Corporation, Pulse
Electronics, Inc., Pulse Embedded Computer Systems, Inc. and
the Pulse Shareholders (Schedules and Exhibits omitted) 2
10.13 License Agreement dated as of December 31, 1993 between SAB
WABCO Holdings B.V. and the Company 2
10.14 Letter Agreement dated as of January 19, 1995 between the
Company and Vestar Capital Partners, Inc. 2
10.15 Westinghouse Air Brake Company 1995 Stock Incentive Plan, as
amended 1
10.16 Westinghouse Air Brake Company 1995 Non-Employee Directors'
Fee and Stock Option Plan 1
10.17 Form of Employment Agreement between William E. Kassling and
the Company 2
10.18 Letter Agreement dated as of January 1, 1995 between the
Company and Vestar Capital Partners, Inc. 2
10.19 Form of Indemnification Agreement between the Company and
Authorized Representatives 2
10.20 Share Purchase Agreement between Futuris Corporation Limited
and the Company (Exhibits omitted) 2
10.21 Purchase Agreement dated as of September 19, 1996 by and
among Mark IV Industries, Inc., Mark IV PLC, and W&P Holding
Corp. (Exhibits and Schedules omitted) (Originally filed as
Exhibit No. 2.01) 4
10.22 Purchase Agreement dated as of September 19,1996 by and
among Mark IV Industries Limited and Westinghouse Railway
Holdings (Canada) Inc. (Exhibits and Schedules omitted)
(Originally filed as Exhibit No. 2.02) 4
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10.23 Amendment No. 1 to Amended and Restated Stockholders
Agreement dated as of March 5, 1997 among the Voting Trust,
Vestar, Charles, AIP and the Company 6
10.24 Common Stock Registration Rights Agreement dated as of March
5, 1997 among the Company, Charles, AIP and the Voting Trust 6
10.25 1998 Employee Stock Purchase Plan 1
10.26 Sale Agreement dated as of August 7, 1998 by and between
Rockwell Collins, Inc. and the Company (Schedules and
Exhibits omitted) (Originally filed as Exhibit No. 2.01) 7
10.27 Amendment No. 1 dated as of October 5, 1998 to Sale
Agreement dated as of August 7, 1998 by and between Rockwell
Collins, Inc. and the Company (Originally filed as Exhibit
No. 2.02) 7
21 List of subsidiaries of the Company 1
23 Consent of Arthur Andersen LLP 1
27 Financial Data Schedule 1
99 Annual Report on Form 11-K for the year ended December 31,
1998 of the Westinghouse Air Brake Company Employee Stock
Ownership Plan and Trust 1
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1 Filed herewith
2 Filed as an exhibit to the Company's Registration Statement
on Form S-1 (No. 33-90866)
3 Filed as an exhibit to the Company's Annual Report on Form
10-K for the period ended December 31, 1995
4 Filed as an exhibit to the Company's Current Report on Form
8-K, dated October 3, 1996
5 Filed as an exhibit to the Company's Registration Statement
on Form S-8 (No. 333-39159)
6 Filed as an exhibit to the Company's Annual Report on Form
10-K for the period ended December 31, 1997
7 Filed as an exhibit to the Company's Current Report on Form
8-K, dated October 5, 1998
</TABLE>
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REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
TO THE BOARD OF DIRECTORS OF
WESTINGHOUSE AIR BRAKE COMPANY:
We have audited the accompanying consolidated balance sheet of Westinghouse Air
Brake Company (a Delaware corporation) and subsidiaries as of December 31, 1998
and 1997, and the related consolidated statements of operations, shareholders'
equity and cash flows for each of the three years in the period ended December
31, 1998. 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 Westinghouse Air Brake Company
and subsidiaries as of December 31, 1998 and 1997, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1998, in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Pittsburgh, Pennsylvania
February 17, 1999
25
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WESTINGHOUSE AIR BRAKE COMPANY
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
DECEMBER 31
---------------------
DOLLARS IN THOUSANDS, EXCEPT PAR VALUE 1998 1997
- -----------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash........................................................ $ 3,323 $ 836
Accounts receivable......................................... 132,901 91,438
Inventories................................................. 103,560 69,297
Deferred taxes.............................................. 13,006 11,169
Other....................................................... 10,171 7,759
---------------------
Total current assets.................................... 262,961 180,499
Property, plant and equipment............................... 214,461 186,534
Accumulated depreciation.................................... (89,480) (78,167)
---------------------
Property, plant and equipment, net...................... 124,981 108,367
OTHER ASSETS
Prepaid pension costs....................................... 5,724 5,061
Goodwill.................................................... 151,658 66,599
Other intangibles........................................... 46,021 42,466
Other noncurrent assets..................................... 4,839 7,887
---------------------
Total other assets...................................... 208,242 122,013
---------------------
Total Assets....................................... $ 596,184 $ 410,879
=====================
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Current portion of long-term debt........................... $ 30,579 $ 32,600
Accounts payable............................................ 62,974 37,582
Accrued income taxes........................................ 8,352 488
Customer deposits........................................... 20,426 21,210
Accrued compensation........................................ 12,769 13,080
Accrued warranty............................................ 12,657 12,851
Accrued interest............................................ 1,616 3,038
Other accrued liabilities................................... 18,177 10,931
---------------------
Total current liabilities............................... 167,550 131,780
Long-term debt.............................................. 437,238 332,334
Reserve for postretirement benefits......................... 16,238 14,860
Accrued pension costs....................................... 3,631 4,700
Deferred income taxes....................................... 3,463 5,561
Other long-term liabilities................................. 1,917 907
---------------------
Total liabilities....................................... 630,037 490,142
SHAREHOLDERS' EQUITY
Preferred stock, 1,000,000 shares authorized, no shares
issued.................................................... -- --
Common stock, $.01 par value; 100,000,000 shares authorized:
47,426,600 shares issued................................ 474 474
Additional paid-in capital.................................. 107,720 105,522
Treasury stock, at cost, 13,532,092 and 13,743,924 shares... (187,654) (190,657)
Unearned ESOP shares, at cost, 8,564,811 and 8,751,531
shares.................................................... (128,472) (131,273)
Retained earnings........................................... 182,291 141,617
Unamortized restricted stock award.......................... (162) --
Accumulated other comprehensive income (loss)............... (8,050) (4,946)
---------------------
Total shareholders' equity.............................. (33,853) (79,263)
---------------------
Liabilities and Shareholders' Equity.................... $ 596,184 $ 410,879
=====================
</TABLE>
The accompanying notes are an integral part of this statement.
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WESTINGHOUSE AIR BRAKE COMPANY
CONSOLIDATED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
---------------------------------
IN THOUSANDS, EXCEPT PER SHARE DATA 1998 1997 1996
<S> <C> <C> <C>
- -----------------------------------------------------------------------------------------------
Net sales................................................... $670,909 $564,441 $453,512
Cost of sales............................................... 451,730 378,323 300,163
---------------------------------
Gross profit........................................... 219,179 186,118 153,349
Selling and marketing expenses.............................. 30,711 25,364 18,643
General and administrative expenses......................... 45,337 38,153 28,890
Engineering expenses........................................ 30,436 24,386 18,244
Amortization expense........................................ 8,029 8,240 7,854
---------------------------------
Total operating expenses............................... 114,513 96,143 73,631
Income from operations................................. 104,666 89,975 79,718
Other income and expenses
Interest expense.......................................... 31,217 29,729 26,152
Other expense (income), net............................... 919 (344) (82)
---------------------------------
Income before income taxes and extraordinary item...... 72,530 60,590 53,648
Income taxes................................................ 27,561 23,327 20,923
---------------------------------
Income before extraordinary item....................... 44,969 37,263 32,725
Loss on early extinguishment of debt, net of tax............ 3,315 -- --
---------------------------------
Net income............................................. $ 41,654 $ 37,263 $ 32,725
=================================
EARNINGS PER COMMON SHARE
Basic
Income before extraordinary item....................... $ 1.79 $ 1.45 $ 1.15
Extraordinary item..................................... (.13) -- --
---------------------------------
Net income............................................. $ 1.66 $ 1.45 $ 1.15
=================================
Diluted
Income before extraordinary item....................... $ 1.75 $ 1.42 $ 1.15
Extraordinary item..................................... (.13) -- --
---------------------------------
Net income............................................. $ 1.62 $ 1.42 $ 1.15
=================================
Weighted Average Shares Outstanding
Basic.................................................. 25,081 25,693 28,473
Diluted................................................ 25,708 26,173 28,473
---------------------------------
</TABLE>
The accompanying notes are an integral part of this statement.
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WESTINGHOUSE AIR BRAKE COMPANY
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
-----------------------------
IN THOUSANDS 1998 1997 1996
<S> <C> <C> <C>
- -------------------------------------------------------------------------------------------
OPERATING ACTIVITIES
Net income.................................................. $ 41,654 $37,263 $32,725
Adjustments to reconcile net income to cash provided by
operations
Extraordinary loss on extinguishment of debt.............. 3,315
Depreciation and amortization............................. 25,208 24,624 22,249
Provision for ESOP contribution........................... 4,472 3,229 2,870
Deferred income taxes..................................... (3,935) (3,506) 2,456
Changes in operating assets and liabilities, net of
acquisitions
Accounts receivable.................................... (26,161) (6,623) (9,868)
Inventories............................................ (16,957) 1,817 8,100
Accounts payable....................................... 20,385 5,900 (6,574)
Accrued income taxes................................... 12,025 (1,349) (411)
Accrued liabilities and customer deposits.............. (11,856) 5,522 9,740
Other assets and liabilities........................... (6,083) 97 (2,376)
-----------------------------
Net cash provided by operating activities............ 42,067 66,974 58,911
INVESTING ACTIVITIES
Purchase of property, plant and equipment, net......... (28,957) (29,196) (12,855)
Acquisitions of businesses, net of cash acquired....... (112,514) (13,492) (78,890)
-----------------------------
Net cash used for investing activities............ (141,471) (42,688) (91,745)
FINANCING ACTIVITIES
Proceeds from term debt obligations.................... 64,500 65,000
Repayments of term debt................................ (7,500) (18,200) (26,300)
Net proceeds from (repayments of) revolving credit
arrangements......................................... 4,675 39,880 (2,935)
Proceeds from other borrowings......................... 43,208
Repayments of other borrowings......................... (2,000) (555) (10)
Debt issuance fees..................................... (2,251) (2,068) (492)
Purchase of treasury stock............................. (44,000) (1,629)
Cash dividends......................................... (980) (1,009) (1,127)
Proceeds from exercise of stock options and employee
stock purchases...................................... 2,546 3,513
-----------------------------
Net cash provided by (used for) financing
activities...................................... 102,198 (22,439) 32,507
Effect of changes in currency exchange rates................ (307) (1,629) 735
-----------------------------
Increase in cash.......................................... 2,487 218 408
Cash, beginning of year................................ 836 618 210
-----------------------------
Cash, end of year...................................... $ 3,323 $ 836 $ 618
=============================
SUPPLEMENTAL CASH FLOW DISCLOSURES
Interest paid during the year.......................... $ 32,639 $30,223 $25,624
Income taxes paid during the year...................... 19,471 28,182 20,452
-----------------------------
</TABLE>
The accompanying notes are an integral part of this statement.
28
<PAGE> 30
WESTINGHOUSE AIR BRAKE COMPANY
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
ACCUMULATED
OTHER
ADDITIONAL UNAMORTIZED COMPREHENSIVE
In thousands, except per COMPREHENSIVE COMMON PAID-IN TREASURY UNALLOCATED RETAINED RESTRICTED INCOME
share INCOME STOCK CAPITAL STOCK ESOP SHARES EARNINGS STOCK AWARD (LOSS)
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE, DECEMBER 31,
1995.................... $474 $104,776 $(147,702) $(137,239) $ 73,765 $ -- $(2,772)
Cash dividends ($.04 per
share).................. (1,127)
Purchase of treasury
stock................... (1,629)
Allocation of ESOP
shares.................. (455) 3,325
Net income................ $32,725 32,725
Translation adjustment.... (336) (336)
------------------------------------------------------------------------------------------------
$32,389
=======
BALANCE, DECEMBER 31,
1996.................... 474 104,321 (149,331) (133,914) 105,363 -- (3,108)
Cash dividends ($.04 per
share).................. (1,009)
Purchase of treasury
stock................... (44,000)
Stock issued under option,
benefit and other
plans................... 839 2,674
Allocation of ESOP
shares.................. 362 2,641
Net income................ $37,263 37,263
Translation adjustment.... (1,838) (1,838)
------------------------------------------------------------------------------------------------
$35,425
=======
BALANCE, DECEMBER 31,
1997.................... 474 105,522 (190,657) (131,273) 141,617 -- (4,946)
Cash dividends ($.04 per
share).................. (980)
Stock issued under option,
benefit and other
plans................... 1,162 3,003 (162)
Allocation of ESOP
shares.................. 1,036 2,801
Net income................ $41,654 41,654
Translation adjustment.... (3,104) (3,104)
-------
$38,550
======= -----------------------------------------------------------------------------------
BALANCE, DECEMBER 31,
1998.................... $474 $107,720 $(187,654) $(128,472) $182,291 $(162) $(8,050)
===================================================================================
</TABLE>
The accompanying notes are an integral part of the financial statements.
29
<PAGE> 31
WESTINGHOUSE AIR BRAKE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BUSINESS
Westinghouse Air Brake Company (the Company) is North America's largest
manufacturer of value-added equipment for locomotives, railway freight cars and
passenger transit vehicles. The Company's products, which are sold to both the
original equipment manufacturer market and the aftermarket, are intended to
enhance safety, improve productivity and reduce maintenance costs for its
customers. The Company's products include electronic controls and monitors, air
brakes, couplers, door controls, draft gears and brake shoes. The Company's
primary manufacturing operations are in the United States and Canada, and the
Company's revenues have been primarily from North America. The Company's
customer base consists of railroad transportation companies, locomotive and
freight car original equipment manufacturers, railroads and transit car builders
and public transit systems.
A portion of the Company's Railroad Group's operations and revenue base is
generally dependent on the capital replacement cycles for locomotives and
freight cars of the large North American-based railroad companies. The Company's
passenger transit operations are dependent on the budgeting and expenditure
appropriation process of federal, state and local governmental units for mass
transit needs established by public policy.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION The consolidated financial statements include the
accounts of the Company and its majority owned subsidiaries. Such statements
have been prepared in accordance with generally accepted accounting principles.
All intercompany accounts and transactions have been eliminated in
consolidation. Certain prior year amounts have been reclassified, where
necessary, to conform to the current year presentation.
USE OF ESTIMATES The preparation of financial statements in conformity with
generally accepted accounting principles requires the Company to make estimates
and assumptions that affect the reported amounts of assets and liabilities at
the date of the financial statements and reported amounts of revenues and
expenses during the reporting period. Actual amounts could differ from the
estimates.
INVENTORIES Inventories are stated at the lower of cost or market. Cost is
determined under the first-in, first-out (FIFO) method. Inventory costs include
material, labor and overhead. The components of inventory, net of reserves,
were:
<TABLE>
<CAPTION>
DECEMBER 31
DOLLARS IN THOUSANDS 1998 1997
- ---------------------------------------------
<S> <C> <C>
Raw materials $ 47,853 $27,395
Work-in-process 29,965 26,640
Finished goods 25,742 15,262
------------------
Total inventory $103,560 $69,297
- ---------------------------------------------
</TABLE>
PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment additions are stated
at cost. Expenditures for renewals and betterments are capitalized. Expenditures
for ordinary maintenance and repairs are expensed as incurred. The Company
provides for book depreciation principally on the straight-line method over the
following estimated useful lives of plant and equipment.
<TABLE>
<CAPTION>
YEARS
- --------------------------------------------
<S> <C>
Land improvements 10 to 20
Buildings 20 to 40
Machinery and equipment 4 to 15
- --------------------------------------------
</TABLE>
Accelerated depreciation methods are utilized for income tax purposes.
INTANGIBLE ASSETS Goodwill is amortized on a straight-line basis over 40 years.
Other intangibles are amortized on a straight-line basis over their estimated
economic lives. Goodwill and other intangible assets, including patents and
tradenames, are periodically reviewed for impairment based on an assessment of
future operations (see Note 4).
REVENUE RECOGNITION Revenue is recognized when products have been shipped to the
respective customers and the price for the product has been determined. The
percentage of completion method of accounting for revenues on long-term sales
contracts is applied on a relatively small amount of contracts when appropriate.
Sales returns are infrequent and not material in relation to the Company's net
sales.
STOCK-BASED COMPENSATION The Company accounts for stock-based compensation,
including stock options and employee stock purchases, under APB Opinion No. 25,
"Accounting for Stock Issued to
30
<PAGE> 32
Employees." See Note 11 for related pro forma disclosures.
RESEARCH AND DEVELOPMENT Research and development costs are charged to expense
as incurred. Such costs totaled $30.4 million, $24.4 million and $18.2 million
in 1998, 1997 and 1996, respectively.
WARRANTY COSTS Warranty costs are accrued based on management's estimates of
repair or upgrade costs per unit and historical experience. In recent years, the
Company has introduced several new products. The Company does not have the same
level of historical warranty experience for these new products as it does for
its continuing products. Therefore, warranty reserves have been established for
these new products based upon management's estimates. Actual future results may
vary from such estimates. Warranty expense was $6.2 million, $9.9 million and
$5.5 million for 1998, 1997 and 1996, respectively. Warranty reserves were $12.7
million and $12.9 million at December 31, 1998 and 1997, respectively.
FINANCIAL DERIVATIVES The Company periodically enters into interest rate swap
agreements to reduce the impact of interest rate changes on its variable rate
borrowings. Interest rate swaps are agreements with a counterparty to exchange
periodic interest payments (such as pay fixed, receive variable) calculated on a
notional principal amount. The interest rate differential to be paid or received
is accrued to interest expense (see Note 5). In addition, the Company
periodically enters into foreign currency exchange forward and options contracts
to mitigate the effects of fluctuations in foreign exchange rates in countries
where it has significant operations.
INCOME TAXES Income taxes are accounted for under the liability method. Deferred
tax assets and liabilities are determined based on differences between financial
reporting and tax bases of assets and liabilities and are measured using the
enacted tax rates and laws that will be in effect when the differences are
expected to reverse. The provision for income taxes includes federal, state and
foreign income taxes (see Note 8).
FOREIGN CURRENCY TRANSLATION The financial statements of the Company's foreign
subsidiaries are translated into U.S. currency under the guidelines set forth in
SFAS No. 52, "Foreign Currency Translation." The effects of currency exchange
rate changes on intercompany transactions of a long-term investment nature are
accumulated and carried as a component of shareholders' equity. The effects of
currency exchange rate changes on intercompany transactions that are non U.S.
dollar amounts are charged or credited to earnings.
EARNINGS PER SHARE Basic earnings per common share are computed by dividing net
income applicable to common shareholders by the weighted-average number of
shares of common stock outstanding during the year. Diluted earnings per common
share are computed by dividing net income applicable to common shareholders by
the weighted average number of shares of common stock outstanding adjusted for
the assumed conversion of all dilutive securities (such as employee stock
options). See Note 11.
OTHER COMPREHENSIVE INCOME In 1998, the Company adopted Statement of Financial
Accounting Standards ("SFAS") No. 130, "Reporting Comprehensive Income" which
established standards for reporting and displaying comprehensive income and its
components in financial statements. Comprehensive income is defined as net
income and all other nonowner changes in shareholders' equity. The Company's
accumulated other comprehensive income (loss) consists entirely of foreign
currency translation adjustments.
SIGNIFICANT CUSTOMERS AND CONCENTRATIONS OF CREDIT RISK The Company's trade
receivables are primarily from rail and transit industry original equipment
manufacturers, railroad carriers and commercial companies that utilize rail cars
in their operations, such as utility and chemical companies. No one customer
accounted for more than 10% of the Company's sales in 1998, 1997 or 1996. The
allowance for doubtful accounts was $2.9 million and $2.0 million as of December
31, 1998 and 1997, respectively.
EMPLOYEES As of December 31, 1998, approximately 28% of the Company's workforce
is covered by collective bargaining agreements. These agreements are generally
effective through 2001 and 2002.
RECENT ACCOUNTING PRONOUNCEMENTS In June 1998, the Financial Accounting
Standards Board issued Statement of Accounting Standards No. 133, "Accounting
for Derivative Instruments and Hedging Activities". The Statement establishes
accounting and reporting standards requiring that every derivative instrument be
measured at its fair value and the changes in fair value be recorded currently
in earnings unless specific hedge accounting criteria are met. Statement No. 133
is effective for fiscal years beginning after June 15, 1999, and accordingly,
the Company anticipates adopting this standard January 1,
31
<PAGE> 33
2000. Management continues to evaluate the impact the standard will have on
results of operations and financial condition.
3. ACQUISITIONS
On October 5, 1998, the Company purchased the railway electronics business
(Rockwell Railroad Electronics) (RRE) of Rockwell Collins, Inc., a wholly owned
subsidiary of Rockwell International Corporation, for approximately $80 million
in cash. The purchase was initially financed by obtaining additional term debt
of $40 million through an amendment to the Company's existing credit facility,
an unsecured bank loan of $30 million and additional borrowings under the
Company's revolving credit agreement. RRE is a leading manufacturer and supplier
of mobile electronics (display and positioning systems), data communications,
and electronic braking systems for the railroad industry and its operations are
in the United States. Revenues of the acquired business for its fiscal year
ended September 30, 1998 were approximately $46 million. The acquisition was
accounted for under the purchase accounting method and, accordingly, its results
are included in WABCO's consolidated financial statements since the date of
acquisition.
The excess of the purchase price over the fair value of the net assets acquired
was approximately $63 million and was allocated to goodwill. This amount is
based upon an independent appraisal and may decrease as a result of adjustments
to purchase price.
The following unaudited pro forma results of operations, including the effects
of pro forma adjustments related to the acquisition of Rockwell Railroad
Electronics have been prepared as if this transaction had occurred at the
beginning of 1997:
<TABLE>
<CAPTION>
(UNAUDITED)
DOLLARS IN THOUSANDS, YEAR ENDED DECEMBER 31
EXCEPT PER SHARE 1998 1997
- -------------------------------------------------
<S> <C> <C>
Net sales $707,840 $597,948
Income before
extraordinary income 41,414 32,575
Net income 38,099 32,575
Diluted earnings per
share
As reported 1.62 1.42
Pro forma 1.48 1.24
- -------------------------------------------------
</TABLE>
The pro forma financial information above does not purport to present what the
Company's results of operations would have been if the acquisition of RRE had
actually occurred on January 1, 1997, or to project the Company's results of
operations for any future period, and does not reflect anticipated cost savings
through the combination of these operations.
In the past three years, the Company also completed the following acquisitions:
i) The October 1998 acquisition of the United States railway service center
business of Comet Industries, Inc., for $13.2 million, financed through
the issuance of $12.2 million of promissory notes. Annual revenue for its
most recent fiscal year was approximately $20 million.
ii) On July 30, 1998, purchased assets and assumed certain liabilities of
U.S.-based Lokring Corporation, for $5.1 million in cash. Lokring
develops, manufactures and markets patented non-welded connectors and
sealing products for railroad and other industries. Annual sales in 1997
were approximately $10 million.
iii) Acquired in April 1998, 100% of the stock of RFS (E) Limited ("RFS") of
England, for approximately $10.0 million including the assumption of
certain debt. RFS is a leading provider of vehicle overhaul, conversion
and maintenance services to Britain's railway industry. Annual revenue for
its most recent fiscal year was approximately $27.5 million.
iv) Acquired in April 1998, the transit coupler product line of Hadady
Corporation located in the United States for $4.6 million in cash.
v) In October 1997, the Company purchased the rail products business and
related assets of Sloan Valve Company for $2.5 million.
vi) Effective July 31, 1997 the Company acquired 100% of the stock of H.P.
s.r.l. ("HP"), an Italian transit company, for a total purchase price of
$5.8 million, which included the assumption of $2.3 million in debt. HP is
located in Sassuolo, Italy and is a leading supplier of door controls for
transit rail cars and buses in the Italian market. Annual revenues
approximated $9 million.
vii) Acquired in May 1997 Stone Safety Service Corporation, New Jersey, and
Stone U.K. Limited ("Stone"), a supplier of transit air conditioning
equipment and in June 1997, the Company acquired the heavy rail air
conditioning business of Thermo King Corporation ("Thermo King") from
Westinghouse Electric. The aggregate purchase price for the Stone and
Thermo King acquisitions was approximately
32
<PAGE> 34
$7.7 million. Annual revenues of the these acquisitions prior to purchase
were approximately $30 million.
viii) On September 19, 1996, the Company purchased the Vapor Group ("Vapor") for
approximately $63.9 million in cash. Vapor is the leading manufacturer of
door controls for transit rail cars and metropolitan buses in the United
States. Annual revenues for its most recent fiscal year prior to the
acquisition totaled $65 million.
ix) In January 1996, the Company acquired Futuris Industrial Products Pty.
Ltd., an Australian molded products manufacturer, for approximately $15
million. Annual revenues prior to acquisition were approximately $10.5
million.
All of these other acquisitions were accounted for under the purchase method.
Accordingly, the results of operations of the applicable acquisition are
included in the Company's financial statements prospectively from the
acquisition date. The excess of the purchase price over the fair value of net
assets was allocated to goodwill. Such recorded amounts totaled approximately
$24 million, $7 million and $17 million, in 1998, 1997 and 1996, respectively.
4. INTANGIBLES
Intangible assets of the Company, other than goodwill, consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31
DOLLARS IN THOUSANDS 1998 1997
- ---------------------------------------------
<S> <C> <C>
Patents, tradenames and
trademarks, net of
accumulated amortization
of $22,874 and $19,768
(4-40 years) $35,251 $35,942
Covenants not to compete,
net of accumulated
amortization of $10,144
and $9,333 (5 years) 6,092 1,133
Other intangibles, net of
accumulated amortization
of $7,356 and $7,052
(3-7 years) 4,678 5,391
-----------------
$46,021 $42,466
- ---------------------------------------------
</TABLE>
At December 31, 1998 and 1997, goodwill, net of accumulated amortization of $7.7
million and $5.4 million, respectively, totaled $151.7 million and $66.6
million, respectively. The Company evaluates the recoverability of intangible
assets, including goodwill, at each balance sheet date based on forecasted
future operations, undiscounted cash flows and other subjective criteria. Based
upon historical information, management believes that the carrying amount of
these intangible assets will be realizable over the respective amortization
periods.
5. LONG-TERM DEBT
Long-term debt consisted of the following:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31
-------------------
DOLLARS IN THOUSANDS 1998 1997
<S> <C> <C>
- ---------------------------------------------
Credit Agreement
Revolving credit $105,555 $100,880
Term loan 202,500 145,500
9 3/8% Senior notes due
June 5, 2005 100,000 100,000
Unsecured credit
facility 30,000
Pulse note 16,990 16,990
Comet notes 10,200
Other 2,572 1,564
-------------------
Total 467,817 364,934
Less-current
portion 30,579 32,600
-------------------
Long-term portion $437,238 $332,334
- ---------------------------------------------
</TABLE>
Credit Agreement
In June 1998, the Company refinanced its credit facility with a consortium of
commercial banks and amended it in October 1998 in connection with the Rockwell
acquisition (as amended, the "Credit Agreement"). The Credit Agreement provides
for an aggregate credit facility of $350 million, consisting of up to $170
million of June 1998 term loans, up to $40 million of September 1998 term loans,
and up to $140 million of revolving loans. In addition, the Credit Agreement
provides for swingline loans of up to an aggregate amount of $5 million, and for
the issuance of letters of credit in an aggregate face amount of up to $50
million. Swingline loans and the issuance of letters of credit will reduce the
amount of revolving loans which may be incurred under the revolving credit
facility.
At December 31, 1998, the Company had available borrowing capacity, net of
letters of credit, of approximately $12 million. The Company repaid a portion of
its borrowings under the Credit Agreement in January 1999 with proceeds of the
offering of $75 million of 9 3/8 Senior Notes, as further described
33
<PAGE> 35
below, resulting in increased borrowing capacity of $47 million. (See Note 19).
The Credit Agreement limits the Company with respect to declaring or making cash
dividend payments and prohibits the Company from declaring or making other
distributions whether in cash, property, securities or a combination thereof,
with respect to any shares of the Company's capital stock subject to certain
exceptions, including an exception pursuant to which the Company will be
permitted to pay cash dividends on its Common Stock in any fiscal year in an
aggregate amount up to $15 million minus the aggregate amount of prepayments of
the Pulse note during such fiscal year so long as no default in the payment of
interest or fees has occurred thereunder. The Credit Agreement contains various
other covenants and restrictions including, without limitation, the following: a
limitation on the incurrence of additional indebtedness; a limitation on
mergers, consolidations and sales of assets and acquisitions (other than mergers
and consolidations with certain subsidiaries, sales of assets in the ordinary
course of business, and acquisitions for which the consideration paid by the
Company does not exceed $50 million individually or $150 million in the
aggregate); a limitation on liens; a limitation on sale and leasebacks; a
limitation on investments, loans and advances; a limitation on certain debt
payments; a limitation on capital expenditures; a minimum interest expense
coverage ratio; and a maximum leverage ratio. All debt incurred under the Credit
Agreement is secured by substantially all of the assets of the Company and its
domestic subsidiaries and is guaranteed by the Company's domestic subsidiaries.
The Credit Agreement contains customary events of default, including payment
defaults, failure of representations to be true in any material respect,
covenant defaults, defaults with respect to other indebtedness of the Company,
bankruptcy, certain judgments against the Company, ERISA defaults and "change of
control" of the Company.
Credit Agreement borrowings bear variable interest rates indexed to common
indexes such as LIBOR. The weighted-average contractual interest rate on Credit
Agreement borrowings was 6.71% on December 31, 1998. To reduce the impact of
interest rate changes on a portion of this variable-rate debt, the Company
entered into interest rate swaps which effectively convert a portion of the debt
from variable to fixed-rate borrowings during the term of the swap contracts. On
December 31 1998, the notional value of interest rate swaps outstanding totaled
$50 million and effectively changed the Company's interest rate from a variable
rate to a fixed rate of 7.09%. The interest rate swap agreements mature in 2000
and 2001. The Company is exposed to credit risk in the event of nonperformance
by the counterparties. However, since only the cash interest payments are
exchanged, exposure is significantly less than the notional amount. The
counterparties are large financial institutions and the Company does not
anticipate nonperformance.
Scheduled term loan principal repayments required under the Credit Agreement as
of December 31, 1998 are as follows:
<TABLE>
<CAPTION>
Dollars in millions
- --------------------------------------------
<S> <C>
1999 $ 20.0
2000 32.5
2001 40.0
2002 50.0
2003 60.0
------
$202.5
- --------------------------------------------
</TABLE>
9 3/8% Senior Notes Due June 2005
In June 1995 the Company issued $100 million of 9 3/8% Senior Notes due 2005
(the "Existing Notes"). In January 1999, the Company issued an additional $75
million of 9 3/8% Senior Notes due 2005 (the "Additional Notes"; the Existing
Notes and the Additional Notes are collectively, the "Notes"). See "Subsequent
Event" Note 19.
The terms of the Existing Notes and the Additional Notes are substantially the
same, and the Existing Notes and the Additional Notes were issued pursuant to
indentures that are substantially the same. The Notes bear interest at the rate
of 9 3/8% and mature in June 2005. The net proceeds of the Existing Notes were
used to prepay term loans outstanding under the then existing credit agreement.
The net proceeds of the Additional Notes were used to repay the unsecured credit
facility and to reduce revolving credit borrowings.
The Notes are senior unsecured obligations of the Company and rank pari passu in
right of payment with all existing and future indebtedness under (i) capitalized
lease obligations, (ii) the Credit Agreement, (iii) indebtedness of the Company
for money borrowed and (iv) indebtedness evidenced by notes, debentures, bonds
or other similar instruments for the payment of which the Company is responsible
or
34
<PAGE> 36
liable unless, in the case of clause (iii) or (iv), in the instrument creating
or evidencing the same or pursuant to which the same is outstanding, it is
provided that such obligations are subordinate in right of payment to the Notes.
Unsecured Credit Facility
In October 1998, the Company obtained a $30 million unsecured credit facility
from a group of commercial banks for the purpose of financing the Rockwell
acquisition. At December 31, 1998, the interest rate on the note was 9.75% per
annum. In January 1999, this facility was repaid with proceeds of the Additional
Note offering. See "Subsequent Event" Note 19.
Pulse Note
As partial payment for the Pulse acquisition, the Company issued a $17.0 million
note due January 31, 2004. Interest is payable semiannually and accrues at 9.5%
until February 1, 2001; and from February 1, 2001 until January 31, 2004,
interest will accrue at the prime rate charged by Chase Manhattan Bank on
December 31, 2000 plus 1%.
Comet Notes
In connection with the Comet acquisition, the Company issued notes totaling
$12.2 million, of which unsecured notes totaling $6.2 million were delivered by
the Company and a note in the amount of $6 million was delivered by a subsidiary
of the Company and secured by the acquired assets. The notes bore interest at
the rate of 10% per annum and were scheduled to mature on October 8, 1999. These
notes were repaid in January 1999 (See Note 19).
Capitalized debt issuance costs of $4.8 million, net of accumulated
amortization, are being amortized over the terms of the borrowings.
35
<PAGE> 37
6. EMPLOYEE BENEFIT PLANS
<TABLE>
<CAPTION>
PENSION PLANS POSTRETIREMENT PLAN
Dollars in thousands ------------------- -------------------
AS OF OR FOR THE YEAR ENDED DECEMBER 31 1998 1997 1998 1997
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CHANGE IN BENEFIT OBLIGATION
Benefit (obligation) at beginning of year......... $(39,424) (34,126) $(17,750) $(14,980)
Service cost...................................... (1,363) (1,176) (300) (289)
Interest cost..................................... (2,904) (2,720) (1,273) (1,226)
Participant contribution.......................... (32) (35)
Actuarial gain (loss)............................. (4,796) (3,964) (1,348) (1,526)
Plan amendments................................... (1,480) (1,025)
Benefits paid..................................... 2,725 2,797 392 271
Effect of currency rate changes................... 1,748 825
------------------------------------------
Benefit (obligation) at end of year............ $(45,526) $(39,424) $(20,279) $(17,750)
------------------------------------------
------------------------------------------
CHANGE IN PLAN ASSETS
Fair value of plan assets at beginning of year.... $ 37,884 $ 33,702 -- --
Actual return on plan assets...................... 5,335 5,519
Employer contribution............................. 3,688 2,550
Participant contribution.......................... 32 35
Administrative expenses........................... (116) (213)
Benefits paid..................................... (2,725) (2,797)
Effect of currency rate changes................... (1,741) (912)
------------------------------------------
Fair value of plan assets at end of year....... $ 42,357 $ 39,884 -- --
------------------------------------------
------------------------------------------
FUNDED STATUS
Funded status at year end......................... $ (3,169) $ (1,540) $(20,279) $(17,750)
Unrecognized net actuarial (gain) loss............ 2,111 (261) 3,960 2,856
Unrecognized prior service cost................... 3,151 2,162 (221) (290)
Unrecognized transition obligation................ 302 324
------------------------------------------
Prepaid (accrued) benefit cost................. $ 2,093 $ 361 $(16,238) $(14,860)
------------------------------------------
------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PENSION PLANS POSTRETIREMENT PLAN
--------------------------- ------------------------
1998 1997 1996 1998 1997 1996
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET PERIODIC BENEFIT COST
Service cost........................... $ 1,505 $ 1,305 $ 1,054 $ 340 $ 289 $ 267
Interest cost.......................... 2,904 2,675 2,394 1,351 1,226 935
Expected return on assets.............. (3,717) (4,463) (2,482)
Net amortization/deferrals............. 755 1,865 302 195 155 13
Special event.......................... 696
-------------------------------------------------------
Net periodic benefit cost........... $ 1,447 $ 1,382 $ 1,964 $1,886 $1,670 $1,215
-------------------------------------------------------
-------------------------------------------------------
ASSUMPTIONS
Discount rate.......................... 6.75% 7.25% 8.50% 6.75% 7.25% 7.50%
Expected rate of return................ 10.00 9.25 9.25 -- -- --
- --------------------------------------------------------------------------------------------------
</TABLE>
36
<PAGE> 38
The Company sponsors defined benefit pension plans which cover substantially all
union employees and certain non-union Canadian employees and provide pension
benefits of stated amounts for each year of service of the employee. In
connection with the establishment of the ESOP (see Note 7) in January 1995, the
pension plan for U.S. salaried employees was modified to eliminate any credit
(or accrual) for current service costs for any future periods, effective March
31, 1995. The Company's 401(k) savings plan was also amended to provide for the
Company's future matching contributions to be made to the ESOP in the form of
the Company's Common Stock. The Company's funding methods, which are primarily
based on the ERISA requirements, differ from those used to recognize pension
expense, which is primarily based on the projected unit credit method, in the
accompanying financial statements. Within the analysis above, the pension plan
for U.S. salaried employees has a benefit obligation of $22,338 and plan assets
of $20,708 as of December 31, 1998. In 1996, as the result of an early
retirement package offered to certain union employees, the Company incurred a
charge of $696,000 reflected as a special event.
In addition to providing pension benefits, the Company had provided certain
unfunded postretirement health care and life insurance benefits for
substantially all U.S. employees. In conjunction with the establishment of the
ESOP in January 1995 (see Note 7), the postretirement health care and life
insurance benefits for salaried employees were modified to discontinue benefits
for employees who had not attained the age of 50 by March 31, 1995. The Company
is not obligated to pay health care and life insurance benefits to individuals
who had retired prior to 1990.
A one percentage point increase in the assumed health care cost trend rates for
each future year increases annual postretirement benefit expense by $290,832 and
the accumulated postretirement benefit obligation by $3.3 million. A one
percentage point decrease in the assumed health care cost trend rates for each
future year decreases annual postretirement benefit expense by $230,163 and the
accumulated postretirement benefit obligation by $2.6 million.
7. EMPLOYEE STOCK OWNERSHIP PLAN AND TRUST (ESOP)
Effective January 31, 1995, the Company established the ESOP to enable
participating employees to obtain ownership interests in the Company. Employees
eligible to participate in the ESOP primarily include the salaried U.S.
employees and, as described in Note 6, the ESOP contributions are intended to
supplement or replace other salaried employee benefit plans.
In connection with the establishment of the ESOP, the Company made a $140
million loan to the ESOP, which was used to purchase 9,336,000 shares of the
Company's outstanding common stock. The ESOP loan initially had a term of 50
years with interest at 8.5% and was collateralized by the shares purchased by
the ESOP. Company contributions to the ESOP will be used to repay the ESOP
loan's annual debt service requirements of approximately $12 million. The
Company is obligated to contribute amounts sufficient to repay the ESOP loan.
The ESOP uses such Company contributions to repay the ESOP loan. Approximately
187,000 shares were to be allocated annually to participants over a 50-year
period. These transactions occur simultaneously and, for accounting purposes,
offset each other. Unearned ESOP shares of $128.5 million at December 31, 1998,
is reflected as a reduction in shareholders' equity in the accompanying
financial statements and will be amortized to compensation expense coterminous
with the ESOP loan. Total compensation expense recognized for allocated ESOP
shares were $4.5 million, $3.2 million and $2.9 million in 1998, 1997 and 1996,
respectively.
8. INCOME TAXES
The provision for income taxes consisted of the following:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
DOLLARS IN THOUSANDS 1998 1997 1996
- --------------------------------------------------
<S> <C> <C> <C>
Current taxes
Federal $19,629 $18,490 $17,498
State 1,330 1,849 2,138
Foreign 10,537 6,494 2,372
---------------------------
31,496 26,833 22,008
Deferred taxes
Federal (1,964) (1,375) (2,432)
State (282) (137) (278)
Foreign (1,689) (1,994) 1,625
---------------------------
(3,935) (3,506) (1,085)
---------------------------
Total provision $27,561 $23,327 $20,923
- --------------------------------------------------
</TABLE>
The 1998 provision excludes a $2.0 million income tax effect on the
extraordinary loss (see Note 9)
37
<PAGE> 39
related to the early extinguishment of certain debt obligations.
The components of income before taxes on income for U.S. and foreign operations,
primarily Canada, were $49.9 million and $22.6 million, respectively, for 1998,
$47.9 million and $12.7 million, respectively, for 1997, and $42.4 million and
$11.3 million, respectively, for 1996.
A reconciliation of the United States federal statutory income tax rate to the
effective income tax rate is provided below:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1998 1997 1996
<S> <C> <C> <C>
- ------------------------------------------------
U. S. federal statutory
rate 35.0% 35.0% 35.0%
State taxes 2.1 2.7 3.5
Foreign .9 .8 .5
-----------------------
Effective rate 38.0% 38.5% 39.0%
- ------------------------------------------------
</TABLE>
The sources of deferred income taxes were as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
DOLLARS IN THOUSANDS 1998 1997 1996
<S> <C> <C> <C>
- --------------------------------------------------
Deferred debt costs $(1,673)
ESOP (1,513) $(1,150) $ (919)
Depreciation (964) 176 782
Postretirement
benefits (593) (851) (171)
Inventory (350) 451 (1,450)
Accrued warranty 1,157 (1,697) (497)
Pension 31 958 (319)
Other liabilities and
reserves (30) (1,393) 1,489
---------------------------
Deferred tax
benefits $(3,935) $(3,506) $(1,085)
- --------------------------------------------------
</TABLE>
Components deferred tax assets and liabilities were as follows:
<TABLE>
<CAPTION>
DECEMBER 31
DOLLARS IN THOUSANDS 1998 1997
<S> <C> <C>
- ---------------------------------------------
ESOP $ 4,539 $ 3,026
Postretirement benefits 3,508 2,915
Inventory 3,461 3,111
Accrued warranty 3,021 4,178
Deferred debt costs 1,673
Pension 749 780
Depreciation (7,458) (8,422)
Other 50 20
-----------------
Net deferred tax asset $ 9,543 $ 5,608
- ---------------------------------------------
</TABLE>
9. EXTRAORDINARY ITEM
In June 1998, the Company refinanced its credit agreement and subsequently
amended the agreement in October 1998. This resulted in a write off of
previously deferred financing costs of approximately $3.3 million, net of tax,
($.13 per diluted share) which has been reported as an extraordinary item.
10. EARNINGS PER SHARE
The computation of earnings per share is as follows:
<TABLE>
<CAPTION>
DOLLARS IN THOUSANDS, YEAR ENDED DECEMBER 31
EXCEPT PER SHARE 1998 1997 1996
<S> <C> <C> <C>
- -------------------------------------------------------
BASIC
Income before
extraordinary item
applicable to common
shareholders $44,969 $37,263 $32,725
Divided by
Weighted average shares
outstanding 25,081 25,693 28,473
Basic earnings per share
before extraordinary
item $1.79 $1.45 $1.15
- -------------------------------------------------------
DILUTED
Income before
extraordinary item
applicable to common
shareholders $44,969 $37,263 $32,725
Divided by sum of
Weighted average shares
outstanding 25,081 25,693 28,473
Conversion of dilutive
stock options 627 480
-------------------------
Diluted shares
outstanding 25,708 26,173 28,473
Diluted earnings per
share before
extraordinary item $1.75 $1.42 $1.15
- -------------------------------------------------------
</TABLE>
Options to purchase .2 million, .5 million and 2.2 million shares of common
stock were outstanding in 1998, 1997, and 1996, respectively, but were not
included in the computation of diluted earnings per share because the options'
exercise price exceeded the average market price of the common shares.
11. STOCK-BASED COMPENSATION PLANS
STOCK OPTIONS Under the 1995 Stock Incentive Plan, as amended in 1998, the
Company may grant options to employees of Westinghouse Air Brake Company and
Subsidiaries for up to 4.7 million shares of Westinghouse Air Brake Company
Common Stock. The 1998 amendment increased the number of stock options available
for grant, from 3.1 million to 4.7 million. Options to purchase approximately
3.8 million shares of Westinghouse Air Brake Company Common Stock under the plan
have been granted to employees of Westinghouse Air Brake Company at, or in
excess of, fair market value at the date of grant.
38
<PAGE> 40
Generally, the options become exercisable over three and five-year vesting
periods and expire ten years from the date of grant.
As part of a long-term incentive program, in 1998 and 1996 the Company granted
options to purchase up to 500,020 and 684,206 shares, respectively, to certain
executives under the 1995 Stock Incentive Plan. The option price per share is
the greater of the market value of the stock on the date of grant or $20 and
$14, respectively. The options vest 100% after eight years and are subject to
accelerated vesting after three years if the Company achieves certain earnings
targets as established by the compensation committee of the board of directors.
The Company also has a nonemployee directors stock option plan under which
100,000 shares of common stock are reserved for issuance at a price not less
than $14. Through year-end 1998, the Company granted nonstatutory stock options
to nonemployee directors to purchase a total of 35,000 shares.
EMPLOYEE STOCK PURCHASE PLAN In 1998, the Company adopted an employee stock
purchase plan (ESPP). The ESPP has 500,000 shares available for issuance.
Participants purchase the Corporation's Common Stock at 85% of the lesser of
fair market value on the first or last day of each offering period. Shares
issued pursuant to the ESPP in 1998 were 6,998 shares and the average purchase
price per share was $16.575.
The Company applies APB 25 and related interpretations in accounting for its
stock-based compensation plans. Accordingly, no compensation expense has been
recognized under these plans. Had compensation expense for these plans been
determined based on the fair value at the grant dates for awards, the Company's
net income and earnings per share would be as set forth in the following table.
For purposes of pro forma disclosures, the estimated fair value is amortized to
expense over the options' vesting period.
<TABLE>
<CAPTION>
DOLLARS IN THOUSANDS, YEAR ENDED DECEMBER 31
EXCEPT PER SHARE 1998 1997 1996
<S> <C> <C> <C>
- --------------------------------------------------
Net income
As reported $41,654 $37,263 $32,725
Pro forma 38,324 34,007 31,117
Diluted earnings per
share
As reported $ 1.62 $ 1.42 $ 1.15
Pro forma 1.49 1.30 1.09
- --------------------------------------------------
</TABLE>
Since compensation expense associated with option grants would be recognized
over the vesting period, the initial impact of applying SFAS No. 123 on pro
forma net income is not representative of the potential impact on pro forma net
income in future years. In each subsequent year, pro forma compensation expense
would include the effect of recognizing a portion of compensation expense from
multiple awards.
For purposes of presenting pro forma results, the fair value of each option
grant is estimated on the date of grant using the Black-Scholes option-pricing
model with the following weighted-average assumptions:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1998 1997 1996
<S> <C> <C> <C>
- -------------------------------------------------
Dividend yield .20% .23% .32%
Risk-free interest rate 4.56 5.80 6.25
Stock price volatility 29.10 29.22 30.43
Expected life (years) 5.0 5.3 7.3
- -------------------------------------------------
</TABLE>
The Black-Scholes option valuation model was developed for use in estimating
fair value of traded options, which are significantly different than employee
stock options. Although this valuation model is an acceptable method for use in
presenting pro forma information, because of the differences in traded options
and employee stock options, the Black-Scholes model does not necessarily provide
a single measure of the fair value of employee stock options.
39
<PAGE> 41
A summary of the Company's stock option activity and related information for the
years ended December 31 follows:
<TABLE>
<CAPTION>
1998 1997 1996
--------------------- --------------------- ---------------------
WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE
EXERCISE EXERCISE EXERCISE
OPTIONS PRICE OPTIONS PRICE OPTIONS PRICE
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Beginning of year.................... 2,778,443 $14.64 2,222,456 $13.63 1,279,500 $14.00
Granted.............................. 813,520 20.99 748,126 17.84 958,956 13.14
Exercised............................ (169,025) 14.39 (135,139) 13.75
Canceled............................. (134,951) 15.86 (57,000) 14.00 (16,000) 14.00
---------- ---------- ----------
End of year.......................... 3,287,987 16.29 2,778,443 14.64 2,222,456 13.63
========== ========== ==========
Exercisable at end of year........... 1,148,134 671,971 332,992
Available for future grant........... 1,107,849 186,418 877,544
Weighted average fair value of
options granted during the year.... $8.98 $8.07 $4.05
- ------------------------------------------------------------------------------------------------------------
</TABLE>
Exercise prices for options outstanding as of December 31, 1998 ranged from
$11.00 to $27.66 The weighted-average remaining contractual life of those
options is 8 years.
RESTRICTED STOCK AWARD In 1998, the Company granted 15,000 shares of restricted
Common Stock to an officer. The shares vest according to a vesting schedule over
a three-year period. The grant date market value totaled $372 thousand and is
being amortized to expense over the vesting period. Unamortized compensation is
recorded as a component of shareholders' equity.
EXECUTIVE RETIREMENT PLAN Under the 1997 Executive Retirement Plan, the Company
may award its Common Stock to certain employees including certain executives who
do not participate in the ESOP. Through December 31, 1998, 19,555 shares have
been awarded with a fair market value of approximately $400 thousand.
With respect to the Restricted Stock Award and the Executive Retirement Plan,
compensation expense is recognized in the consolidated statement of operations.
12. OPERATING LEASES
Minimum annual rentals payable under noncancelable leases in each of the next
five years and beyond are as follows:
<TABLE>
<CAPTION>
Dollars in millions
- --------------------------------------------
<S> <C>
1999 $ 3.2
2000 2.6
2001 2.2
2002 1.2
2003 .7
Thereafter 2.1
-----
$12.0
- --------------------------------------------
</TABLE>
Rental expense under all leases was approximately $3.8 million, $3.3 million and
$2.8 million for the years ended December 31, 1998, 1997 and 1996, respectively.
Operating leases relate principally to facilities, transportation equipment and
communication systems.
13. STOCK REPURCHASE
In March 1997, the Company repurchased from Scandinavian Incentive Holdings,
B.V., ("SIH"), 4 million shares of the Company's Common Stock for an aggregate
purchase price of $44 million plus fees and expenses of approximately $2 million
(the "Redemption"). The Redemption was effected pursuant to a Redemption
Agreement (the "Redemption Agreement") dated as of March 5, 1997 among the
Company, SIH and Incentive AB, the sole shareholder of SIH. Concurrently
therewith, SIH sold its remaining 6 million shares of WABCO Common Stock to
investors consisting of Vestar Equity Partners, L.P., Charlesbank Capital
Partners, LLC, f/k/a Harvard
40
<PAGE> 42
Private Capital Holdings, Inc., American Industrial Partners Capital Fund II,
L.P. and certain members of management of the Company (the "Management
Purchasers") for a purchase price of $11 per share in cash, pursuant to a Stock
Purchase Agreement dated as of March 5, 1997, which sale was effective as of
March 31, 1997 (the "SIH Purchase").
To finance the Redemption, the Company amended its Credit Agreement to increase
the revolving credit availability by $15 million (from $125 million to $140
million) and to obtain a waiver of the requirement to make a prepayment in an
aggregate principal amount equal to 50% of excess cash flow for 1996, or
approximately $11.5 million. The Company obtained consents from record owners as
of March 3, 1997 of the Existing Notes to certain amendments to a covenant
contained in the Indenture dated as of June 20, 1995 among the Company, as
issuer, and The Bank of New York, as trustee, pursuant to which the Notes were
issued (the "Indenture"). The Company borrowed $46 million to fund the
Redemption and related expenses.
The following presents the Company's results for the year ended December 31,
1997 on a pro forma basis as if the stock repurchase had occurred on January 1,
1997:
<TABLE>
<CAPTION>
IN THOUSANDS, EXCEPT PER SHARE REPORTED PRO FORMA
- ----------------------------------------------------
<S> <C> <C>
Net income $37,263 $36,774
Basic earnings per share 1.45 1.49
Diluted earnings per share 1.42 1.46
Average shares used for Basic 25,693 24,718
Diluted 26,173 25,198
- ----------------------------------------------------
</TABLE>
14. STOCKHOLDERS' AND VOTING TRUST AGREEMENTS
As of December 31, 1998, the approximate ownership interests in the Company's
common stock are held by management and the ESOP (58%), the investors referred
to in Note 13 (17%), and all others including public shareholders (25%). The
investors referred to in Note 13 and certain members of senior management
purchased 6 million shares of WABCO common stock from SIH. The seller is a
successor in interest to Incentive AB (a Swedish corporation) which acquired
Investment AB Cardo, an original equity owner at the time of the 1990
acquisition of the Railway Products Group of American Standard, Inc. ("1990
Acquisition"). A Stockholders Agreement exists between management and the
investors referred to in Note 13 that provides for, among other things, the
composition of the Board of Directors as long as certain minimum stock ownership
percentages are maintained, restrictions on the disposition of shares and rights
to request the registration of the shares.
The active original management owners have entered into an Amended Voting
Trust/Disposition Agreement effective December 13, 1995, as amended. The
agreement provides for, among other matters, the stock to be voted as one block
and restrictions on the sale or transfer of such stock. The agreement expires on
January 1, 2000 and can be terminated by an affirmative vote of two-thirds of
the stock shares held by the trust. In connection with this Voting Trust, the
Company has entered into an Indemnification Agreement with the trustees, which
is covered by the Company's directors and officers liability insurance.
The shares held by the ESOP (established January 31, 1995) are subject to the
terms of the related ESOP Loan Agreement, Employee Stock Ownership Trust
Agreement, Employee Stock Ownership Plan and the Pledge Agreement. The ESOP is
further described in Note 7.
15. PREFERRED STOCK
The Company's authorized capital stock includes 1,000,000 shares of preferred
stock. The Board of Directors has the authority to issue the preferred stock and
to fix the designations, powers, preferences and rights of the shares of each
such class or series, including dividend rates, conversion rights, voting
rights, terms of redemption and liquidation preferences, without any further
vote or action by the Company's shareholders. The rights and preferences of the
preferred stock would be superior to those of the common stock. At December 31,
1998 and 1997 there was no preferred stock issued or outstanding.
16. COMMITMENTS AND CONTINGENCIES
Under the terms of the purchase agreement and related documents for the 1990
Acquisition, American Standard, Inc. ("ASI"), has indemnified the Company for
certain items including, among others, environmental claims. The indemnification
provisions of the agreement expire at various dates through 2000. If ASI was
unable to honor or meet these indemnifications, the Company would be responsible
for such items. In the opinion of management, ASI currently has the ability to
meet its indemnification
41
<PAGE> 43
obligations. ASI has not disputed any coverage or reimbursement under these
provisions.
The Company, through one of its operating subsidiaries, has been named, along
with other parties, as a Potentially Responsible Party (PRP) under the North
Carolina Inactive Sites Response Act because of an alleged release or threat of
release of hazardous substances at the "Old James Landfill" site in North
Carolina. The Company believes that any costs associated with the cleanup
activities at this site which it may be held responsible for, if any, are
covered by (a) the ASI indemnification referred to above, as ASI previously
owned 50% of the subsidiary and (b) a related insurance policy which expires
January 2002 for environmental claims provided by the other former 50% owner of
the involved operating subsidiary. The Company has submitted a claim under the
policy for any costs of clean up imposed on or incurred by the Company in
connection with the "Old James Landfill" and Rocky Mountain International
Insurance, Ltd. has acknowledged coverage under the policy, subject to the
stated policy exclusions. In addition, management believes that such costs, if
any, attributable to the Company will not be material and, therefore, has not
established a reserve for such costs.
The Company's operations do not use and its products do not contain any
asbestos. The operations acquired by the Company from ASI discontinued the use
of asbestos in 1980. The Company is named as a codefendant in asbestos claims
filed by third parties against ASI relating to events occurring prior to 1981
(which is significantly prior to the 1990 acquisition). These claims are covered
by the indemnification agreement and the insurance policy referred to above. ASI
has taken complete responsibility in administering, defending and settling the
claims. The Company is not involved with, nor has it incurred any costs related
to, these claims. ASI has not claimed that the Company has any responsibility
for these cases. Management believes that these claims are not related to the
Company and that such costs, if any, attributable to the Company and will not be
material; therefore, the financial statements accordingly do not reflect any
costs or reserves for such claims.
In the opinion of management, based on available information, environmental
matters and asbestos claims do not presently represent any material
contingencies to the Company.
On February 12, 1999, GE Harris Railway Electronics, LLC and GE Harris Railway
Electronic Services, LLC (collectively, "GE Harris") brought suit against the
Company for alleged patent infringement and unfair competition related to a
communications system installed in one of the Company's products. GE Harris is
seeking to prohibit the Company from future infringement and is seeking an
unspecified amount of money damages to recover, in part, royalties. While this
lawsuit is in the earliest stages, the Company believes the technology developed
by the Company does not infringe on the GE Harris patents.
From time to time the Company is involved in litigation relating to claims
arising out of its operations in the ordinary course of business. As of the date
hereof, the Company is involved in no litigation that the Company believes will
have a material adverse effect on its financial condition, results of operations
or liquidity. The Company historically has not been required to pay any material
liability claims.
17. SEGMENT INFORMATION
WABCO has three reportable segments -- Railroad Group, Transit Group and Molded
Products Group. The key factors used to identify these reportable segments are
the organization and alignment of the Company's internal operations, the nature
of the products and services and customer type. The business segments are:
RAILROAD GROUP consists of products geared to the production of freight cars and
locomotives, including braking control equipment and train coupler systems and
operating freight railroads. Revenues are derived from OEM and aftermarket sales
and from repairs and services.
TRANSIT GROUP consists of products for passenger transit vehicles (typically
subways, rail and busses) that include braking and monitoring systems, climate
control and door equipment that are engineered to meet individual customer
specifications. Revenues are derived from OEM and aftermarket sales as well as
from repairs and services.
MOLDED PRODUCTS GROUP include manufacturing and distribution of brake shoes and
other rubberized products. Revenues are generally derived from the aftermarket.
The Company evaluates its business segments' operating results based on income
from operations. Corporate activities include general corporate expenses,
elimination of intersegment transactions, interest income and expense and other
unallocated charges. Since certain administrative and other operating expenses
and other items have not been allocated to
42
<PAGE> 44
business segments, the results in the below tables are not necessarily a measure
computed in accordance with generally accepted accounting principles and may not
be comparable to other companies.
Segment financial information for 1998 is as follows:
<TABLE>
<CAPTION>
MOLDED
RAILROAD TRANSIT PRODUCTS CORPORATE
IN THOUSANDS GROUP GROUP GROUP ACTIVITIES TOTAL
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Sales to external customers....... $388,797 $211,801 $ 70,311 $670,909
Intersegment sales................ 14,137 1,276 8,805 $(24,218)
----------------------------------------------------------
Total sales.................. $402,934 $213,077 $ 79,116 $(24,218) $670,909
==========================================================
Income from operations............ $ 78,987 $ 16,047 $ 20,713 $(11,081) $104,666
Interest expense and other........ 32,136 32,136
----------------------------------------------------------
Income before income taxes and
extraordinary item........... $ 78,987 $ 16,047 $ 20,713 $(43,217) $ 72,530
==========================================================
Depreciation and amortization..... $ 7,401 $ 4,742 $ 1,952 $ 11,113 $ 25,208
Capital expenditures.............. 12,111 8,470 5,393 2,983 28,957
Working capital................... 75,516 41,856 9,762 (31,723) 95,411
Segment assets.................... 325,585 182,398 48,550 39,651 596,184
- ------------------------------------------------------------------------------------------------
</TABLE>
Segment financial information for 1997 is as follows:
<TABLE>
<CAPTION>
MOLDED
RAILROAD TRANSIT PRODUCTS CORPORATE
IN THOUSANDS GROUP GROUP GROUP ACTIVITIES TOTAL
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Sales to external customers....... $310,295 $189,541 $ 64,605 $564,441
Intersegment sales................ 8,977 1,247 7,323 $(17,547)
----------------------------------------------------------
Total sales.................. $319,272 $190,788 $ 71,928 $(17,547) $564,441
==========================================================
Income from operations............ $ 63,840 $ 19,907 $ 18,364 $(12,136) $ 89,975
Interest expense and other........ 29,385 29,385
----------------------------------------------------------
Income before income taxes and
extraordinary item........... $ 63,840 $ 19,907 $ 18,364 $(41,521) $ 60,590
==========================================================
Depreciation and amortization..... $ 6,284 $ 4,168 $ 2,029 $ 12,143 $ 24,624
Capital expenditures.............. 19,236 5,341 3,254 1,365 29,196
Working capital................... 42,485 29,553 8,401 (31,720) 48,719
Segment assets.................... 175,586 149,669 42,865 42,759 410,879
- ------------------------------------------------------------------------------------------------
</TABLE>
43
<PAGE> 45
Segment financial information for 1996 is as follows:
<TABLE>
<CAPTION>
MOLDED
RAILROAD TRANSIT PRODUCTS CORPORATE
IN THOUSANDS GROUP GROUP GROUP ACTIVITIES TOTAL
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Sales to external customers................. $294,021 $100,902 $58,589 $453,512
Intersegment sales.......................... 12,707 863 6,089 $(19,659)
------------------------------------------------------
Total sales............................ $306,728 $101,765 $64,678 $(19,659) $453,512
======================================================
Income from operations...................... $ 62,839 $ 12,865 $15,057 $(11,043) $ 79,718
Interest expense and other.................. 26,070 26,070
------------------------------------------------------
Income before income taxes and
extraordinary item..................... $ 62,839 $ 12,865 $15,057 $(37,113) $ 53,648
======================================================
Depreciation and amortization............... $ 5,893 $ 2,785 $ 1,563 $ 12,008 $ 22,249
Capital expenditures........................ 8,759 2,306 1,663 127 12,855
Working capital............................. 46,705 21,862 7,922 (28,313) 48,176
Segment assets.............................. 157,768 117,274 40,890 47,304 363,236
- ----------------------------------------------------------------------------------------------------
</TABLE>
The following geographic area data include trade revenues based on product
shipment destination and long-lived assets consists of plant, property and
equipment, net of depreciation, that are resident in their respective countries.
<TABLE>
<CAPTION>
SALES LONG-LIVED ASSETS
In thousands ------------------------------ -----------------------------
YEAR ENDED DECEMBER 31 1998 1997 1996 1998 1997 1996
<S> <C> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------
United States................... $486,010 $421,057 $333,405 $ 78,720 $ 71,030 $63,348
Canada.......................... 74,066 72,618 76,301 38,775 34,529 30,178
Other international............. 110,833 70,766 43,806 7,486 2,808 2,318
---------------------------------------------------------------
Total...................... $670,909 $564,441 $453,512 $124,981 $108,367 $95,844
- -------------------------------------------------------------------------------------------------
</TABLE>
18. FAIR VALUE OF FINANCIAL INSTRUMENTS
The estimated fair values of the Company's financial instruments approximate
their related carrying values, except for the following:
<TABLE>
<CAPTION>
1998 1997
------------- -------------
CARRY FAIR CARRY FAIR
DOLLARS IN MILLIONS VALUE VALUE VALUE VALUE
<S> <C> <C> <C> <C>
- ----------------------------------------------------
9 3/8% Senior Notes $(100) $(106) $(100) $(106)
Unsecured credit
facility (30) (30) -- --
Note Payable-Pulse
9 1/2% (17) (18) (17) (18)
Comet Notes (10) (10) -- --
Interest rate swaps -- (1) -- (1)
- ----------------------------------------------------
</TABLE>
Fair values of the fixed rate obligations were estimated using discounted cash
flow analyses. The fair value of the Company's interest rate swaps (see Note 5)
were based on dealer quotes and represent the estimated amount the Company would
pay to the counterparty to terminate the swap agreements.
19. SUBSEQUENT EVENT
In January 1999, WABCO completed the private placement of $75 million of 9 3/8%
Senior Notes which mature in 2005. The Senior Notes were issued at a premium
resulting in an effective rate of 8.5%. The issuance improved WABCO's financial
liquidity by i) using a portion of the proceeds to repay $30 million of debt
associated with the RRE acquisition that bore interest at 9.56%; ii) using a
portion of the proceeds to repay variable-rate revolving credit borrowings
thereby increasing amounts available under the revolving credit facility; and
iii) repay the remaining unpaid principal of $10.2 million from the Comet
acquisition. As result of the issuance, the Company will write-off previously
capitalized debt issuance costs of approximately $.02 per diluted share, in the
first quarter of 1999.
44
<PAGE> 46
20. SELECTED QUARTERLY FINANCIAL DATA
<TABLE>
<CAPTION>
(UNAUDITED)
-----------------------------------------
FIRST SECOND THIRD FOURTH
DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA QUARTER QUARTER QUARTER QUARTER
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1998
Net sales........................................... $158,136 $172,052 $160,476 $180,245
Operating income.................................... 24,755 26,084 25,181 28,646
Income before taxes................................. 17,513 18,871 17,493 18,653
Income before extraordinary item.................... 10,858 11,700 10,846 11,565
Net income.......................................... 10,858 8,970 10,846 10,980
Diluted earnings per common share before
extraordinary item................................ 0.42 0.45 0.42 0.45
Diluted earnings per common share................... 0.42 0.34 0.42 0.43
1997
Net sales........................................... $136,508 $138,066 $142,761 $147,106
Operating income.................................... 22,542 22,784 22,036 22,613
Income before taxes................................. 15,719 15,279 14,486 15,106
Net income.......................................... 9,589 9,320 8,836 9,518
Diluted earnings per common share................... 0.34 0.37 0.35 0.37
- -----------------------------------------------------------------------------------------------
</TABLE>
In the second quarter of 1998, the Company refinanced its credit agreement and
wrote-off deferred financing costs of approximately $2.7 million, net of tax, or
$.11 per diluted share. In the fourth quarter of 1998, the Company amended its
credit agreement and wrote-off deferred financing costs of approximately $.6
million, net of tax, or $.02 per diluted share. Such charges were recorded as
extraordinary items.
45
<PAGE> 47
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Company has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
WESTINGHOUSE AIR BRAKE COMPANY
By /s/ WILLIAM E. KASSLING
------------------------------------
William E. Kassling, Chief
Executive Officer
Date: February 18, 1999
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Company in the
capacities indicated and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE AND TITLE DATE
------------------- ----
<S> <C>
/s/ WILLIAM E. KASSLING February 18, 1999
- --------------------------------------------
William E. Kassling, Chairman of the Board,
and Chief Executive Officer
/s/ ROBERT J. BROOKS February 18, 1999
- --------------------------------------------
Robert J. Brooks, Chief Financial Officer,
Chief Accounting Officer and Director
/s/ JAMES C. HUNTINGTON, JR. February 18, 1999
- --------------------------------------------
James C. Huntington, Director
/s/ KIM G. DAVIS February 18, 1999
- --------------------------------------------
Kim G. Davis, Director
/s/ EMILIO A. FERNANDEZ February 18, 1999
- --------------------------------------------
Emilio A. Fernandez, Director
/s/ JAMES V. NAPIER February 18, 1999
- --------------------------------------------
James V. Napier, Director
/s/ JAMES P. KELLEY February 18, 1999
- --------------------------------------------
James P. Kelley, Director
/s/ GREGORY T. H. DAVIES February 18, 1999
- --------------------------------------------
Gregory T. H. Davies, President,
Chief Operating Officer and Director
</TABLE>
46
<PAGE> 48
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
TO THE BOARD OF DIRECTORS OF
WESTINGHOUSE AIR BRAKE COMPANY:
We have audited, in accordance with generally accepted auditing standards, the
consolidated financial statements of Westinghouse Air Brake Company included in
this Form 10-K, and have issued our report thereon dated February 17, 1999. Our
audits were made for the purpose of forming an opinion on those statements taken
as a whole. The schedule listed in the index in Item 14(a)2 of this Form 10-K is
the responsibility of the Company's management and is presented for purposes of
complying with the Securities and Exchange Commission's rules and is not part of
the basic financial statements. This schedule has been subjected to the auditing
procedures applied in the audits of the basic financial statements and, in our
opinion, fairly states in all material respects the financial date required to
be set forth therein in relation to the basic financial statements taken as a
whole.
ARTHUR ANDERSEN LLP
Pittsburgh, Pennsylvania
February 17, 1999
47
<PAGE> 49
SCHEDULE II
WESTINGHOUSE AIR BRAKE COMPANY
VALUATION AND QUALIFYING ACCOUNTS
FOR EACH OF THE THREE YEARS ENDED DECEMBER 31
<TABLE>
<CAPTION>
BALANCE AT CHARGED/ CHARGED TO DEDUCTIONS BALANCE
BEGINNING OF (CREDITED) TO OTHER FROM AT END OF
DOLLARS IN THOUSANDS PERIOD EXPENSE ACCOUNTS (1) RESERVES (2) PERIOD
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1998
Accrued warranty...................... $12,851 $6,238 $4,936 $11,368 $12,657
Allowance for doubtful accounts....... 2,045 528 712 428 2,857
1997
Accrued warranty...................... $ 8,172 $9,893 $2,281 $ 7,495 $12,851
Allowance for doubtful accounts....... 1,347 812 36 150 2,045
1996
Accrued warranty...................... $ 3,655 $5,459 $3,802 $ 4,744 $ 8,172
Allowance for doubtful accounts....... 831 406 210 100 1,347
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Reserves of acquired companies
(2) Actual disbursements and/or charges
48
<PAGE> 50
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
FILING METHOD
-------------
<S> <C> <C>
3.1 Restated Certificate of Incorporation of the Company dated
January 30, 1995, as amended March 30, 1995 2
3.2 Amended and Restated By-Laws of the Company, effective March
31, 1997 5
4.1 Form of Indenture between the Company and The Bank of New
York with respect to the public offering of $100,000,000 of
9 3/8% Senior Notes due 2005 2
4.2 Form of Note (included in Exhibit 4.1)
4.3 First Supplemental Indenture dated as of March 21, 1997
between the Company and The Bank of New York 6
4.4 Indenture dated as of January 12, 1999 by and between the
Company and The Bank of New York with respect to the private
offering of $75,000,000 of 9 3/8% Senior Notes due 2005,
Series B 1
4.5 Form of Note (included in Exhibit 4.4) 1
9 Second Amended WABCO Voting Trust/Disposition Agreement
dated as of December 13, 1995 among the Management Investors
(Schedules and Exhibits omitted) 3
10.1 Westinghouse Air Brake Company Employee Stock Ownership Plan
and Trust, effective January 31, 1995 2
10.2 ESOP Loan Agreement dated January 31, 1995 between
Westinghouse Air Brake Company Employee Stock Ownership
Trust ("ESOT") and the Company (Exhibits omitted) 2
10.3 Employee Stock Ownership Trust Agreement dated January 31,
1995 between the Company and U.S. Trust Company of
California, N.A. 2
10.4 Pledge Agreement dated January 31, 1995 between ESOT and the
Company 2
10.5 Credit Agreement dated as of June 30, 1998, and Amended and
Restated as of October 2, 1998 among the Company, various
financial institutions, The Chase Manhattan Bank, Chase
Manhattan Bank Delaware, and The Bank of New York (Schedules
and Exhibits omitted) 1
10.6 Amended and Restated Stockholders Agreement dated as of
March 5, 1997 among the RAC Voting Trust ("Voting Trust"),
Vestar Equity Partners, L.P., Charlesbank Capital Partners
f/k/a Harvard Private Capital Holdings, Inc. ("Charles"),
American Industrial Partners Capital Fund II, L.P. ("AIP")
and the Company 6
10.7 Common Stock Registration Rights Agreement dated as of
January 31, 1995 among the Company, Scandinavian Incentive
Holding B.V. ("SIH"), Voting Trust, Vestar Capital, Pulse
Electronics, Inc., Pulse Embedded Computer Systems, Inc.,
the Pulse Shareholders and ESOT (Schedules and Exhibits
omitted) 2
10.8 Indemnification Agreement dated January 31, 1995 between the
Company and the Voting Trust trustees 2
10.9 Agreement of Sale and Purchase of the North American
Operations of the Railway Products Group, an operating
division of American Standard Inc., dated as of 1990 between
Rail Acquisition Corp. and American Standard Inc. (only
provisions on indemnification are reproduced) 2
10.10 Letter Agreement (undated) between the Company and American
Standard Inc. on environmental costs and sharing 2
</TABLE>
49
<PAGE> 51
<TABLE>
<CAPTION>
FILING METHOD
-------------
<S> <C> <C>
10.11 Purchase Agreement dated as of June 17, 1992 among the
Company, Schuller International, Inc., Manville Corporation
and European Overseas Corporation (only provisions on
indemnification are reproduced) 2
10.12 Asset Purchase Agreement dated as of January 23, 1995 among
the Company, Pulse Acquisition Corporation, Pulse
Electronics, Inc., Pulse Embedded Computer Systems, Inc. and
the Pulse Shareholders (Schedules and Exhibits omitted) 2
10.13 License Agreement dated as of December 31, 1993 between SAB
WABCO Holdings B.V. and the Company 2
10.14 Letter Agreement dated as of January 19, 1995 between the
Company and Vestar Capital Partners, Inc. 2
10.15 Westinghouse Air Brake Company 1995 Stock Incentive Plan, as
amended 1
10.16 Westinghouse Air Brake Company 1995 Non-Employee Directors'
Fee and Stock Option Plan 1
10.17 Form of Employment Agreement between William E. Kassling and
the Company 2
10.18 Letter Agreement dated as of January 1, 1995 between the
Company and Vestar Capital Partners, Inc. 2
10.19 Form of Indemnification Agreement between the Company and
Authorized Representatives 2
10.20 Share Purchase Agreement between Futuris Corporation Limited
and the Company (Exhibits omitted) 2
10.21 Purchase Agreement dated as of September 19, 1996 by and
among Mark IV Industries, Inc., Mark IV PLC, and W&P Holding
Corp. (Exhibits and Schedules omitted) (Originally filed as
Exhibit No. 2.01) 4
10.22 Purchase Agreement dated as of September 19,1996 by and
among Mark IV Industries Limited and Westinghouse Railway
Holdings (Canada) Inc. (Exhibits and Schedules omitted)
(Originally filed as Exhibit No. 2.02) 4
10.23 Amendment No. 1 to Amended and Restated Stockholders
Agreement dated as of March 5, 1997 among the Voting Trust,
Vestar, Charles, AIP and the Company 6
10.24 Common Stock Registration Rights Agreement dated as of March
5, 1997 among the Company, Charles, AIP and the Voting Trust 6
10.25 1998 Employee Stock Purchase Plan 1
10.26 Sale Agreement dated as of August 7, 1998 by and between
Rockwell Collins, Inc. and the Company (Schedules and
Exhibits omitted) (Originally filed as Exhibit No. 2.01) 7
10.27 Amendment No. 1 dated as of October 5, 1998 to Sale
Agreement dated as of August 7, 1998 by and between Rockwell
Collins, Inc. and the Company (Originally filed as Exhibit
No. 2.02) 7
21 List of subsidiaries of the Company 1
23 Consent of Arthur Andersen LLP 1
27 Financial Data Schedule 1
99 Annual Report on Form 11-K for the year ended December 31,
1998 of the Westinghouse Air Brake Company Employee Stock
Ownership Plan and Trust 1
</TABLE>
50
<PAGE> 52
<TABLE>
<CAPTION>
FILING METHOD
- -------------
<C> <S>
1 Filed herewith
2 Filed as an exhibit to the Company's Registration Statement
on Form S-1 (No. 33-90866)
3 Filed as an exhibit to the Company's Annual Report on Form
10-K for the period ended December 31, 1995
4 Filed as an exhibit to the Company's Current Report on Form
8-K, dated October 3, 1996
5 Filed as an exhibit to the Company's Registration Statement
on Form S-8 (No. 333-39159)
6 Filed as an exhibit to the Company's Annual Report on Form
10-K for the period ended December 31, 1997
7 Filed as an exhibit to the Company's Current Report on Form
8-K, dated October 5, 1998
</TABLE>
51
<PAGE> 1
EXHIBIT 4.4
WESTINGHOUSE AIR BRAKE COMPANY
----------
$75,000,000
9-3/8% Senior Notes due 2005
----------
INDENTURE
Dated as of January 12, 1999
THE BANK OF NEW YORK,
Trustee
<PAGE> 2
<TABLE>
<CAPTION>
CROSS-REFERENCE TABLE*
Trust Indenture
Act Section Indenture Section
----------- -----------------
<S> <C>
310(a)(1)............................................................ 7.10
(a)(2)............................................................ 7.10
(a)(3)............................................................ N.A.
(a)(4)............................................................ N.A.
(a)(5)............................................................ 7.10
(b)............................................................... 7.8; 7.10; 10.2
(c)............................................................... N.A.
311(a)............................................................... 7.11
(b)............................................................... 1.3; 7.11
(c)............................................................... N.A.
312(a)............................................................... 2.5
(b)............................................................... 10.3
(c)............................................................... 10.3
313(a)............................................................... 7.6
(b)(1)............................................................ N.A.
(b)(2)............................................................ 7.6
(c)............................................................... 7.6; 10.2
(d)............................................................... 7.6
314(a)............................................................... 4.4; 4.5; 10.2
(b)............................................................... N.A.
(c)(1)............................................................ 10.4
(c)(2)............................................................ 10.4
(c)(3)............................................................ N.A.
(d)............................................................... N.A.
(e)............................................................... 10.5
(f)............................................................... N.A.
315(a)............................................................... 7.1(2)
(b)............................................................... 7.5; 10.2
(c)............................................................... 7.1(1)
(d)............................................................... 7.1(3)
(e)............................................................... 6.11
316(a)(last sentence)................................................ 2.9
(a)(1)(A)......................................................... 6.5
(a)(1)(B)......................................................... 6.4
</TABLE>
- -----------
N.A. means not applicable.
*This Cross-Reference Table is not part of this Indenture.
<PAGE> 3
<TABLE>
<S> <C>
(a)(2)............................................................ N.A.
(b)............................................................... 6.7
317(a)(1)............................................................ 6.8
(a)(2)............................................................ 6.9
(b)............................................................... 2.4
318(a)............................................................... 10.1
(c)............................................................... 10.1
</TABLE>
- -----------
N.A. means not applicable.
*This Cross-Reference Table is not part of this Indenture.
<PAGE> 4
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Page
----
ARTICLE 1
DEFINITIONS AND INCORPORATION
BY REFERENCE
<S> <C> <C>
Section 1.1. Definitions........................................................................1
Section 1.2. Other Definitions.................................................................22
Section 1.3. Incorporation by Reference of Trust Indenture Act.................................22
Section 1.4. Rules of Construction.............................................................23
ARTICLE 2
THE SECURITIES
Section 2.1. Form and Dating...................................................................24
Section 2.2. Execution and Authentication......................................................25
Section 2.3. Registrar and Paying Agent........................................................26
Section 2.4. Paying Agent to Hold Money in Trust...............................................26
Section 2.5. Securityholder Lists..............................................................27
Section 2.6. Transfer and Exchange.............................................................27
Section 2.7. Replacement Securities............................................................28
Section 2.8. Outstanding Securities............................................................28
Section 2.9. Treasury Securities...............................................................28
Section 2.10. Temporary Securities..............................................................29
Section 2.11. Cancellation......................................................................29
Section 2.12. Defaulted Interest................................................................29
Section 2.13. Persons Deemed Owners.............................................................29
Section 2.14. CUSIP Numbers.....................................................................30
Section 2.15. Book-Entry Provisions for Global Securities.......................................30
Section 2.16. Registration of Transfers and Exchanges...........................................31
ARTICLE 3
REDEMPTION
Section 3.1. Notices to Trustee................................................................36
Section 3.2. Selection of Securities to Be Redeemed............................................36
Section 3.3. Notice of Redemption..............................................................37
Section 3.4. Effect of Notice of Redemption....................................................38
Section 3.5. Deposit of Redemption Price.......................................................38
</TABLE>
-i-
<PAGE> 5
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
Section 3.6. Securities Redeemed in Part.......................................................38
Section 3.7. Redemption........................................................................39
Section 3.8. Limitations.......................................................................39
ARTICLE 4
COVENANTS
Section 4.1. Payment of Principal and Interest.................................................39
Section 4.2. Maintenance of Office or Agency for Notices and Demands...........................39
Section 4.3. Insurance Matters.................................................................40
Section 4.4. SEC Reports.......................................................................40
Section 4.5. Compliance Certificate............................................................40
Section 4.6. Corporate Existence...............................................................40
Section 4.7. Payment of Taxes and Other Claims.................................................40
Section 4.8. Appointments to Fill Vacancies in Trustee's Office................................41
Section 4.9. Limitation of Indebtedness........................................................41
Section 4.10. Limitation on Indebtedness and Capital Stock of Restricted Subsidiaries...........42
Section 4.11. Limitation on Restricted Payments.................................................43
Section 4.12. Limitation on Restrictions on Distributions from Restricted Subsidiaries..........45
Section 4.13. Limitation on Sales of Assets.....................................................47
Section 4.14. Limitation on Affiliate Transactions..............................................49
Section 4.15. Change of Control.................................................................50
Section 4.16. Limitation on Liens...............................................................51
Section 4.17. Limitation on Sale/Leaseback Transactions.........................................52
Section 4.18. Further Instruments and Acts......................................................52
ARTICLE 5
SUCCESSOR COMPANY
Section 5.1. When Company May Merge or Transfer Assets.........................................52
Section 5.2. Successor Corporation Substituted.................................................53
ARTICLE 6
DEFAULTS AND REMEDIES
Section 6.1. Events of Default.................................................................53
Section 6.2. Acceleration......................................................................56
</TABLE>
-ii-
<PAGE> 6
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
Section 6.3. Other Remedies....................................................................56
Section 6.4. Waiver of Past Defaults...........................................................56
Section 6.5. Control by Majority...............................................................57
Section 6.6. Limitation on Suits...............................................................57
Section 6.7. Rights of Holders To Receive Payment..............................................57
Section 6.8. Collection Suit by Trustee........................................................58
Section 6.9. Trustee May File Proofs of Claim..................................................58
Section 6.10. Priorities........................................................................58
Section 6.11. Undertaking for Costs.............................................................59
Section 6.12. Waiver of Stay or Extension Laws..................................................59
ARTICLE 7
TRUSTEE
Section 7.1. Duties of Trustee.................................................................59
Section 7.2. Rights of Trustee.................................................................60
Section 7.3. Individual Rights of Trustee......................................................61
Section 7.4. Trustee's Disclaimer..............................................................61
Section 7.5. Notice of Defaults................................................................61
Section 7.6. Reports by Trustee to Holders.....................................................62
Section 7.7. Compensation and Indemnity........................................................62
Section 7.8. Replacement of Trustee............................................................63
Section 7.9. Successor Trustee by Merger, etc..................................................64
Section 7.10. Eligibility; Disqualification.....................................................64
Section 7.11. Preferential Collection of Claims Against Company.................................64
ARTICLE 8
DISCHARGE OF INDENTURE
Section 8.1. Legal Defeasance and Covenant Defeasance of the Securities........................65
Section 8.2. Termination of Obligations upon Cancellation of the Securities....................67
Section 8.3. Survival of Certain Obligations...................................................68
Section 8.4. Acknowledgment of Discharge by Trustee............................................68
Section 8.5. Application of Trust Assets.......................................................68
Section 8.6. Repayment to the Company; Unclaimed Money.........................................69
Section 8.7. Reinstatement.....................................................................69
</TABLE>
-iii-
<PAGE> 7
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE 9
AMENDMENTS
Section 9.1. Without Consent of Holders........................................................69
Section 9.2. With Consent of Holders...........................................................70
Section 9.3. Compliance with Trust Indenture Act...............................................72
Section 9.4. Revocation and Effect of Consents.................................................72
Section 9.5. Notation on or Exchange of Securities.............................................72
Section 9.6. Trustee to Sign Amendments, etc...................................................72
ARTICLE 10
MISCELLANEOUS
Section 10.1. Trust Indenture Act Controls......................................................73
Section 10.2. Notices...........................................................................73
Section 10.3. Communication by Holders with Other Holders.......................................74
Section 10.4. Certificate and Opinion as to Conditions Precedent................................75
Section 10.5. Statements Required in Certificate or Opinion.....................................75
Section 10.6. Rules by Trustee and Agents.......................................................75
Section 10.7. No Recourse Against Others........................................................76
Section 10.8. GOVERNING LAW.....................................................................76
Section 10.9. No Adverse Interpretation of Other Agreements.....................................76
Section 10.10. Successors........................................................................76
Section 10.11. Severability......................................................................76
Section 10.12. Counterpart Originals.............................................................76
Section 10.13. Variable Provisions...............................................................77
Section 10.14. Provisions of Indenture for the Sole Benefit of Parties and Securityholders.......77
Section 10.15. Table of Contents, Headings, etc..................................................77
SIGNATURES...................................................................................................78
EXHIBIT A FORM OF SERIES B1 SECURITY
EXHIBIT B FORM OF SERIES B2 SECURITY
EXHIBIT C FORM OF LEGEND FOR GLOBAL SECURITIES
EXHIBIT D FORM OF TRANSFER CERTIFICATE
EXHIBIT E FORM OF TRANSFER CERTIFICATE FOR INSTITUTIONAL ACCREDITED INVESTORS
EXHIBIT F FORM OF CERTIFICATE FOR REGULATION S TRANSFERS
</TABLE>
-iv-
<PAGE> 8
INDENTURE, dated as of January 12, 1999 between Westinghouse
Air Brake Company, a Delaware corporation (the "Company"), and The Bank of New
York, as trustee, a New York banking corporation (the "Trustee").
Each party agrees as follows for the benefit of the other
party and for the equal and ratable benefit of the Holders of the Company's
9-3/8% Senior Notes due 2005 (the "Securities"):
ARTICLE 1
DEFINITIONS AND INCORPORATION
BY REFERENCE
Section 1.1. Definitions.
"Additional Assets" means (i) any property or assets (other
than Indebtedness and Capital Stock) in a Related Business, (ii) the Capital
Stock of a Person that becomes a Restricted Subsidiary as a result of the
acquisition of such Capital Stock by the Company or another Restricted
Subsidiary or (iii) Capital Stock constituting a minority interest in any Person
that at such time is a Restricted Subsidiary; provided, however, that any such
Restricted Subsidiary described in clause (ii) or (iii) above is primarily
engaged in a Related Business.
"Adjusted Consolidated Assets" means at any time the total
amount of assets of the Company and its consolidated Restricted Subsidiaries
(less applicable depreciation, amortization and other valuation reserves), after
deducting therefrom all current liabilities of the Company and its consolidated
Restricted Subsidiaries (excluding intercompany items), all as set forth on the
consolidated balance sheet of the Company and its consolidated Restricted
Subsidiaries as of the end of the most recent fiscal quarter ended at least 45
days prior to the date of determination.
"Affiliate" of any specified Person means any other Person,
directly or indirectly, controlling or controlled by or under direct or indirect
common control with such specified Person. For the purposes of this definition,
"control" when used with respect to any Person means the power to direct the
management and policies of such Person, directly or indirectly, whether through
the ownership of voting securities, by contract or otherwise; and the terms
"controlling" and "controlled" have meanings correlative to the foregoing. For
purposes of the provisions described under Sections 4.13 and 4.14 only,
"Affiliate" shall also mean any beneficial owner of shares representing 5% or
more of the total voting power of the Voting Stock (on a fully diluted basis) of
the Company or of rights or warrants to purchase such Voting Stock (whether or
not currently exercisable) and any Person who would be an Affiliate of any such
beneficial owner pursuant to the first sentence hereof.
<PAGE> 9
-2-
"Agent" means any Registrar or Paying Agent or authenticating
agent or co-registrar.
"Asset Disposition" means any sale, lease, transfer or other
disposition (or series of related sales, leases, transfers or dispositions) by
the Company or any Restricted Subsidiary, other than permitted Sale/Leaseback
Transactions, including any disposition by means of a merger, consolidation or
similar transaction (each referred to for the purposes of this definition as a
"disposition"), of (i) any shares of Capital Stock of a Restricted Subsidiary
(other than directors' qualifying shares or shares required by applicable law to
be held by a Person other than the Company or a Restricted Subsidiary), (ii) all
or substantially all the assets of any division or line of business of the
Company or any Restricted Subsidiary or (iii) any other assets of the Company or
any Restricted Subsidiary outside of the ordinary course of business of the
Company or such Restricted Subsidiary (other than, in the case of (i), (ii) and
(iii) above, (x) a disposition by a Restricted Subsidiary to the Company or by
the Company or a Subsidiary to a Wholly Owned Subsidiary and (y) for purposes of
Section 4.13 only, a disposition that constitutes a Restricted Payment permitted
by Section 4.11); provided, that the receipt of any insurance proceeds in
connection with any casualty shall not be included within the meaning of "Asset
Disposition" except to the extent in excess of $3,000,000 in the aggregate in
any fiscal year; provided, however, that to the extent the Company shall have
reinvested on the date of any required Excess Proceeds Offer (or certified to
the Trustee that it intends to reinvest within 180 days of such Excess Proceeds
Offer) any of such excess proceeds in equipment, vehicles or other assets used
in the Company's principal lines of business, the resultant Excess Proceeds
Offer shall be reduced by the amount so reinvested or to be reinvested.
"Attributable Debt" in respect of a Sale/Leaseback Transaction
means, as at the time of determination, the present value (discounted at the
interest rate borne by the Securities, compounded annually) of the total
obligations of the lessee for rental payments during the remaining term of the
lease included in such Sale/Leaseback Transaction (including any period for
which such lease has been extended).
"Average Life" means, as of the date of determination, with
respect to any Indebtedness or Preferred Stock, the quotient obtained by
dividing (i) the sum of the products of numbers of years from the date of
determination of the dates of each successive scheduled principal payment of
such Indebtedness or redemption or similar payment with respect to such
Preferred Stock multiplied by the amount of such payment by (ii) the sum of all
such payments.
"Bankruptcy Law" means Title 11, United States Code or any
similar Federal or state law for the relief of debtors.
"Board" or "Board of Directors" means the Board of Directors
of the Company or any committee thereof duly authorized to act on behalf of such
Board.
<PAGE> 10
-3-
"Business Day" means each day which is not a Legal Holiday.
"Capital Lease Obligations" means an obligation that is
required to be classified and accounted for as a capitalized lease for financial
reporting purposes in accordance with GAAP, and the amount of Indebtedness
represented by such obligation shall be the capitalized amount of such
obligation determined in accordance with GAAP; and the Stated Maturity thereof
shall be the date of the last payment of rent or any other amount due under such
lease prior to the first date upon which such lease may be terminated by the
lessee without payment of a penalty.
"Capital Stock" of any Person means any and all shares,
interests, rights to purchase, warrants, options, participations or other
equivalents of or interests in (however designated) equity of such Person,
including any Preferred Stock.
"Cash Equivalents" means, at any time, (i) any evidence of
Indebtedness with a maturity of 180 days or less from the date of acquisition
issued or directly and fully guaranteed or insured by the United States of
America or any agency or instrumentality thereof (provided that the full faith
and credit of the United States of America is pledged in support thereof); (ii)
certificates of deposit or acceptances with a maturity of 180 days or less from
the date of acquisition of any financial institution that is a member of the
Federal Reserve System having combined capital and surplus and undivided profits
of not less than $300,000,000 and a Keefe Bank Watch (or successor) Rating of
P-1 (or subsequent equivalent rating) or better; (iii) commercial paper with a
maturity of 180 days or less from the date of acquisition issued by a
corporation that is not an Affiliate of the Company organized under the laws of
any state of the United States or the District of Columbia and rated at least
A-1 (or subsequent equivalent rating) by Standard & Poor's Corporation and its
successors or at least P-1 (or subsequent equivalent rating) by Moody's
Investors Service, Inc. and its successors; and (iv) repurchase agreements and
reverse repurchase agreements with terms of more than 30 days relating to
obligations of the types described in clause (i) above entered into with a
financial institution of the type described in clause (ii) above, provided that
the terms of such agreements comply with the guidelines set forth in the Federal
Financial Agreements of Depository Institutions With Securities Dealers and
Others, as adopted by the Comptroller of the Currency on October 31, 1985.
"Change of Control" means the occurrence of any of the
following events: (i) any "person" (as such term is used in Sections 13(d) and
14(d) of the Exchange Act), other than (a) any Designated Person or (b)
combination of Designated Persons, is or becomes the beneficial owner (as
defined in Rules 13d-3 and 13d-5 under the Exchange Act, except that for
purposes of this clause (i) such person shall be deemed to have "beneficial
ownership" of all shares that any such person has the right to acquire, whether
such right is exercisable immediately or only after the passage of time),
directly or indirectly, of more than 35% of the total voting power of the Voting
Stock of the Company; (ii) during any period of two consecutive years,
individuals who at the beginning of such period constituted the Board of
Directors of the Company (together with
<PAGE> 11
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any new directors whose election by such Board of Directors or whose nomination
for election by the stockholders of the Company was approved by a vote of a
majority of the directors of the Company then still in office who were either
directors at the beginning of such period or whose election or nomination for
election was previously so approved) cease for any reason to constitute a
majority of the Board of Directors of the Company then in office; (iii) the
Company conveys, transfers or leases all or substantially all its assets to any
person or group, in one transaction or a series of transactions other than any
conveyance, transfer or lease between the Company and a Wholly Owned Subsidiary;
or (iv) the stockholders of the Company shall approve any plan or proposal for
the liquidation or dissolution of the Company.
"Change of Control Payment Date" has the meaning set forth in
Section 4.15(b)(3).
"Code" means the Internal Revenue Code of 1986, as amended
from time to time.
"Common Stock" means, with respect to any Person, any and all
shares, interests, participations or other equivalents (however designated,
whether voting or non-voting) of such Person's common stock, whether now
outstanding or issued after the Existing Securities Issue Date, including,
without limitation, all series and classes of such common stock.
"Company" means Westinghouse Air Brake Company, a Delaware
corporation, until a successor replaces it in accordance with Article 5, and
thereafter means the successor.
"Consolidated Coverage Ratio" as of any date of determination
means the ratio of (i) the aggregate amount of EBITDA for the four most recent
fiscal quarters for which the Company has filed financial statements with the
SEC pursuant to the requirements of the Exchange Act prior to the date of such
determination to (ii) Consolidated Interest Expense for such four fiscal
quarters; provided, however, that (1) if the Company or any Restricted
Subsidiary has Incurred any Indebtedness since the beginning of such period that
remains outstanding or if the transaction giving rise to the need to calculate
the Consolidated Coverage Ratio is an Incurrence of Indebtedness, or both,
EBITDA and Consolidated Interest Expense for such period shall be calculated
after giving effect on a pro forma basis to such Indebtedness as if such
Indebtedness had been Incurred on the first day of such period and the discharge
of any other Indebtedness repaid, repurchased, defeased or otherwise discharged
with the proceeds of such new Indebtedness as if such discharge had occurred on
the first day of such period, except that, in making such calculation,
Indebtedness Incurred under a revolving credit or similar arrangement to finance
seasonal fluctuations in working capital needs shall be computed on the average
daily balance of such Indebtedness during such period unless such Indebtedness
is projected in the reasonable judgment of senior management of the Company to
remain outstanding for a period in excess of 12 months from the date of
Incurrence of such Indebtedness, in which case, such Indebtedness will be
assumed to have been Incurred on the first day of such
<PAGE> 12
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coverage period, (2) if since the beginning of such period the Company or any
Restricted Subsidiary shall have made any Asset Disposition, the EBITDA for such
period shall be reduced by an amount equal to the EBITDA (if positive) directly
attributable to the assets which are the subject of such Asset Disposition for
such period, or increased by an amount equal to the EBITDA (if negative)
directly attributable thereto for such period, and Consolidated Interest Expense
for such period shall be reduced by an amount equal to the Consolidated Interest
Expense directly attributable to any Indebtedness of the Company or any
Restricted Subsidiary repaid, repurchased, defeased or otherwise discharged with
respect to the Company and its continuing Restricted Subsidiaries in connection
with such Asset Disposition for such period (or, if the Capital Stock of any
Restricted Subsidiary is sold, the Consolidated Interest Expense for such period
directly attributable to the Indebtedness of such Restricted Subsidiary to the
extent the Company and its continuing Restricted Subsidiaries are no longer
liable for such Indebtedness after such sale), (3) if since the beginning of
such period the Company or any Restricted Subsidiary (by merger or otherwise)
shall have made an Investment in any Restricted Subsidiary (or any person which
becomes a Restricted Subsidiary) or an acquisition of assets, including any
acquisition of assets occurring in connection with a transaction causing a
calculation to be made hereunder, which constitutes all or substantially all of
an operating unit of a business, EBITDA and Consolidated Interest Expense for
such period shall be calculated after giving pro forma effect thereto (including
the Incurrence of any Indebtedness) as if such Investment or acquisition
occurred on the first day of such period and (4) if since the beginning of such
period any Person (that subsequently became a Restricted Subsidiary or was
merged with or into the Company or any Restricted Subsidiary since the beginning
of such period) shall have made any Asset Disposition, any Investment or
acquisition of assets that would have required an adjustment pursuant to clause
(2) or (3) above if made by the Company or a Restricted Subsidiary during such
period, EBITDA and Consolidated Interest Expense for such period shall be
calculated after giving pro forma effect thereto as if such Asset Disposition,
Investment or acquisition occurred on the first day of such period. For purposes
of this definition, whenever pro forma effect is to be given to an acquisition
of assets, the amount of income or earnings relating thereto, and the amount of
Consolidated Interest Expense associated with any Indebtedness incurred in
connection therewith, the pro forma calculations shall be determined in good
faith by a responsible financial or accounting officer of the Company. If any
Indebtedness bears a floating rate of interest and is being given pro forma
effect, the interest of such Indebtedness shall be calculated as if the rate in
effect on the date of determination had been the applicable rate for the entire
period (taking into account any Interest Rate Protection Agreement applicable to
such Indebtedness if such Interest Rate Protection Agreement has a remaining
term in excess of 12 months).
"Consolidated Current Liabilities" as of the date of
determination means the aggregate amount of liabilities of the Company and its
consolidated Restricted Subsidiaries which may properly be classified as current
liabilities (including taxes accrued as estimated), on
<PAGE> 13
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a consolidated basis, after eliminating (i) all intercompany items between the
Company and any Restricted Subsidiary and between Restricted Subsidiaries and
(ii) all current maturities of long-term Indebtedness, all as determined in
accordance with GAAP consistently applied.
"Consolidated Interest Expense" means, for any period, the
total interest expense of the Company and its consolidated Restricted
Subsidiaries, plus (x) to the extent not included in such total interest
expense, and to the extent incurred by the Company or its Restricted
Subsidiaries, (i) interest expense attributable to capital leases, (ii)
amortization of debt discount and debt issuance cost (excluding debt issuance
cost relating to the Securities), (iii) capitalized interest, (iv) non-cash
interest payments, (v) commissions, discounts and other fees and charges owed
with respect to letters of credit and bankers' acceptance financing, (vi) net
costs under Interest Rate Protection Agreements (including amortization of
fees), (vii) Preferred Stock dividends in respect of all Preferred Stock held by
Persons other than the Company or a Wholly Owned Subsidiary, (viii) interest
incurred in connection with Investments in discontinued operations and (ix)
interest actually paid by the Company or any of its consolidated Restricted
Subsidiaries under any Guarantee of Indebtedness of any Person and minus (y) to
the extent included in such total interest expense, any amortization by the
Company and its consolidated Restricted Subsidiaries of (i) capitalized interest
or (ii) commissions, discounts and other fees and charges owed with respect to
letters of credit and bankers' acceptance financing.
"Consolidated Net Income" means, for any period, the net
income of the Company and its consolidated Restricted Subsidiaries; provided,
however, that there shall not be included in such Consolidated Net Income: (i)
any net income of any Person if such Person is not a Restricted Subsidiary,
except that (A) subject to the limitations contained in clause (iv) below, the
Company's equity in the net income of any such Person for such period shall be
included in such Consolidated Net Income up to the aggregate amount of cash
actually distributed by such Person during such period to the Company or a
Restricted Subsidiary as a dividend or other distribution (subject, in the case
of a dividend or other distribution paid to a Restricted Subsidiary, to the
limitations contained in clause (iii) below) and (B) the Company's equity in a
net loss of any Person (other than an Unrestricted Subsidiary) for such period
shall be included in determining such Consolidated Net Income; (ii) any net
income (or loss) of any Person acquired by the Company or a Subsidiary in a
pooling of interests transaction for any period prior to the date of such
acquisition; (iii) the net income of any Restricted Subsidiary to the extent
that such Restricted Subsidiary is subject to restrictions, directly or
indirectly, on the payment of dividends or the making of distributions, directly
or indirectly, to the Company, except that the Company's equity in a net loss of
any such Restricted Subsidiary for such period shall be included in determining
such Consolidated Net Income; (iv) any gain (but not loss) realized upon the
sale or other disposition of any property, plant or equipment of the Company or
its Consolidated Restricted Subsidiaries (including pursuant to any
sale-and-leaseback arrangement) which is not sold or otherwise disposed of in
the ordinary course of business and
<PAGE> 14
-7-
any gain (but not loss) realized upon the sale or other disposition of any
Capital Stock of any Person; (v) extraordinary gains or losses; and (vi) the
cumulative effect of a change in accounting principles.
"Consolidated Net Tangible Assets" as of any date of
determination means the total amount of assets (less accumulated depreciation
and amortization, allowances for doubtful receivables, other applicable reserves
and other properly deductible items) which would appear on a consolidated
balance sheet of the Company and its consolidated Restricted Subsidiaries,
determined on a consolidated basis in accordance with GAAP, and after giving
effect to purchase accounting and after deducting therefrom, to the extent
otherwise included, the amounts of: (i) Consolidated Current Liabilities; (ii)
minority interests in consolidated Subsidiaries held by Persons other than the
Company or a Restricted Subsidiary; (iii) excess of cost over fair value of
assets of businesses acquired, as determined in good faith by the Board of
Directors; (iv) any revaluation or other write-up in book value of assets
subsequent to the Existing Securities Issue Date as a result of a change in the
method of valuation in accordance with GAAP consistently applied; (v)
unamortized debt discount and expenses and other unamortized deferred charges,
goodwill, patents, trademarks, service marks, trade names, copyrights, licenses,
organization or developmental expenses and other intangible items (if included
in total assets); (vi) treasury stock (if included in total assets); (vii)
Unallocated ESOP Shares; and (viii) cash set apart and held in a sinking or
other analogous fund established for the purpose of redemption or other
retirement of Capital Stock to the extent such obligation is not reflected in
Consolidated Current Liabilities.
"Consolidated Net Worth" means the total of the amounts shown
on the balance sheet of the Company and its consolidated Restricted
Subsidiaries, determined on a consolidated basis in accordance with GAAP, as of
the end of the most recent fiscal quarter for which the Company has filed
financial statements with the SEC pursuant to the requirements of the Exchange
Act, prior to the taking of any action for the purpose of which the
determination is being made, as (i) the par or stated value of all outstanding
Capital Stock of the Company plus (ii) paid-in capital or capital surplus
relating to such Capital Stock plus (iii) any retained earnings or earned
surplus less (to the extent otherwise included) (A) any accumulated deficit, (B)
any amounts attributable to Disqualified Stock, (C) Unallocated ESOP Shares, (D)
treasury stock and (E) any cumulative translation adjustment.
"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 through the ownership of voting securities, by contract or
otherwise, and the terms "Controlling" and "Controlled" shall have meanings
correlative thereto.
<PAGE> 15
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"Credit Agreement" means the Credit Agreement dated as of
January 31, 1995, as amended and restated as of February 15, 1995, among the
Company, the financial institutions named therein, Chemical Bank, as Swingline
Lender, Issuing Bank, Administrative Agent and Collateral Agent, Chemical Bank
Delaware, as Issuing Bank, The Bank of New York and Credit Suisse, as
Co-Administrative Agents, and The Bank of New York, as Documentation Agent, as
the same may be amended or modified from time to time, and any agreement
evidencing any refunding, replacement, refinancing or renewal, in whole or in
part, of the Credit Agreement.
"Default" means any event which is, or after notice or passage
of time or both would be, an Event of Default.
"Depository" means, with respect to the Securities issued in
the form of one or more Global Securities, The Depository Trust Company or
another Person designated as Depository by the Company, which must be a clearing
agency registered under the Exchange Act.
"Designated Person" means Incentive AB, a corporation
organized under the laws of the Kingdom of Sweden, or any of its subsidiaries,
Vestar or Vestar Capital or any of their respective Controlled Affiliates, the
ESOP, the Pulse Shareholders and any of their respective Affiliates, the Voting
Trust and any person or entity holding a beneficial interest in the Voting Trust
or the Capital Stock of the Company held by the Voting Trust on the Existing
Securities Issue Date (or, in the case of any such person or entity, their
permitted transferees).
"Disqualified Stock" means, with respect to any Person, any
Capital Stock which by its terms (or by the terms of any security into which it
is convertible or for which it is exchangeable) or upon the happening of any
event (i) matures or is mandatorily redeemable pursuant to a sinking fund
obligation or otherwise, (ii) is convertible or exchangeable for Indebtedness or
Disqualified Stock or (iii) is redeemable at the option of the holder thereof,
in whole or in part, in each case on or prior to the first anniversary of the
Stated Maturity of the Securities.
"EBITDA" for any period means Consolidated Net Income plus the
following to the extent deducted in calculating such Consolidated Net Income:
(a) all income tax expense of the Company, (b) Consolidated Interest Expense,
(c) depreciation expense, (d) amortization expense and (e) other noncash charges
(including any charges resulting from the write-up of inventory) deducted in
determining Consolidated Net Income (and not already excluded from the
definition of the term "Consolidated Net Income"), in each case for such period.
"ESOP" means collectively, the Westinghouse Air Brake Company
Employee Stock Ownership Plan effective January 1, 1995 and the Westinghouse Air
Brake Company Employee Stock Ownership Trust established effective January 1,
1995 pursuant to the Westinghouse Air Brake Company Employee Stock Ownership
Trust Agreement between the Company and U.S. Trust Company of California, N.A.,
as such plan (the "Plan") and trust (the "Trust") may be amended, modified or
supplemented from time to time.
<PAGE> 16
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"ESOP Loan" means the loan made by the Company to the ESOP in
an aggregate principal amount equal to $140,040,000 pursuant to the ESOP Loan
Agreement, dated as of January 31, 1995, between the Company and the Trust, as
such loan may be amended, modified, extended, renewed, replaced or refinanced
from time to time without increase in such aggregate principal amount.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Exchange Securities" means the 9-3/8% Senior Notes due 2005,
Series B2, to be issued in exchange for the Initial Securities pursuant to the
Registration Rights Agreement.
"Existing Securities" means the $100 million aggregate
principal amount of the Company's 9-3/8% Senior Notes due 2005 issued pursuant
to the Existing Securities Indenture.
"Existing Securities Indenture" means the Indenture dated as
of June 20, 1995 between the Company and The Bank of New York, as Trustee.
"Existing Securities Issue Date" means June 20, 1995.
"Fair Market Value" means, with respect to any asset, the
price which could be negotiated in an arm's-length free market transaction, for
cash, between a willing seller and a willing buyer, neither of which is under
compulsion to complete the transaction. The Fair Market Value of any asset or
assets shall be determined by the Board of Directors of the Company, acting in
good faith, and shall be evidenced by a resolution of such Board of Directors
delivered to the Trustee.
"Final Maturity Date" means June 15, 2005.
"Foreign Subsidiary" means a corporation that is not
incorporated under the laws of the United States or any political subdivision
thereof and whose business is primarily conducted outside of the United States.
"Fully Traded Common Stock" means common stock issued by any
corporation whose common stock is listed on either The New York Stock Exchange
or The American Stock Exchange or included for trading privileges in the
National Market System of the National Association of Securities Dealers
Automated Quotation System; provided, however, that (a) either such common stock
is freely tradeable under the Securities Act upon issuance or the holder thereof
has contractual registration rights that will permit the sale of such common
stock pursuant to an effective registration statement not later than nine months
after issuance to the Company or one of its Subsidiaries and (b) such common
stock is also so listed or included for trading privileges.
<PAGE> 17
-10-
"GAAP" means generally accepted accounting principles in the
United States of America as in effect as of the date of this Indenture,
including those set forth in the opinions and pronouncements of the Accounting
Principles Board of the American Institute of Certified Public Accountants and
statements and pronouncements of the Financial Accounting Standards Board or in
such other statement by such other entity as approved by a significant segment
of the accounting profession.
"Global Securities" means one or more 144A Global Securities,
Regulation S Global Securities and IAI Global Securities.
"Guarantee" means any obligation, contingent or otherwise, of
any Person directly or indirectly guaranteeing any Indebtedness of any Person
and any obligation, direct or indirect, contingent or otherwise, of such Person
(i) to purchase or pay (or advance or supply funds for the purchase or payment
of) such Indebtedness of such Person (whether arising by virtue of partnership
arrangements, or by agreements to keep-well, to purchase assets, goods,
securities or services, or take-or-pay, or to maintain financial statement
conditions or otherwise) or (ii) entered into for the purpose of assuring in any
other manner the obligee of such Indebtedness of the payment thereof or to
protect such obligee against loss in respect thereof (in whole or in part);
provided, however, that the term "Guarantee" shall not include endorsements for
collection or deposit in the ordinary course of business. The term "Guarantee"
used as a verb has a corresponding meaning. The term "Guarantor" shall mean any
Person Guaranteeing any obligation.
"Holder," "Holder of Securities," "Securityholder" or other
similar terms, means the Person in whose name a particular Security shall be
registered on the books of the Registrar kept for that purpose in accordance
with the terms hereof, and the word "majority," used in connection with the
terms "Holder," "Holder of Securities," or other similar terms, shall signify
the "majority in principal amount" whether or not so expressed.
"IAI Global Security" means a permanent global security in
registered form representing the aggregate principal amount of Securities sold
to Institutional Accredited Investors.
"Incur" means issue, assume, Guarantee, incur or otherwise
become liable for; provided, however, that any Indebtedness or Capital Stock of
a Person existing at the time such Person becomes a Subsidiary (whether by
merger, consolidation, acquisition or otherwise) shall be deemed to be Incurred
by such Subsidiary at the time it becomes a Subsidiary. The term "Incurrence"
when used as a noun shall have a correlative meaning.
<PAGE> 18
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"Indebtedness" of any Person means, without duplication, (i)
the principal of and premium (if any) in respect of (A) indebtedness of such
Person for money borrowed and (B) indebtedness evidenced by notes, debentures,
bonds or other similar instruments for the payment of which such Person is
responsible or liable; (ii) all Capital Lease Obligations of such Person and all
Attributable Debt in respect of Sale/Leaseback Transactions entered into by such
Person; (iii) all obligations of such Person issued or assumed as the deferred
purchase price of property, all conditional sale obligations of such Person and
all obligations of such Person under any title retention agreement (but
excluding trade accounts payable arising in the ordinary course of business);
(iv) all obligations of such Person for reimbursement of any obligor on any
letter of credit, banker's acceptance or similar credit transaction (other than
obligations with respect to letters of credit securing obligations (other than
obligations described in (i) through (iii) above) entered into in the ordinary
course of business of such Person to the extent such letters of credit are not
drawn upon or, if and to the extent drawn upon, such drawing is reimbursed no
later than the third Business Day following receipt by such Person of a demand
for reimbursement following payment on the letter of credit); (v) the amount of
all obligations of such Person with respect to the redemption, repayment or
other repurchase of any Disqualified Stock (but excluding, in each case, any
accrued dividends); (vi) all obligations of the types referred to in clauses (i)
through (v) of other Persons and all dividends of other Persons for the payment
of which, in either case, such Person is responsible or liable, directly or
indirectly, as Guarantor or otherwise; and (vii) all obligations of the type
referred to in clauses (i) through (vi) of other Persons secured by any Lien on
any property or asset of such Person (whether or not such obligation is assumed
by such Person), the amount of such obligation being deemed to be the lesser of
the value of such property and assets or the amount of the obligation so
secured.
"Indenture" means this Indenture, as amended from time to
time.
"Initial Purchaser" means Chase Securities Inc.
"Initial Securities" means the 9-3/8% Senior Notes due 2005,
Series B1, of the Company.
"Institutional Accredited Investor" means an institution that
is an "accredited investor" as that term is defined in Rule 501(a)(1), (2), (3)
or (7) under the Securities Act.
"Interest Payment Date" means each semiannual interest payment
date on June 15 and December 15 of each year, commencing June 15, 1999.
"Interest Rate Protection Agreement" means any interest rate
swap agreement, interest rate cap agreement or other financial agreement or
arrangement designed to protect the Company or any Restricted Subsidiary against
fluctuations in interest rates.
<PAGE> 19
-12-
"Interest Record Date" for the interest payable on any
Interest Payment Date (except a date for payment of defaulted interest) means
the June 1 or December 1 (whether or not a Business Day), as the case may be,
immediately preceding such Interest Payment Date.
"Investment" in any Person means any direct or indirect
advance, loan (other than advances to customers in the ordinary course of
business that are recorded as accounts receivable on the balance sheet of such
Person) or other extension of credit (including by way of Guarantee or similar
arrangement) or capital contribution to (by means of any transfer of cash or
other property to others or any payment for property or services for the account
or use of others), or any purchase or acquisition of Capital Stock, Indebtedness
or other similar instruments issued by such Person. For purposes of the
definition of "Unrestricted Subsidiary," the definition of "Restricted Payment"
and Section 4.11, (i) "Investment" shall include the portion (proportionate to
the Company's equity interest in such Subsidiary) of the fair market value of
the net assets of any Subsidiary of the Company at the time that such Subsidiary
is designated an Unrestricted Subsidiary; provided, however, that upon a
redesignation of such Subsidiary as a Restricted Subsidiary, the Company shall
be deemed to continue to have a permanent "Investment" in an Unrestricted
Subsidiary in an amount (if positive) equal to (x) the Company's "Investment" in
such Subsidiary at the time of such redesignation less (y) the portion
(proportionate to the Company's equity interest in such Subsidiary) of the fair
market value of the net assets of such Subsidiary at the time of such
redesignation; and (ii) any property transferred to or from an Unrestricted
Subsidiary shall be valued at its fair market value at the time of such
transfer, in each case as determined in good faith by the Board of Directors.
"Issue Date" means the original issue date of the Securities,
January 12, 1999.
"Joint Venture" means a joint venture, partnership or other
similar arrangement, whether in corporate, partnership or other legal form;
provided that, as to any such arrangement in corporate form, such corporation
shall not as to any Person of which such corporation is a Subsidiary, be
considered to be a Joint Venture to which such Person is a party.
"Legal Holiday" means Saturday, Sunday or a day on which
banking institutions in New York, New York or at a place of payment are
authorized or obligated by law, regulation or executive order to remain closed.
"Lien" means any mortgage, pledge, security interest,
encumbrance, lien or charge of any kind (including any conditional sale or other
title retention agreement or lease in the nature thereof).
"Net Available Cash" from an Asset Disposition means cash
payments, Cash Equivalents and Fully Traded Common Stock received therefrom
(including any cash payments, Cash Equivalents and Fully Traded Common Stock
received by way of deferred payment of
<PAGE> 20
-13-
principal pursuant to a note or installment receivable or otherwise, but only as
and when received, but excluding any other consideration received in the form of
assumption by the acquiring Person of Indebtedness or other obligations relating
to such properties or assets or received in any other noncash form) in each case
net of all legal, title and recording tax expenses, commissions and other fees
and expenses incurred, and all federal, state, provincial, foreign and local
taxes required to be accrued as a liability under GAAP, as a consequence of such
Asset Disposition, and in each case net of all payments made on any Indebtedness
which is secured by any assets subject to such Asset Disposition, in accordance
with the terms of any Lien upon or other security agreement of any kind with
respect to such assets, or which must by its terms, or in order to obtain a
necessary consent to such Asset Disposition, or by applicable law be repaid out
of the proceeds from such Asset Disposition, and net of all distributions and
other payments required to be made to minority interestholders in Subsidiaries
or joint ventures as a result of such Asset Disposition.
"Net Cash Proceeds," with respect to any issuance or sale of
Capital Stock, means the cash proceeds of such issuance or sale net of
attorneys' fees, accountants' fees, underwriters' or placement agents' fees,
discounts or commissions and brokerage, consultant and other fees actually
incurred in connection with such issuance or sale and net of taxes paid or
payable as a result thereof.
"Officer" means the Chairman of the Board of Directors, the
Chief Executive Officer, the President, the Chief Financial Officer, the
Treasurer, Controller, Secretary or any Vice President of the Company or any
other obligor upon the Securities.
"Officers' Certificate" means a certificate signed by the
Chairman of the Board of Directors, the Vice Chairman, the President or any Vice
President and by the Chief Financial Officer, Treasurer or the Secretary of such
Person which shall comply with applicable provisions of Sections 10.4 and 10.5
hereof.
"144A Global Security" means a permanent global security in
registered form representing the aggregate principal amount of Securities sold
in reliance on Rule 144A.
"Opinion of Counsel" means an opinion in writing signed by
legal counsel who is reasonably acceptable to the Trustee. Such counsel may be
an employee of or counsel to the Company, any Subsidiary of the Company or to
the Trustee.
"Paying Agent" has the meaning set forth in Section 2.3.
"Permitted Investments" means any of the following: (i) any
investment in direct obligations of the United States of America or any agency
thereof or obligations guaranteed by the United States of America or any agency
thereof, (ii) investments in time deposit accounts,
<PAGE> 21
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certificates of deposit and money market deposits maturing within 180 days of
the date of acquisition thereof issued by a bank or trust company which is
organized under the laws of the United States of America, any state thereof or
any foreign country recognized by the United States, and, in the case of
investments in excess of $100,000 in any one bank or trust company, which bank
or trust company has capital, surplus and undivided profits aggregating in
excess of $50,000,000 (or the foreign currency equivalent thereof) and has
outstanding debt which is rated "A" (or such similar equivalent rating) or
higher by at least one nationally recognized statistical rating organization (as
defined in Rule 436 under the Securities Act) or any money-market fund sponsored
by a registered broker dealer or mutual fund distributor, (iii) repurchase
obligations with a term of not more than 30 days for underlying securities of
the types described in clause (i) above entered into with a bank meeting the
qualifications described in clause (ii) above, (iv) investments in commercial
paper, maturing not more than 90 days after the date of acquisition, issued by a
corporation (other than an Affiliate of the Company) organized and in existence
under the laws of the United States of America or any foreign country recognized
by the United States of America with a rating at the time as of which any
investment therein is made of "P-1" (or higher) according to Moody's Investors
Service, Inc. or "A-1" (or higher) according to Standard & Poor's Corporation,
and (v) investments in securities with maturities of six months or less from the
date of acquisition issued or fully guaranteed by any state, commonwealth or
territory of the United States of America, or by any political subdivision or
taxing authority thereof, and rated at least "A" by Standard & Poor's
Corporation or "A" by Moody's Investors Service, Inc.
"Permitted Liens" means, with respect to any Person, (a) Liens
existing on the date of this Indenture, including Liens securing borrowings up
to the amount of the commitments under the Credit Agreement on the Existing
Securities Issue Date and other obligations under or expressly permitted by the
Credit Agreement; (b) Liens subsequently created, whether under the Credit
Agreement or otherwise; provided that such Liens, together with any Liens under
clause (a) that secure Indebtedness under the Credit Agreement, do not secure
Indebtedness with a principal amount that is greater than the amount of the
commitments under the Credit Agreement on the Existing Securities Issue Date
except to the extent such Liens are permitted under any of clauses (c) through
(t) of this definition of Permitted Liens; (c) Liens securing borrowings of up
to $60 million permitted pursuant to Section 4.9(b)(vi); (d) Liens on property
at the time such Person or any of its Subsidiaries acquires the property,
including any acquisition by means of a merger or consolidation with or into
such Person or a Subsidiary of such Person; provided, however, that the Liens
may not extend to any other property owned by such Person or any of its
Subsidiaries; (e) Liens securing Purchase Money Indebtedness; (f) additional
Liens for any purpose of up to 15% of the Company's Consolidated Net Tangible
Assets; (g) pledges or deposits by such Person under workmen's compensation
laws, unemployment insurance laws or similar legislation, or good faith deposits
in connection with bids, tenders, contracts (other than for the payment of
Indebtedness) or leases to which such Person is a party, or deposits to secure
<PAGE> 22
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public or statutory obligations of such Person or deposits of cash or United
States government bonds to secure surety or appeal bonds to which such Person is
a party, or deposits as security for contested taxes or import duties or for the
payment of rent, in each case Incurred in the ordinary course of business; (h)
Liens imposed by law, such as carriers', warehousemen's and mechanics' Liens, in
each case for sums not yet due or being contested in good faith by appropriate
proceedings or other Liens arising out of judgments or awards against such
Person with respect to which such Person shall then be proceeding with an appeal
or other proceedings for review; (i) Liens for property taxes not yet subject to
penalties for non-payment or which are being contested in good faith and by
appropriate proceedings; (j) Liens in favor of issuers of surety bonds or
letters of credit issued pursuant to the request of and for the account of such
Person in the ordinary course of its business; provided, however, that such
letters of credit (and reimbursement obligations thereunder) do not constitute
Indebtedness; (k) survey exceptions, encumbrances, easements or reservations of,
or rights of others for, licenses, rights of way, sewers, electric lines,
telegraph and telephone lines and other similar purposes, or zoning or other
restrictions as to the use of real properties or Liens incidental to the conduct
of the business of such Person or to the ownership of its properties which were
not Incurred in connection with Indebtedness and which do not in the aggregate
materially adversely affect the value of said properties or materially impair
their use in the operation of the business of such Person; (l) Liens securing
Indebtedness incurred to finance the construction, purchase or lease of, or
repairs, improvements or additions to, property of such Person; provided,
however, that the Lien may not extend to any other property owned by such Person
or any of its Restricted Subsidiaries at the time the Lien is Incurred, and the
Indebtedness secured by the Lien may not be Incurred more that 180 days after
the later of the acquisition, completion of construction, repair, improvement,
addition or commencement of full operation of the property subject to the Lien;
(m) Liens on inventory and receivables and the products and proceeds thereof;
(n) Liens on property or shares of stock of another Person at the time such
other Person becomes a Subsidiary of such Person; provided, however, that any
such Lien may not extend to any other property owned by such Person or any of
its Restricted Subsidiaries; (o) Liens securing Indebtedness or other
obligations of a Subsidiary of such Person owing to such Person or a Wholly
Owned Subsidiary of such Person (other than an Unrestricted Subsidiary); (p)
Liens Incurred by another Person on assets that are the subject of a Capital
Lease Obligation to which such Person or a Subsidiary of such Person is a party;
provided, however, that any such Lien may not secure Indebtedness of such Person
or any of its Restricted Subsidiaries (except by virtue of clause (vii) of the
definition of "Indebtedness") and may not extend to any other property owned by
such Person or any Subsidiary of such Person; (q) Liens securing Interest Rate
Protection Agreements so long as the related Indebtedness is, and is permitted
to be under this Indenture, secured by a Lien on the same property securing the
Interest Rate Protection Agreement; (r) Liens to secure any Refinancing (or
successive Refinancings) as a whole, or in part, of any Indebtedness secured by
any Lien referred to in the foregoing clauses (a), (c), (l) and (n); provided,
however, that (x) such new Lien shall be limited to all or part of the same
property that secured the original Lien (plus
<PAGE> 23
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improvements on such property) and (y) the Indebtedness secured by such Lien at
such time is not increased (other than by an amount necessary to pay fees and
expenses, including premiums, related to the Refinancing of such Indebtedness);
(s) Liens Incurred in connection with any Sale/Leaseback Transaction permitted
pursuant to Section 4.17 securing borrowings of up to $10 million; and (t) Liens
with respect to any Indebtedness Incurred by any Restricted Subsidiary pursuant
to clause (7) of Section 4.10; provided that such Lien shall only be a
"Permitted Lien" so long as such Indebtedness requires a restriction on
distributions referred to under Section 4.12(iv)(7).
"Person" means an individual, corporation, partnership, joint
venture, association, joint-stock company, trust, unincorporated organization or
government or any agency or political subdivision thereof or any other entity.
"Physical Securities" means one or more certificated
Securities in registered form.
"Preferred Stock," as applied to the Capital Stock of any
corporation, means Capital Stock of any class or classes (however designated)
which is preferred as to the payment of dividends, or as to the distribution of
assets upon any voluntary or involuntary liquidation or dissolution of such
corporation, over shares of Capital Stock of any other class of such
corporation.
"Principal" of a Security means the principal of the Security
plus the premium, if any, payable on the Security which is due or overdue or is
to become due at the relevant time.
"Private Exchange Securities" has the meaning provided in
Section 1 of the Registration Rights Agreement.
"Private Placement Legend" means the legend initially set
forth on the Initial Securities in the form set forth on Exhibit A hereto.
"Pulse Shareholders" means, collectively, Emilio A. Fernandez,
Jr., Emilio A. Fernandez, Jr., as custodian for Eric A. Fernandez, Ofelia B.
Fernandez, Emily A. Fernandez, Angel P. Bezos, Rayssa C. Bezos, as custodian for
Michelle R. Bezos, Jennifer A. Bezos, David R. Bezos, Jose M. Llosa and Ronald
L. Woltz.
"Purchase Agreement" means the Purchase Agreement dated as of
January 7, 1999, by and among the Company and the Initial Purchaser.
"Purchase Money Indebtedness" means Indebtedness (i)
consisting of the deferred purchase price of property, conditional sale
obligations, obligations under any title retention agreement and other purchase
money obligations, including borrowings, in each case where the maturity of such
Indebtedness does not exceed the anticipated useful life of the asset being
<PAGE> 24
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financed, and (ii) Incurred to finance the acquisition or construction by any
Subsidiary of such asset, including additions and improvements; provided,
however, that any Lien arising in connection with any such Indebtedness shall be
limited to the specified asset being financed or, in the case of real property
or fixtures, including additions and improvements, the real property on which
such asset is attached; and provided, further, however, that the principal
amount of such Indebtedness does not exceed the lesser of 85% of the cost or 85%
of the fair market value of the asset being financed (such fair market value as
determined in good faith by the Board of Directors, as evidenced by a
resolution).
"Qualified Institutional Buyer" or "QIB" means a "qualified
institutional buyer" as that term is defined in Rule 144A under the Securities
Act.
"Redemption Date," when used with respect to any Security to
be redeemed, means the date fixed for such redemption pursuant to this
Indenture.
"Redemption Date," when used with respect to any Security to
be redeemed, means the date fixed by the Company for such redemption pursuant to
this Indenture and the Securities.
"Redemption Price" means the amount payable for the redemption
or repurchase of any Security on the Redemption Date, and shall always include
interest accrued and unpaid to the Redemption Date, unless otherwise
specifically provided.
"Refinance" means, in respect of any Indebtedness, to
refinance, extend, renew, refund, repay, prepay, redeem, defease or retire, or
to issue Indebtedness in exchange or replacement for, such Indebtedness.
"Refinanced" and "Refinancing" shall have correlative meanings.
"Refinancing Indebtedness" means Indebtedness that Refinances
any Indebtedness of the Company or any Restricted Subsidiary existing on the
date of the Existing Securities Indenture or Incurred in compliance with this
Indenture; provided, however, that (i) such Refinancing Indebtedness has a
Stated Maturity no earlier than the Stated Maturity of the Indebtedness being
Refinanced, (ii) such Refinancing Indebtedness has an Average Life at the time
such Refinancing Indebtedness is Incurred that is equal to or greater than the
Average Life of the Indebtedness being Refinanced, (iii) such Refinancing
Indebtedness has an aggregate principal amount (or if Incurred with original
issue discount, an aggregate issue price) that is equal to or less than the
aggregate principal amount (or if Incurred with original issue discount, the
aggregate accreted value) then outstanding or committed (plus fees and expenses,
including any premium and defeasance costs) under the Indebtedness being
Refinanced; provided further, however, that Refinancing Indebtedness shall not
include (x) Indebtedness of a Subsidiary that refinances Indebtedness of the
Company or (y) Indebtedness of the Company or a Restricted
<PAGE> 25
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Subsidiary that refinances Indebtedness of an Unrestricted Subsidiary and (iv)
such Refinancing Indebtedness is subordinated in right of payment to the
Securities at least to the extent that the Indebtedness to be Refinanced is
subordinated in right of payment to the Securities.
"Registrar" has the meaning set forth in Section 2.3.
"Registration Rights Agreement" means the Exchange and
Registration Rights Agreement dated as of January 12, 1999, by and among the
Company and the Initial Purchaser.
"Regulation S" means Regulation S under the Securities Act.
"Regulation S Global Security" means the Regulation S
Temporary Global Security and the Regulation S Permanent Global Security.
"Regulation S Permanent Global Security" means a permanent
global security in registered form representing the outstanding principal amount
of the Regulation S Temporary Global Security upon expiration of the Restricted
Period.
"Regulation S Temporary Global Security" means a temporary
global security in registered form representing the aggregate principal amount
of Securities sold in reliance on Regulation S.
"Related Business" means any business related, ancillary or
complementary to the businesses of the Company and the Restricted Subsidiaries
on the date of the Existing Securities Indenture.
"Responsible Officer," when used with respect to the Trustee,
shall mean any officer in the corporate trust department of the Trustee or any
officer of the Trustee customarily performing functions similar to those
performed by any officer in the corporate trust department of the Trustee with
respect to a particular corporate matter or any other officer to whom any
corporate trust matter is referred because of his knowledge of and familiarity
with the particular subject.
"Restricted Payment" with respect to any Person means (i) the
declaration or payment of any dividends or any other distributions of any sort
in respect of its Capital Stock (including any payment in connection with any
merger or consolidation involving such Person) or similar payment to the direct
or indirect holders of its Capital Stock(other than dividends or distributions
payable solely in its Capital Stock (other than Disqualified Stock) or rights to
acquire its Capital Stock (other than Disqualified Stock) and dividends or
distributions payable solely to the Company or a Restricted Subsidiary, and
other than pro rata dividends or other distributions made by a Subsidiary to
minority stockholders (or owners of an equivalent interest in the case of a
Subsidiary that is an entity other than a corporation)), (ii) the purchase,
<PAGE> 26
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redemption or other acquisition or retirement for value of any Capital Stock of
the Company or of any Restricted Subsidiary held by any Person or of any Capital
Stock of a Restricted Subsidiary held by any Affiliate of the Company (other
than a Wholly Owned Subsidiary), including the exercise of any option to
exchange any Capital Stock (other than into Capital Stock of the Company that is
not Disqualified Stock), (iii) any principal payment on, or purchase,
repurchase, redemption, defeasance or other acquisition or retirement for value,
prior to scheduled maturity, scheduled repayment or scheduled sinking fund
payment of any Subordinated Indebtedness (other than the purchase, repurchase or
other acquisition of Indebtedness purchased in anticipation of satisfying a
sinking fund obligation, principal installment or final maturity, in each case
due within one year of the date of acquisition) or (iv) the making of any
Investment in any Person (other than (x) a Permitted Investment or (y) any
Investment made to acquire a Restricted Subsidiary).
"Restricted Period" means the "distribution compliance period"
applicable to the Company described in Regulation S.
"Restricted Security" has the meaning set forth in Rule
144(a)(3) under the Securities Act; provided, however, that the Trustee shall be
entitled to request and conclusively rely upon an Opinion of Counsel with
respect to whether any Security is a Restricted Security.
"Restricted Subsidiary" means any Subsidiary of the Company
that is not an Unrestricted Subsidiary.
"Rule 144A" means Rule 144A under the Securities Act.
"Rule 144A Global Security" means a permanent global security
in registered form representing the outstanding principal amount of Securities
sold in reliance on Rule 144A.
"Sale/Leaseback Transaction" means an arrangement relating to
property now owned or hereafter acquired whereby the Company or a Restricted
Subsidiary transfers such property to a Person and leases it back from such
Person, other than leases for a term of not more than 12 months or between the
Company and a Wholly Owned Subsidiary or between Wholly Owned Subsidiaries.
"SEC" means the Securities and Exchange Commission.
"Securities" shall have the meaning set forth in the recitals
of this Indenture and more particularly shall mean any Securities issued under
this Indenture and means, collectively, the Initial Securities, the Private
Exchange Securities and the Unrestricted Securities treated as a single class of
securities, as amended or supplemented from time to time in accordance with the
terms of this Indenture.
<PAGE> 27
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"Securities Act" means the Securities Act of 1933, as amended.
"Senior Indebtedness" means (i) Indebtedness of the Company,
whether outstanding on the date of the Existing Securities Indenture or
thereafter Incurred and (ii) accrued and unpaid interest (including interest
accruing on or after the filing of any petition in bankruptcy or for
reorganization relating to the Company to the extent post-filing interest is
allowed in such proceeding) in respect of (A) indebtedness of the Company for
money borrowed and (B) indebtedness evidenced by notes, debentures, bonds or
other similar instruments for the payment of which the Company is responsible or
liable unless, in the instrument creating or evidencing the same or pursuant to
which the same is outstanding, it is provided that such obligations are
subordinate in right of payment to the Securities; provided, however, that
Senior Indebtedness shall not include (1) any obligation of the Company to any
Subsidiary, (2) any liability for federal, state, local or other taxes owed or
owing by the Company, (3) any accounts payable or other liability to trade
creditors arising in the ordinary course of business (including guarantees
thereof or instruments evidencing such liabilities), (4) any Indebtedness of the
Company (and any accrued and unpaid interest in respect thereof) which is
expressly subordinate in right of payment to any other Indebtedness or other
obligation of the Company or (5) that portion of any Indebtedness which at the
time of Incurrence is Incurred in violation of this Indenture.
"Stated Maturity" means, with respect to any security, the
date specified in such security as the fixed date on which the final payment of
principal of such security is due and payable, including pursuant to any
mandatory redemption provision (but excluding any provision providing for the
repurchase of such security at the option of the holder thereof upon the
happening of any contingency unless such contingency has occurred).
"Subordinated Indebtedness" means any Indebtedness of the
Company (whether outstanding on the Existing Securities Issue Date or thereafter
Incurred) which is subordinate or junior in right of payment to the Securities
pursuant to a written agreement to that effect.
"Subsidiary" means, in respect of any Person, any corporation,
association, partnership or other business entity of which more than 50% of the
total voting power of shares of Capital Stock or other interests (including
partnership interests) entitled (without regard to the occurrence of any
contingency) to vote in the election of directors, managers or trustees thereof
is at the time owned or controlled, directly or indirectly, by (i) such Person,
(ii) such Person and one or more Subsidiaries of such Person or (iii) one or
more Subsidiaries of such Person.
"TIA" or "Trust Indenture Act" means the Trust Indenture Act
of 1939, as amended (15 U.S.C. Sections 77aaa-77bbbb), as in effect on the date
on which this Indenture is qualified under the TIA, except as provided in
Section 9.3 hereof; provided, however, that in the event the Trust Indenture Act
is amended after such date, "Trust Indenture Act" and "TIA" mean, to the extent
required by such amendment, the Trust Indenture Act as so amended.
<PAGE> 28
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"Trustee" means the party named as such in this Indenture
until a successor replaces it in accordance with the applicable provisions
hereof, and thereafter means such successor serving hereunder.
"Unallocated ESOP Shares" means shares of Common Stock of the
Company which are held by the ESOP but have not yet been allocated to
participants' accounts.
"Unrestricted Securities" means one or more Securities that do
not and are not required to bear the Private Placement Legend in the form set
forth in Exhibit A hereto, including, without limitation, the Exchange
Securities and any Securities registered under the Securities Act pursuant to
and in accordance with the Registration Rights Agreement.
"Unrestricted Subsidiary" means (i) any Subsidiary of the
Company that at the time of determination shall be designated an Unrestricted
Subsidiary by the Board of Directors in the manner provided below and (ii) any
Subsidiary of an Unrestricted Subsidiary. The Board of Directors may designate
any Subsidiary of the Company (including any newly acquired or newly formed
Subsidiary) to be an Unrestricted Subsidiary unless such Subsidiary or any of
its Subsidiaries owns any Capital Stock or Indebtedness of, or holds any Lien on
any property of, the Company or any other Subsidiary of the Company that is not
a Subsidiary of the Subsidiary to be so designated; provided, however, that
either (A) the Subsidiary to be so designated has total assets of $1,000 or less
or (B) if such Subsidiary has assets greater than $1,000, such designation would
be permitted under Section 4.11. The Board of Directors may designate any
Unrestricted Subsidiary to be a Restricted Subsidiary; provided, however, that
immediately after giving effect to such designation (x) the Company could Incur
$1.00 of additional Indebtedness under Section 4.9(a) and (y) no Default shall
have occurred and be continuing. Any such designation by the Board of Directors
shall be evidenced to the Trustee by promptly filing with the Trustee a copy of
the board resolution giving effect to such designation and an Officers'
Certificate certifying that such designation complied with the foregoing
provisions.
"U.S. Government Obligations" means direct obligations (or
certificates representing an ownership interest in such obligations) of the
United States of America (including any agency or instrumentality thereof) for
the payment of which the full faith and credit of the United States of America
is pledged and which are not callable at the issuer's option.
"Vestar" means Vestar WABCO Investors, L.P., a Delaware
limited partnership.
"Vestar Capital" means Vestar Capital Partners, Inc., a
Delaware corporation.
<PAGE> 29
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"Voting Stock" of a corporation means all classes of Capital
Stock of such corporation then outstanding and normally entitled to vote in the
election of directors.
"Voting Trust" shall mean the RAC Voting Trust, established
pursuant to the RAC Voting Trust/Disposition Agreement, dated as of January 9,
1990, as amended as of February 28, 1990, March 9, 1990 and amended pursuant to
that certain Amended WABCO Voting Trust/Disposition Agreement dated as of
January 31, 1995, by and between the individuals named therein and the voting
trustees (as such agreement may be further amended or modified from time to
time).
"Wholly Owned Subsidiary" means a Restricted Subsidiary all
the Capital Stock of which (other than directors' qualifying shares and shares
held by other Persons to the extent such shares are required by applicable law
to be held by a Person other than the Company or a Restricted Subsidiary) is
owned by the Company or one or more Wholly Owned Subsidiaries.
Section 1.2. Other Definitions.
Defined in
Term Section
---- -------
"Affiliate Transaction"......................... 4.14(a)
"covenant defeasance"........................... 8.1(c)
"Custodian"..................................... 6.1
"Excess Net Available Cash"..................... 4.13(a)
"Excess Proceeds"............................... 4.13(a)
"Excess Proceeds Offer"......................... 4.13(a)
"Excess Proceeds Payment"....................... 4.13(a)
"Excess Proceeds Payment Date".................. 4.13(c)
"Event of Default".............................. 6.1
"legal defeasance".............................. 8.1(b)
"Paying Agent".................................. 2.3
"Registrar"..................................... 2.3
"Successor Company"............................. 5.1
Section 1.3. Incorporation by Reference of Trust Indenture
Act.
Whenever this Indenture refers to a provision of the TIA, the
provision is incorporated by reference in and made a part of this Indenture.
<PAGE> 30
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The following TIA terms used in this Indenture have the
following meanings:
"Commission" means the SEC;
"indenture securities" means the Securities;
"indenture security holder" means a Securityholder;
"indenture to be qualified" means this Indenture;
"indenture trustee" or "institutional trustee" means the
Trustee; and
"obligor" on the Securities means the Company, any other
obligor upon the Securities or any successor obligor upon the Securities.
All other terms used in this Indenture that are defined by the
TIA, defined by TIA reference to another statute or defined by SEC rule under
the TIA have the meaning so assigned to them.
In addition, for purposes of Sections 311(b)(4) and 311(b)(6)
of the TIA, the following terms shall have the following meanings:
"cash transaction" means any transaction in which full payment
for goods or securities sold is made within seven days after delivery of the
goods or securities in currency or in checks or other orders drawn upon banks or
bankers acceptances and payable upon demand.
"self-liquidating paper" means any draft, bill of exchange,
acceptance or obligation which is made, drawn, negotiated or incurred by the
Company for the purpose of financing the purchase, processing, manufacture,
shipment, storage or sale of goods, wares or merchandise and which is secured by
documents evidencing title to, possession of or a lien upon, the goods, wares or
merchandise or the receivables or proceeds arising from the sale of the goods,
wares or merchandise previously constituting the security, provided the security
is received by the Trustee simultaneously with the creation of the creditor
relationship with the Company arising from the making, drawing, negotiating or
incurring of the draft, bill of exchange, acceptance or obligation.
Section 1.4. Rules of Construction.
Unless the context otherwise requires:
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the
meaning assigned to it in accordance with GAAP;
<PAGE> 31
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(3) "or" is not exclusive;
(4) "including" means including without limitation;
(5) words in the singular include the plural, and in the
plural include the singular;
(6) unsecured Indebtedness shall not be deemed to be
subordinate or junior to secured Indebtedness merely by virtue of its
nature as unsecured Indebtedness; and
(7) provisions apply to successive events and transactions.
ARTICLE 2
THE SECURITIES
Section 2.1. Form and Dating.
The Initial Securities and the Trustee's certificate of
authentication thereof shall be substantially in the form of Exhibit A hereto,
which is hereby incorporated in and expressly made a part of this Indenture. The
Exchange Securities and the Trustee's certificate of authentication thereof
shall be substantially in the form of Exhibit B hereto, which is hereby
incorporated in and expressly made a part of this Indenture. The Securities may
have notations, legends or endorsements required by law, stock exchange rule or
usage. The Company and the Trustee shall approve the form of the Securities and
any notation, legend or endorsement on them. Each Security shall be dated the
date of its issuance and shall show the date of its authentication.
Securities offered and sold in reliance on Rule 144A shall be
issued initially in the form of one or more Rule 144A Global Securities and
Securities offered and sold in reliance on Regulation S shall be issued
initially in the form of one or more Regulation S Temporary Global Securities,
each substantially in the form set forth in Exhibit A hereto, deposited with the
Trustee, as custodian for the Depository, duly executed by the Company and
authenticated by the Trustee as hereinafter provided and shall bear the legend
set forth in Exhibit C hereto. The aggregate principal amount of the Global
Securities may from time to time be increased or decreased by adjustments made
on the records of the Trustee, as custodian for the Depository, as hereinafter
provided. Securities issued in exchange for interests in a Global Security
pursuant to Section 2.17 may be issued in the form of Physical Securities in
substantially the form set forth in Exhibit A hereto.
The Restricted Period for the Regulation S Temporary Global
Security shall be terminated upon the receipt by the Trustee of (i) a written
certificate from the Depository, together with copies of certificates from the
Euroclear System and Cedel Bank certifying that
<PAGE> 32
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they have received certification of non-United States beneficial ownership of
100% of the aggregate principal amount of the Regulation S Temporary Global
Security (except to the extent of any beneficial owners thereof who acquired an
interest therein during the Restricted Period pursuant to another exemption from
registration under the Securities Act and who will take delivery of a beneficial
ownership interest in a 144A Global Security or an IAI Global Security) and (ii)
receipt of an Opinion of Counsel. Following the termination of the Restricted
Period, beneficial interests in the Regulation S Temporary Global Security shall
be exchanged for beneficial interests in the Regulation S Permanent Global
Security. Simultaneously with the authentication of the Regulation S Permanent
Global Security, the Trustee shall cancel the Regulation S Temporary Global
Security. The aggregate principal amount of the Regulation S Temporary Global
Security and the Regulation S Permanent Global Security may from time to time be
increased or decreased by adjustments made on the records of the Trustee and the
Depository or its nominee, as the case may be, in connection with transfers of
interest as hereinafter provided.
The provisions of the "Operating Procedures of the Euroclear
System" and "Terms and Conditions Governing Use of Euroclear" and the "General
Terms and Conditions of Cedel Bank" and "Customer Handbook" of Cedel Bank shall
be applicable to transfers of beneficial interests in the Regulation S Temporary
Global Security and the Regulation S Permanent Global Security that are held by
participants through Euroclear or Cedel Bank.
Section 2.2. Execution and Authentication.
Two Officers shall sign the Securities for the Company by
manual or facsimile signature. The Company's seal shall be reproduced on the
Securities.
If an Officer whose signature is on a Security no longer holds
that office at the time the Security is authenticated, the Security shall
nevertheless be valid.
A Security shall not be valid until authenticated by the
manual signature of the Trustee. The signature shall be conclusive evidence that
the Security has been authenticated under this Indenture. The form of Trustee's
certificate of authentication to be borne by the Securities shall be
substantially as set forth in Exhibits A and B hereto.
The Trustee shall from time to time authenticate Securities
for original issue in an aggregate principal amount not to exceed $1.00 upon a
written order of the Company signed by two Officers. Such order shall specify
the amount of the Securities to be authenticated and the date on which the
original issue of the Securities is to be authenticated. The aggregate principal
amount of Securities outstanding at any time may not exceed $1.00 except as
provided in Section 2.7.
<PAGE> 33
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The Trustee may appoint an authenticating agent acceptable to
the Company to authenticate Securities. An authenticating agent may authenticate
Securities whenever the Trustee may do so. Each reference in this Indenture to
authentication by the Trustee includes authentication by such agent. An
authenticating agent has the same rights as an Agent to deal with the Company or
an Affiliate. The Company agrees to compensate any authenticating agent for its
services hereunder.
Section 2.3. Registrar and Paying Agent.
The Company shall maintain an office or agency where
Securities may be presented for registration of transfer or for exchange
("Registrar") and an office or agency including the office or agency maintained
by the Company pursuant to Section 4.2 where Securities may be presented for
payment ("Paying Agent"). The Registrar shall keep a register of the Securities
and of their transfer and exchange. The Company may appoint one or more
co-registrars and one or more additional paying agents. The term "Paying Agent"
includes any additional paying agent. The Company may change any Paying Agent,
Registrar or co-registrar without notice to any Securityholder. The Company
shall notify the Trustee of the name and address of any Agent not a party to
this Indenture. If the Company fails to appoint or maintain another entity as
Registrar or Paying Agent, the Trustee shall act as such. The Company or any of
its Subsidiaries may act as Paying Agent, Registrar or co-registrar.
The Company initially appoints the Trustee as Registrar and
Paying Agent in connection with the Securities.
Section 2.4. Paying Agent to Hold Money in Trust.
The Company (or any other obligor upon the Securities) shall
require each Paying Agent other than the Trustee to agree in writing that the
Paying Agent will hold in trust for the benefit of Securityholders or the
Trustee all money held by the Paying Agent for the payment of principal or
interest on the Securities, and will notify the Trustee of any Default by the
Company (or any other obligor upon the Securities) in making any such payment.
While any such Default continues, the Trustee may require a Paying Agent to pay
all money held by it to the Trustee. The Company (or any other obligor upon the
Securities) at any time may require a Paying Agent to pay all money held by it
to the Trustee. Upon payment over to the Trustee of all money that shall have
been delivered by the Company to the Paying Agent, the Paying Agent shall have
no further liability for the money. If the Company, a Subsidiary or any other
obligor upon the Securities acts as Paying Agent, it shall segregate and hold in
a separate trust fund for the benefit of the Securityholders all money held by
it as Paying Agent.
<PAGE> 34
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Section 2.5. Securityholder Lists.
The Trustee shall preserve in as current a form as is
reasonably practicable the most recent list available to it of the names and
addresses of Securityholders and shall otherwise comply with TIA Section 312(a).
If the Trustee is not the Registrar, the Company (or any other obligor upon the
Securities) shall furnish to the Trustee at least seven Business Days before
each interest payment date (and in all events at intervals of not more than six
months) and at such other times as the Trustee may request in writing a list in
such form and as of such date as the Trustee may reasonably require of the names
and addresses of Securityholders, and the Company shall otherwise comply with
TIA Section 312(a).
Section 2.6. Transfer and Exchange.
The Securities will be issued in fully registered form and
will be transferable only upon the surrender of the Securities being transferred
for registration of transfer. Where Securities are presented to the Registrar or
a co-registrar with a request to register, transfer or exchange them for an
equal principal amount of Securities of other denominations, the Registrar shall
register the transfer or make the exchange if its requirements for such
transactions are met; provided that any Security presented or surrendered for
registration of transfer or exchange shall be duly endorsed or accompanied by a
written instruction of transfer in form satisfactory to the Registrar and the
Trustee duly executed by the Holder thereof or his attorney duly authorized in
writing. To permit registrations of transfer and exchanges in compliance with
this Indenture, the Company shall issue and the Trustee shall authenticate
Securities at the Registrar's request.
The Company shall not be required (i) to issue, to register
the transfer of or to exchange Securities during a period beginning at the
opening of business on a Business Day 15 days before the day of any selection of
Securities for redemption under Section 3.2 hereof and ending at the close of
business on the day of selection, (ii) to register the transfer of or exchange
of a Security so selected for redemption in whole or in part, except the
unredeemed portion of any Security being redeemed in part or (iii) to register
the transfer or exchange of a Security between the record date and the next
succeeding interest payment date.
No service charge shall be made for any registration of
transfer or exchange (except as otherwise expressly permitted herein), but the
Company may require payment of a sum sufficient to cover any tax, assessment or
other governmental charge payable in connection therewith (other than such
transfer tax or similar governmental charge payable upon exchanges pursuant to
Section 2.10, 3.6 or 9.5 hereof).
Any Holder of a beneficial interest in a Global Security
shall, by acceptance of such beneficial interest in a Global Security, agree
that transfers of beneficial interests in such Global Security may be effected
only through a book-entry system maintained by the Depository (or its agent),
and that ownership of a beneficial interest in a Global Security shall be
required to be reflected in a book entry.
<PAGE> 35
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Section 2.7. Replacement Securities.
If any mutilated Security is surrendered to the Trustee, or
the Company and the Trustee receive evidence to their satisfaction of the
destruction, loss or theft of any Security, the Company shall issue and the
Trustee, upon the written order of the Company signed by two Officers, shall
authenticate a replacement Security if the Trustee's requirements are met. If
required by the Trustee or the Company, an indemnity bond must be supplied by
the Holder that is sufficient in the judgment of the Trustee and the Company to
protect the Company, the Trustee, any Agent or any authenticating agent from any
loss which any of them may suffer if a Security is replaced. The Company may
charge for its expenses in replacing a Security.
Every replacement Security is an additional obligation of the
Company and entitled to the benefit of this Indenture.
Section 2.8. Outstanding Securities.
The Securities outstanding at any time are all the Securities
authenticated by the Trustee except for those cancelled by it, those delivered
to it for cancellation and those described in this Section as not outstanding.
If a Security is replaced pursuant to Section 2.7, it ceases
to be outstanding unless the Trustee receives proof satisfactory to it that the
replaced Security is held by a bona fide purchaser.
If the Paying Agent segregates and holds in trust, in
accordance with this Indenture, on a redemption date or maturity date money
sufficient to pay all principal and interest payable on that date with respect
to the Securities (or portions thereof) to be redeemed or maturing, as the case
may be, and is not prohibited from paying such money to the Holders thereof
pursuant to the terms of this Indenture, then on and after that date such
Securities (or portions thereof) cease to be outstanding and interest on them
ceases to accrue.
A Security does not cease to be outstanding because the
Company or an Affiliate holds the Security, except as otherwise provided in
Section 2.9 hereof.
Section 2.9. Treasury Securities.
In determining whether the Holders of the required principal
amount of Securities have concurred in any direction, waiver or consent,
Securities owned by the Company or a Subsidiary thereof shall be considered as
though not outstanding, except that for the purposes of determining whether the
Trustee shall be protected in relying on any such direction, waiver or consent,
only Securities which the Trustee knows are so owned shall be so disregarded.
<PAGE> 36
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Section 2.10. Temporary Securities.
Until definitive Securities are ready for delivery, the
Company may prepare and the Trustee shall authenticate temporary Securities.
Temporary Securities shall be substantially in the form of definitive Securities
but may have variations that the Company considers appropriate for temporary
Securities. Without unreasonable delay, the Company shall prepare and the
Trustee, upon receipt of the written order of the Company signed by two
Officers, shall authenticate definitive Securities in exchange for temporary
Securities. Until such exchange, temporary Securities shall be entitled to the
same rights, benefits and privileges as definitive Securities.
Section 2.11. Cancellation.
The Company at any time may deliver Securities to the Trustee
for cancellation. The Registrar and Paying Agent shall forward to the Trustee
any Securities surrendered to them for registration of transfer, exchange or
payment. The Trustee shall cancel all Securities surrendered for registration of
transfer, exchange, payment, replacement or cancellation. The Company may not
issue new Securities to replace Securities that it has paid or that have been
delivered to the Trustee for cancellation. All cancelled Securities held by the
Trustee shall be returned promptly to the Company.
Section 2.12. Defaulted Interest.
If the Company defaults in a payment of interest on the
Securities, it shall pay the defaulted interest in any lawful manner plus, to
the extent lawful, interest payable on the defaulted interest, to the Persons
who are Securityholders on a subsequent special record date, in each case at the
rate provided in the Securities. The Company shall, with the consent of the
Trustee, fix each such special record date and payment date. At least 15 days
before the special record date, the Company (or the Trustee, in the name of and
at the expense of the Company) shall mail to Securityholders a notice that
states the special record date, the related payment date and the amount of such
interest to be paid.
Section 2.13. Persons Deemed Owners.
Prior to due presentment of a Security for registration of
transfer and subject to Section 2.12, the Company, the Trustee, any Paying
Agent, any co-registrar and any Registrar may deem and treat the person in whose
name any Security shall be registered upon the register of Securities kept by
the Registrar as the absolute owner of such Security (whether or not such
<PAGE> 37
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Security shall be overdue and notwithstanding any notation of the ownership or
other writing thereon made by anyone other than the Company, any co-registrar
and any Registrar) for the purpose of receiving payments of principal of or
interest on such Security and for all other purposes; and none of the Company,
the Trustee, any Paying Agent, any co-registrar or any Registrar shall be
affected by any notice to the contrary.
Section 2.14. CUSIP Numbers.
The Company in issuing the Securities may use "CUSIP" numbers
(if then generally in use), and, if so, the Trustee shall use "CUSIP" numbers in
notices of redemption as a convenience to Holders; provided that any such notice
may state that no representation is made as to the correctness of such numbers
either as printed on the Securities or as contained in any notice of a
redemption and that reliance may be placed only on the other identification
numbers printed on the Securities, and any such redemption shall not be affected
by any defect in or omission of such numbers.
Section 2.15. Book-Entry Provisions for Global Securities.
(a) The Global Securities initially shall (i) be registered in
the name of the Depository or the nominee of such Depository, (ii) be delivered
to the Trustee as custodian for such Depository and (iii) bear legends as set
forth in Exhibit C.
Members of, or participants in, the Depository
("Participants") shall have no rights under this Indenture with respect to any
Global Security held on their behalf by the Depository, or the Trustee as its
custodian, or under the Global Security, and the Depository may be treated by
the Company, the Trustee and any agent of the Company or the Trustee as the
absolute owner of the Global Security for all purposes whatsoever.
Notwithstanding the foregoing, nothing herein shall prevent the Company, the
Trustee or any agent of the Company or the Trustee from giving effect to any
written certification, proxy or other authorization furnished by the Depository
or impair, as between the Depository and Participants, the operation of
customary practices governing the exercise of the rights of a Holder of any
Security.
(b) Transfers of Global Securities shall be limited to
transfers in whole, but not in part, to the Depository, its successors or their
respective nominees. Interests of beneficial owners in the Global Securities may
be transferred or exchanged for Physical Securities in accordance with the rules
and procedures of the Depository and the provisions of Section 2.16; provided,
however, that Physical Securities shall be transferred to all beneficial owners
in exchange for their beneficial interests in Global Securities if (i) the
Company notifies the Trustee in writing that DTC is no longer willing or able to
act as a depositary or DTC ceases to be registered as a clearing agency under
the Exchange Act and a successor depositary is not appointed within 90 days of
such notice or cessation, (ii) the Company, at its option, notifies the Trustee
in writing
<PAGE> 38
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that it elects to cause the issuance of the securities as Physical Securities,
or (iii) an Event of Default has occurred and is continuing and the Registrar
has received a request from the Depository to issue Physical Securities;
provided that in no event shall the Regulation S Temporary Global Security be
exchanged by the Company for Physical Securities prior to (x) the expiration of
the Restricted Period and (y) the receipt by the Registrar of any certificates
required pursuant to Rule 903 under the Securities Act as stated in an Opinion
of Counsel.
(c) In connection with the transfer of Global Securities as an
entirety to beneficial owners pursuant to paragraph (b) of this Section 2.15,
the Global Securities shall be deemed to be surrendered to the Trustee for
cancellation, and the Company shall execute, and the Trustee shall upon written
instructions from the Company authenticate and deliver, to each beneficial owner
identified by the Depository in exchange for its beneficial interest in the
Global Securities, an equal aggregate principal amount of Physical Securities of
authorized denominations.
(d) Any Physical Security constituting a Restricted Security
delivered in exchange for an interest in a Global Security pursuant to paragraph
(c) of this Section 2.15 shall, except as otherwise provided by Section 2.16,
bear the Private Placement Legend.
(e) The Holder of any Global Security may grant proxies and
otherwise authorize any Person, including Participants and Persons that may hold
interests through Participants, to take any action which a Holder is entitled to
take under this Indenture or the Securities.
Section 2.16. Registration of Transfers and Exchanges.
(a) Transfer and Exchange of Physical Securities. When
Physical Securities are presented to the Registrar or co-Registrar with a
written request:
(i) to register the transfer of the Physical Securities; or
(ii) to exchange such Physical Securities for an equal
principal amount of Physical Securities of other authorized
denominations,
the Registrar or co-Registrar shall register the transfer or make the exchange
as requested if the requirements under this Indenture as set forth in this
Section 2.16 for such transactions are met; provided, however, that the Physical
Securities presented or surrendered for registration of transfer or exchange:
(I) shall be duly endorsed or accompanied by a written
instrument of transfer in form satisfactory to the Registrar or
co-Registrar, duly executed by the Holder thereof or his attorney duly
authorized in writing; and
<PAGE> 39
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(II) in the case of Physical Securities the offer and sale of
which have not been registered under the Securities Act, such Physical
Securities shall be accompanied, in the discretion of the Company or
the Trustee, by the following additional information and documents, as
applicable:
(A) if such Physical Security is being delivered to the
Registrar or co-Registrar by a Holder for
registration in the name of such Holder, without
transfer, a certification from such Holder to that
effect (substantially in the form of Exhibit D
hereto); or
(B) if such Physical Security is being transferred to a
QIB in accordance with Rule 144A, a certification to
that effect (substantially in the form of Exhibit D
hereto); or
(C) if such Physical Security is being transferred to an
Institutional Accredited Investor, delivery of a
certification to that effect (substantially in the
form of Exhibit D hereto) and a transferee letter of
representation (substantially in the form of Exhibit
E hereto) and, at the option of the Company or the
Trustee, an Opinion of Counsel reasonably
satisfactory to the Company or the Trustee, as the
case may be, to the effect that such transfer is in
compliance with the Securities Act; or
(D) if such Physical Security is being transferred in
reliance on Regulation S, delivery of a certification
to that effect (substantially in the form of Exhibit
D hereto) and a transferor certificate for Regulation
S transfer substantially in the form of Exhibit F
hereto and, at the option of the Company or the
Trustee, an Opinion of Counsel reasonably
satisfactory to the Company or the Trustee, as the
case may be, to the effect that such transfer is in
compliance with the Securities Act; or
(E) if such Physical Security is being transferred in
reliance on Rule 144 under the Securities Act,
delivery of a certification to that effect
(substantially in the form of Exhibit D hereto) and,
at the option of the Company or the Trustee, an
Opinion of Counsel reasonably satisfactory to the
Company or the Trustee, as the case may be, to the
effect that such transfer is in compliance with the
Securities Act; or
(F) if such Physical Security is being transferred in
reliance on another exemption from the registration
requirements of the Securities Act, a certification
to that effect (substantially in the form of Exhibit
D hereto) and, at the option of the Company or the
Trustee, an Opinion of Counsel reasonably acceptable
to the Company or the Trustee, as the case may be, to
the effect that such transfer is in compliance with
the Securities Act.
<PAGE> 40
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(b) Restrictions on Transfer of a Physical Security for a
Beneficial Interest in a Global Security. A Physical Security the offer and sale
of which has not been registered under the Securities Act may not be exchanged
for a beneficial interest in a Global Security except upon satisfaction of the
requirements set forth below. Upon receipt by the Registrar or co-Registrar of a
Physical Security, duly endorsed or accompanied by appropriate instruments of
transfer, in form satisfactory to the Registrar or co-Registrar, together with:
(A) certification, substantially in the form of Exhibit D
hereto, that such Physical Security is being transferred (I) to a QIB,
(II) to an Institutional Accredited Investor or (III) in an offshore
transaction in reliance on Regulation S and, with respect to (II) and
(III), at the option of the Company or the Trustee, an Opinion of
Counsel reasonably acceptable to the Company or the Trustee, as the
case may be, to the effect that such transfer is in compliance with the
Securities Act; and
(B) written instructions directing the Registrar or
co-Registrar to make, or to direct the Depository to make, an
endorsement on the applicable Global Security to reflect an increase in
the aggregate amount of the Securities represented by the Global
Security,
then the Registrar or co-Registrar shall cancel such Physical Security and
cause, or direct the Depository to cause, in accordance with the standing
instructions and procedures existing between the Depository and the Registrar or
co-Registrar, the principal amount of Securities represented by the applicable
Global Security to be increased accordingly. If no 144A Global Security, IAI
Global Security or Regulation S Global Security, as the case may be, is then
outstanding, the Company shall, unless either of the events in the proviso to
Section 2.15(b) have occurred and are continuing, issue and the Trustee shall,
upon written instructions from the Company in accordance with Section 2.2,
authenticate a new Global Security of such type in principal amount equal to the
principal amount of the interest requested to be transferred. Private Exchange
Securities, as such, may not be exchanged for a beneficial interest in a Global
Security.
(c) Transfer and Exchange of Global Securities. The transfer
and exchange of Global Securities or beneficial interests therein shall be
effected through the Depository in accordance with this Indenture (including the
restrictions on transfer set forth herein) and the procedures of the Depository
therefor; provided, however, that prior to the expiration of the Restricted
Period, transfers of beneficial interests in the Regulation S Temporary Global
Security may not be made to a U.S. Person or for the account or benefit of a
U.S. Person (other than an Initial Purchaser). Upon receipt by the Registrar or
Co-Registrar of written instructions, or such other instruction as is customary
for the Depository, from the Depository or its nominee,
<PAGE> 41
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requesting the registration of transfer of an interest in a 144A Global
Security, an IAI Global Security or a Regulation S Global Security, as the case
may be, to another type of Global Security, together with the applicable Global
Securities (or, if the applicable type of Global Security required to represent
the interest as requested to be obtained is not then outstanding, only the
Global Security representing the interest being transferred), the Registrar or
Co-Registrar shall reflect on its books and records (and the applicable Global
Security) the applicable increase and decrease of the principal amount of
Securities represented by such types of Global Securities, giving effect to such
transfer. If the applicable type of Global Security required to represent the
interest as requested to be obtained is not outstanding at the time of such
request, the Company shall issue and the Trustee shall, upon written
instructions from the Company in accordance with Section 2.2, authenticate a new
Global Security of such type in principal amount equal to the principal amount
of the interest requested to be transferred.
(d) Transfer of a Beneficial Interest in a Global Security for
a Physical Security.
(i) Any Person having a beneficial interest in a Global
Security may upon written request exchange such beneficial interest for a
Physical Security; provided, however, that prior to the Registration, a
transferee that is a QIB or an Institutional Accredited Investor may not
exchange a beneficial interest in Global Security for a Physical Security;
provided that in no event shall Physical Securities be issued upon the transfer
or exchange of beneficial interests in the Regulation S Temporary Global
Security prior to (x) the expiration of the Restricted Period and (y) the
receipt by the Registrar of any certificates required pursuant to Rule 903 under
the Securities Act as stated in an Opinion of Counsel. Upon receipt by the
Registrar or co-Registrar of written instructions, or such other form of
instructions as is customary for the Depository, from the Depository or its
nominee on behalf of any Person having a beneficial interest in a Global
Security and upon receipt by the Trustee of a written order or such other form
of instructions as is customary for the Depository or the Person designated by
the Depository as having such a beneficial interest containing registration
instructions and, in the case of any such transfer or exchange of a beneficial
interest in Securities the offer and sale of which have not been registered
under the Securities Act, the following additional information and documents:
(A) if such beneficial interest is being transferred in
reliance on Rule 144 under the Securities Act, delivery of a
certification to that effect (substantially in the form of Exhibit D
hereto) and, at the option of the Company or the Trustee, an Opinion of
Counsel reasonably satisfactory to the Company or the Trustee, as the
case may be, to the effect that such transfer is in compliance with the
Securities Act; or
(B) if such beneficial interest is being transferred in
reliance on another exemption from the registration requirements of the
Securities Act, a certification to that effect (substantially in the
form of Exhibit D hereto) and, at the option of the Company or the
Trustee, an Opinion of Counsel reasonably satisfactory to the Company
or the Trustee, as the case may be, to the effect that such transfer is
in compliance with the Securities Act,
<PAGE> 42
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then the Registrar or co-Registrar will cause, in accordance with the standing
instructions and procedures existing between the Depository and the Registrar or
co-Registrar, the aggregate principal amount of the applicable Global Security
to be reduced and, following such reduction, the Company will execute and, upon
receipt of an authentication order in the form of an Officers' Certificate in
accordance with Section 2.2, the Trustee will authenticate and deliver to the
transferee a Physical Security in the appropriate principal amount.
(ii) Securities issued in exchange for a beneficial interest
in a Global Security pursuant to this Section 2.16(d) shall be registered in
such names and in such authorized denominations as the Depository, pursuant to
instructions from its direct or indirect participants or otherwise, shall
instruct the Registrar or co-Registrar in writing. The Registrar or co-Registrar
shall deliver such Physical Securities to the Persons in whose names such
Physical Securities are so registered.
(e) Restrictions on Transfer and Exchange of Global
Securities. Notwithstanding any other provisions of this Indenture, a Global
Security may not be transferred as a whole except by the Depository to a nominee
of the Depository or by a nominee of the Depository to the Depository or another
nominee of the Depository or by the Depository or any such nominee to a
successor Depository or a nominee of such successor Depository.
(f) Private Placement Legend. Upon the transfer, exchange or
replacement of Securities not bearing the Private Placement Legend, the
Registrar or co-Registrar shall deliver Securities that do not bear the Private
Placement Legend. Upon the transfer, exchange or replacement of Securities
bearing the Private Placement Legend, the Registrar or co-Registrar shall
deliver only Securities that bear the Private Placement Legend unless, and the
Trustee is hereby authorized to deliver Securities without the Private Placement
Legend if, (i) there is delivered to the Trustee an Opinion of Counsel
reasonably satisfactory to the Company and the Trustee to the effect that
neither such legend nor the related restrictions on transfer are required in
order to maintain compliance with the provisions of the Securities Act; (ii)
such Security has been sold pursuant to an effective registration statement
under the Securities Act (including pursuant to a Registration); or (iii) the
date of such transfer, exchange or replacement is two years after the later of
(x) the Issue Date and (y) the last date that the Company or any affiliate (as
defined in Rule 144 under the Securities Act) of the Company was the owner of
such Securities (or any predecessor thereto).
(g) General. By its acceptance of any Security bearing the
Private Placement Legend, each Holder of such a Security acknowledges the
restrictions on transfer of such Security set forth in this Indenture and in the
Private Placement Legend and agrees that it will transfer such Security only as
provided in this Indenture.
<PAGE> 43
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The Trustee shall have no obligation or duty to monitor,
determine or inquire as to compliance with any restrictions on transfer imposed
under this Indenture or under applicable law with respect to any transfer of any
interest in any Security (including any transfers between or among Participants
or beneficial owners of interest in any Global Security) other than to require
delivery of such certificates and other documentation or evidence as are
expressly required by, and to do so if and when expressly required by the terms
of, this Indenture, and to examine the same to determine substantial compliance
as to form with the express requirements hereof.
The Registrar shall retain copies of all letters, notices and
other written communications received pursuant to this Section 2.16 or Section
2.15. The Company shall have the right to inspect and make copies of all such
letters, notices or other written communications at any reasonable time upon the
giving of reasonable written notice to the Registrar.
ARTICLE 3
REDEMPTION
Section 3.1. Notices to Trustee.
If the Company elects to redeem Securities pursuant to the
redemption provisions of Section 3.7 hereof, it shall notify the Trustee in
writing of the Redemption Date and the principal amount of Securities to be
redeemed.
The Company shall give each notice to the Trustee provided for
in this Section at least 60 days before the Redemption Date unless the Trustee
consents to a shorter period. Such notice shall be accompanied by an Officers'
Certificate and an Opinion of Counsel from the Company to the effect that such
redemption will comply with the conditions herein. If fewer than all the
Securities are to be redeemed, the record date relating to such redemption shall
be selected by the Company and given to the Trustee, which record date shall be
not less than 15 days after the date of notice to the Trustee.
Any such notice may be cancelled prior to notice being mailed
to any Holder pursuant to Section 3.3 hereof and shall thereafter be void and of
no effect.
Section 3.2. Selection of Securities to Be Redeemed.
If fewer than all the Securities are to be redeemed, the
Trustee shall select the Securities to be redeemed pro rata or by lot or by a
method that complies with applicable legal
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and securities exchange requirements, if any, and that the Trustee in its sole
discretion considers fair and appropriate and in accordance with methods
generally used at the time of selection by fiduciaries in similar circumstances.
The Trustee shall make the selection from outstanding Securities not previously
called for redemption. The Trustee may select for redemption portions of the
principal of Securities that have denominations larger than $1,000. Securities
and portions of them the Trustee selects shall be in amounts of $1,000 or a
whole multiple of $1,000. Provisions of this Indenture that apply to Securities
called for redemption also apply to portions of Securities called for
redemption. The Trustee shall notify the Company promptly of the Securities or
portions of Securities to be redeemed.
Section 3.3. Notice of Redemption.
At least 30 days but not more than 60 days before a Redemption
Date, the Company shall mail a notice of redemption by first-class mail to each
Holder of Securities to be redeemed.
The notice shall identify (including the CUSIP number, if any)
the Securities to be redeemed and shall state:
(1) the Redemption Date;
(2) the Redemption Price;
(3) the name and address of the Paying Agent;
(4) that Securities called for redemption must be surrendered
to the Paying Agent to collect the Redemption Price;
(5) if fewer than all the outstanding Securities are to be
redeemed, the identification and principal amounts of the particular
Securities to be redeemed;
(6) that, unless the Company defaults in making such
redemption payment interest on Securities (or portion thereof) called
for redemption ceases to accrue on and after the Redemption Date; and
(7) that no representation is made as to the correctness or
accuracy of the CUSIP number, if any, listed in such notice or printed
on the Securities.
At the Company's request, the Trustee shall give the notice of
redemption in the Company's name and at the Company's expense. In such event,
the Company shall provide the Trustee with the information required by this
Section.
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Section 3.4. Effect of Notice of Redemption.
Once notice of redemption is mailed, Securities called for
redemption become due and payable on the Redemption Date and at the Redemption
Price stated in the notice. Upon surrender to the Paying Agent, such Securities
shall be paid at the Redemption Price stated in the notice, plus accrued
interest to the Redemption Date. Failure to give notice or any defect in the
notice to any Holder shall not affect the validity of the notice to any other
Holder.
Section 3.5. Deposit of Redemption Price.
Prior to the Redemption Date, the Company shall deposit with
the Paying Agent (or, if the Company or any of its Subsidiaries is the Paying
Agent, shall segregate and hold in trust) money sufficient to pay the Redemption
Price of and accrued interest on all Securities to be redeemed on that date,
other than Securities or portions of Securities called for redemption which have
been delivered by the Company to the Trustee for cancellation.
Section 3.6. Securities Redeemed in Part.
Upon surrender of a Security that is redeemed in part, the
Company shall execute and the Trustee shall authenticate for the Holder at the
expense of the Company a new Security equal in principal amount to the
unredeemed portion of the Security surrendered.
Section 3.7. Redemption.
Except as provided otherwise below, the Company may not redeem
any of the Securities prior to June 15, 2000. At any time on or after June 15,
2000, the Company may, at its option, redeem outstanding Securities, in whole or
in part, at a Redemption Price equal to a percentage of the principal amount
thereof, as set forth in the immediately succeeding paragraph, plus all accrued
and unpaid interest thereon to the Redemption Date (subject to the right of
Holders of record on the relevant record date to receive interest due on the
relevant interest payment date).
The Redemption Price as a percentage of principal amount shall
be as follows, if the Securities are redeemed during the 12-month period
commencing on or after June 15 of the years set forth below:
<TABLE>
<CAPTION>
Year Percentage
---- ----------
<S> <C>
2000................................. 104.688
2001................................. 102.344
2002 and thereafter.................. 100.000
</TABLE>
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Any redemption pursuant to this Section 3.7 shall be made
pursuant to the provisions of Sections 3.1 through 3.6 hereof.
In the case of any redemption of Securities or Existing
Securities, the Company shall redeem Existing Securities or Securities, as the
case may be, on a pro rata basis.
Section 3.8. Limitations.
The provisions of this Article 3 and of the Securities shall
not apply to any private or open market purchase of Securities by the Company,
whether or not any Securities so purchased are retired or extinguished.
ARTICLE 4
COVENANTS
Subject to the provisions of Section 8.1, so long as
Securities are outstanding hereunder, the Company covenants for the benefit of
the Securityholders that:
Section 4.1. Payment of Principal and Interest.
The Company shall promptly pay the principal of, premium, if
any, and interest on the Securities on the dates and in the manner provided in
the Securities and the Registration Rights Agreement. Principal, premium, if
any, and interest shall be considered paid on the date due if on such date the
Trustee or the Paying Agent holds in accordance with this Indenture money
sufficient to pay all principal, premium, if any, and interest then due.
The Company shall pay interest on overdue principal and
premium, if any, at the rate specified therefor in the Securities, and it shall
pay interest on overdue installments of interest at the same rate to the extent
lawful as provided in Section 2.12.
Section 4.2. Maintenance of Office or Agency for Notices and
Demands.
The Company will maintain in The City of New York an office or
agency where the Securities may be presented for payment, an office or agency
where the Securities may be presented for registration of transfer and for
exchange as provided in this Indenture and an office or agency where notices and
demands to or upon the Company in respect of such Securities or of this
Indenture may be served. Until otherwise designated by the Company in a written
notice to the Trustee, such office or agency in The City of New York shall be
the principal corporate trust office of the Trustee at 101 Barclay Street, New
York, New York 10286. If at any time the Company shall fail to maintain any such
required office, such presentations and demands may also be made and notices may
also be served at the principal corporate trust office of the Trustee which
shall be, until further notice to the Company by the Trustee, at 101 Barclay
Street, New York, New York 10286.
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Section 4.3. Insurance Matters.
The Company will at all times insure or act as self-insurer,
and cause its Subsidiaries to insure or act as self-insurers, to such extent as
the Company may determine is prudent and not inconsistent with industry
practice.
Section 4.4. SEC Reports.
Notwithstanding that the Company may not be required to remain
subject to the reporting requirements of Section 13 or 15(d) of the Exchange
Act, the Company shall file with the SEC and provide the Trustee and
Securityholders with such annual reports and such information, documents and
other reports specified in Sections 13 and 15(d) of the Exchange Act. The
Company also shall comply with the other provisions of TIA Section 314(a).
Section 4.5. Compliance Certificate.
The Company shall deliver to the Trustee within 120 days after
the end of each fiscal year of the Company an Officers' Certificate stating that
in the course of the performance by the signers of their duties as Officers of
the Company they would normally have knowledge of any Default by the Company and
whether or not the signers know of any Default that occurred during such period.
If they do, the certificate shall describe the Default, its status and what
action the Company is taking or proposes to take with respect thereto. The
Company also shall comply with TIA Section 314(a)(4).
Section 4.6. Corporate Existence.
Subject to Article 5, the Company will do or cause to be done
all things necessary to preserve and keep in full force and effect its corporate
existence, material rights (charter and statutory) and franchises; provided,
however, that the Company shall not be required to preserve any such material
right or franchise if the preservation thereof is no longer desirable in the
conduct of the business of the Company or the loss thereof is not materially
adverse to the Holders of the Securities.
Section 4.7. Payment of Taxes and Other Claims.
The Company will pay or discharge or cause to be paid or
discharged, before any penalty accrues thereon, (1) all material taxes,
assessments and governmental charges levied or imposed upon the Company or any
Subsidiary or upon the income, profits or property of the Company or any
Subsidiary, and (2) all material lawful claims for labor, materials and supplies
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which, if unpaid, might by law become a Lien upon the property of the Company or
any Subsidiary; provided, however, that the Company shall not be required to pay
or discharge or cause to be paid or discharged any such tax, assessment, charge
or claim whose amount, applicability or validity is being contested in good
faith by appropriate proceedings.
Section 4.8. Appointments to Fill Vacancies in Trustee's
Office.
The Company, whenever necessary to avoid or fill a vacancy in
the office of the Trustee, will appoint, in the manner provided in Section 7.8,
a Trustee, so that there shall at all times be a Trustee hereunder.
Section 4.9. Limitation of Indebtedness.
(a) The Company shall not, and shall not permit any Restricted
Subsidiary to, Incur any Indebtedness unless (i) the Consolidated Coverage Ratio
at the date of such Incurrence exceeds 2.5 to 1.0; and (ii) no Default or Event
of Default shall have occurred and be continuing at the time or as a consequence
of the Incurrence of such Indebtedness.
(b) Notwithstanding the foregoing paragraph (a), the Company
may Incur any or all of the following Indebtedness:
(1) Indebtedness Incurred pursuant to the Credit Agreement so
long as the aggregate principal amount of such Indebtedness outstanding
at any time shall not exceed $250 million;
(2) Subordinated Indebtedness owed to and held by a Wholly
Owned Subsidiary; provided, however, that any subsequent issuance or
transfer of any Capital Stock or any other event which results in any
such Wholly Owned Subsidiary ceasing to be a Wholly Owned Subsidiary or
any subsequent transfer of such Subordinated Indebtedness (other than
to another Wholly Owned Subsidiary) shall be deemed, in each case, to
constitute the Incurrence of such Subordinated Indebtedness by the
Company;
(3) the Securities and the Existing Securities;
(4) Indebtedness outstanding on the date of the Existing
Securities Indenture (other than Indebtedness described in clause (1),
(2) or (3) above;
(5) Refinancing Indebtedness in respect of Indebtedness
Incurred pursuant to Section 4.9(a) or pursuant to clause (3) or (4)
above or this clause (5);
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(6) additional Indebtedness in an aggregate principal amount
outstanding at any time not exceeding $60 million Incurred pursuant to
the Credit Agreement or any replacement thereof;
(7) Indebtedness in an aggregate principal amount which,
together with all other Indebtedness of the Company then outstanding
(other than Indebtedness permitted by clauses (1) through (6) above)
does not exceed $80 million (less the aggregate amount of any
Indebtedness Incurred pursuant to clause (6) above); and
(8) Indebtedness arising out of Capital Lease Obligations,
Purchase Money Indebtedness and Sale/Leaseback Transactions permitted
pursuant to Section 4.17 in an aggregate principal amount outstanding
at any one time not exceeding $20 million.
(c) Notwithstanding the foregoing, the Company shall not Incur
any Indebtedness pursuant to Section 4.9(b) if the proceeds thereof are used,
directly or indirectly, to Refinance any Subordinated Indebtedness unless such
Indebtedness shall be subordinated to the Securities to at least the same extent
as such Subordinated Indebtedness.
Section 4.10. Limitation on Indebtedness and Capital Stock of
Restricted Subsidiaries.
The Company shall not permit any Restricted Subsidiary to
Incur, directly or indirectly, any Indebtedness or Capital Stock except:
(1) Indebtedness or Capital Stock issued to and held by the
Company or a Wholly Owned Subsidiary; provided, however, that any
subsequent issuance or transfer of any Capital Stock or any other event
which results in any such Wholly Owned Subsidiary ceasing to be a
Wholly Owned Subsidiary or any subsequent transfer of such Indebtedness
or Capital Stock (other than to the Company or a Wholly Owned
Subsidiary) shall be deemed, in each case, to constitute the issuance
of such Indebtedness or Capital Stock by the issuer thereof;
(2) Indebtedness or Capital Stock of a Subsidiary incurred
and outstanding on or prior to the date on which such Subsidiary was
acquired by the Company (other than Indebtedness or Capital Stock
Incurred in connection with, or to provide all or any portion of the
funds or credit support utilized to consummate, the transaction or
series of related transactions pursuant to which such Subsidiary became
a Subsidiary or was acquired by the Company) and Refinancing
Indebtedness Incurred in respect thereof; provided, however, that such
Refinancing Indebtedness shall only be permitted under this clause (2)
to the extent Incurred by the Subsidiary that originally Incurred such
Indebtedness;
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(3) Indebtedness or Capital Stock issued and outstanding on
or prior to the date of the Existing Securities Indenture (other than
Indebtedness described in clauses (1) or (2) above);
(4) Purchase Money Indebtedness; provided, however, that the
aggregate amount of Purchase Money Indebtedness outstanding after
giving pro forma effect to any Incurrence of Purchase Money
Indebtedness may not exceed $30 million unless, after giving effect to
the Incurrence of such Purchase Money Indebtedness, the Company would
be able to Incur an additional $1.00 of Indebtedness pursuant to
Section 4.9(a);
(5) Indebtedness Incurred by any Restricted Subsidiary that
is a Foreign Subsidiary; provided, however, that any such Indebtedness
Incurred by such Restricted Subsidiary shall not exceed 20% of the
Consolidated Net Tangible Assets of such Restricted Subsidiary;
(6) Refinancing Indebtedness Incurred in respect of
Indebtedness or Capital Stock referred to in clauses (3) or (4) above
or this clause (6); and
(7) Indebtedness Incurred by any Restricted Subsidiary that
is a Foreign Subsidiary for the purpose of acquiring a Restricted
Subsidiary that is a Foreign Subsidiary; provided, the principal amount
of such Indebtedness may not exceed the purchase price for such
Subsidiary; provided, further, that after giving effect to the
Incurrence of such Indebtedness, the Company would be able to Incur an
additional $1.00 of Indebtedness pursuant to Section 4.9(a).
Section 4.11. Limitation on Restricted Payments.
(a) The Company shall not, and shall not permit any Restricted
Subsidiary, directly or indirectly, to make a Restricted Payment if at the time
the Company or such Restricted Subsidiary makes such Restricted Payment:
(1) a Default or Event of Default shall have occurred and be
continuing (or would result therefrom); or
(2) the Company is not able to Incur an additional $1.00 of
Indebtedness pursuant to Section 4.9(a); or
(3) the aggregate amount of such Restricted Payment and all
other Restricted Payments since the Existing Securities Issue Date
would exceed the sum of:
(A) 50% of the Consolidated Net Income accrued
during the period (treated as one accounting period) from
April 1, 1995 to the end of the most recent
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fiscal quarter ending prior to the date of such Restricted
Payment (or, in the case such Consolidated Net Income shall be
a deficit, minus 100% of such deficit); and
(B) the aggregate Net Cash Proceeds received by
the Company from the issuance or sale of its Capital Stock
(excluding Disqualified Stock and including Capital Stock
issued upon conversions of convertible debt or upon exercise
of options or warrants) subsequent to the Existing Securities
Issue Date (excluding an issuance or sale to the Subsidiary of
the Company and excluding an issuance or sale to the ESOP).
(b) The provisions of the foregoing paragraph (a) shall not
prohibit:
(i) dividends paid within 60 days after the date of
declaration thereof if at such date of declaration such dividend would
have complied with this Section 4.11; provided, however, that at the
time of payment of such dividend, no other Default shall have occurred
and be continuing (or result therefrom); provided further, however,
that such dividend shall be included in the calculation of the amount
of Restricted Payments;
(ii) the Company and its Restricted Subsidiaries from making
loans or advancements to, or investments in, any Joint Venture in an
aggregate amount not exceeding $15 million plus the lesser of (I) any
amounts received as repayment of any such loan, advancement or
investment and (II) the initial amount thereof;
(iii) the declaration of payment of dividends on Common Stock
of the Company following a public offering of its Common Stock of up to
6% per annum of the Net Cash Proceeds received by the Company in such
public offering;
(iv) the Company and its Restricted Subsidiaries from making
any contribution to the ESOP or refinancing the ESOP Loan;
(v) any purchase or redemption of Capital Stock or
Subordinated Indebtedness of the Company made by exchange for, or out
of the proceeds of the substantially concurrent sale of, Capital Stock
of the Company (other than Disqualified Stock and other than Capital
Stock issued or sold to a Subsidiary of the Company or the ESOP);
provided, however, that (A) such purchase or redemption shall be
excluded in the calculation of the amount of Restricted Payments and
(B) the Net Cash Proceeds from such sale shall be excluded from the
calculation of amounts under Section 4.11(a)(3)(B);
(vi) any purchase or redemption of Subordinated Indebtedness
made by exchange for, or out of the proceeds of the substantially
concurrent sale of, Indebtedness of the Company which is permitted to
be Incurred pursuant to Section 4.9; provided, however, that such
purchase or redemption shall be excluded in the calculation of the
amount of Restricted Payments;
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(vii) loans and advances to employees of the Company or any of
its Restricted Subsidiaries for travel, entertainment and relocation
expenses in the ordinary course of business in an aggregate amount
outstanding at any one time not to exceed $5 million;
(viii) the redemption of up to 4,000,000 shares of Common
Stock from Scandinavian Holdings, B.V. on or prior to April 30, 1997
at an aggregate purchase price that, together with Restricted Payments
otherwise permitted under paragraph (a) above, would not exceed
$44,000,000; provided, however, that Restricted Payments made pursuant
to this clause (viii) shall be included in the calculation of
Restricted Payments for all purposes under Section 4.11(a)(3); and
(ix) up to an aggregate amount of $2,000,000 of additional
Restricted Payments from and after March 21, 1997 until such time as
the Company has the authority under Section 4.11(a) to make such
Restricted Payments; provided, however, that Restricted Payments made
pursuant to this clause (ix) shall be included in the calculation of
Restricted Payments for all purposes under Section 4.11(a).
For purposes of performing the calculation specified in
Section 4.11(a)(3), amounts paid in respect of clauses (i) and (iii) of this
Section 4.11(b) shall be counted as Restricted Payments and amounts paid in
respect of clauses (ii), (iv) and (v) of this Section 4.11(b) shall not be
counted as Restricted Payments. Any sale or transfer of property by an
Unrestricted Subsidiary to the Company or a Restricted Subsidiary with the
intention of taking back a lease of that property will be considered a loan to
that Unrestricted Subsidiary for this purpose.
Section 4.12. Limitation on Restrictions on Distributions from
Restricted Subsidiaries.
The Company shall not, and shall not permit any Restricted
Subsidiary to, create or otherwise cause or permit to exist or become effective
any consensual encumbrance or restriction on the ability of any Restricted
Subsidiary to (i) pay dividends or make any other distributions on its Capital
Stock or pay any Indebtedness owed to the Company or any Restricted Subsidiary,
(ii) make any loans or advances to the Company or any Restricted Subsidiary,
(iii) transfer any of its property or assets to the Company or any Restricted
Subsidiary or (iv) make payments in respect of any Indebtedness owed to the
Company or any Restricted Subsidiary, except:
<PAGE> 53
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(1) any such encumbrance or restriction pursuant to an
agreement in effect at or entered into on the Existing Securities Issue
Date;
(2) any such encumbrance or restriction with respect to a
Restricted Subsidiary pursuant to an agreement relating to any
Indebtedness Incurred by such Restricted Subsidiary on or prior to the
date on which such Restricted Subsidiary was acquired by the Company
(other than Indebtedness Incurred as consideration, or to provide all
or any portion of the funds or credit support utilized to consummate,
the transaction or series of related transactions pursuant to which
such Restricted Subsidiary became a Restricted Subsidiary or was
acquired by the Company) and outstanding on such date;
(3) any such encumbrance or restriction pursuant to an
agreement effecting a Refinancing of Indebtedness Incurred pursuant to
an agreement referred to in clause (1) or (2) of this Section 4.12 or
contained in any amendment to an agreement referred to in clause (1) or
(2) above; provided, however, that the encumbrances and restrictions
with respect to such Restricted Subsidiary contained in any such
refinancing agreement or amendment are no less favorable to the
Securityholders than any such encumbrances and restrictions with
respect to such Restricted Subsidiary contained in such agreements;
(4) any such encumbrance or restriction consisting of
customary nonassignment provisions in leases governing leasehold
interests to the extent such provisions restrict the transfer of the
lease or the property leased thereunder;
(5) in the case of clause (iii) above, encumbrances and
restrictions contained in security agreements or mortgages securing
Indebtedness of a Restricted Subsidiary to the extent such restrictions
restrict the transfer of the property subject to such security
agreements or mortgages;
(6) any such encumbrance or restriction with respect to a
Restricted Subsidiary imposed pursuant to an agreement entered into for
the sale or disposition of all or substantially all the Capital Stock
or assets of such Restricted Subsidiary pending the closing of such
sale or disposition;
(7) any such encumbrance or restriction with respect to any
Restricted Subsidiary that is a Foreign Subsidiary pursuant to an
agreement relating to Indebtedness permitted to be Incurred pursuant to
Section 4.10(7); and
(8) restrictions imposed by applicable law.
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Section 4.13. Limitation on Sales of Assets.
(a) The Company shall not, and shall not permit any Restricted
Subsidiary to, make any Asset Disposition unless: (i) the Company or such
Restricted Subsidiary, as the case may be, receives consideration at the time of
such sale or other disposition at least equal to the Fair Market Value thereof;
(ii) at least 75% of the consideration received by the Company or such
Restricted Subsidiary, as the case may be, consists of cash or Cash Equivalents
or Fully Traded Common Stock; provided, however, that the amount of any Senior
Indebtedness of the Company or such Restricted Subsidiary that is assumed by the
transferee in any such transaction shall be deemed to be cash for purposes of
this Section 4.13(a) and (iii) the Net Available Cash received by the Company or
such Restricted Subsidiary, as the case may be, from such Asset Disposition is
applied in accordance with the following paragraphs.
In the event and to the extent that the Company makes one or
more Asset Dispositions on or after the Existing Securities Issue Date in any
period of 12 consecutive months with respect to assets the Fair Market Value of
which exceeds $20 million as of the beginning of such 12-month period, then the
Company shall (i) within 365 days after the date the Net Available Cash so
received from such Asset Dispositions exceeds $230 million (such excess being
referred to as "Excess Net Available Cash") and to the extent the Company elects
(or is required by the terms of any Indebtedness) (A) apply an amount equal to
such Excess Net Available Cash to repay Senior Indebtedness or (B) invest an
equal amount, or the amount not so applied pursuant to clause (A), in Additional
Assets and (ii) apply such Excess Net Available Cash (to the extent not applied
pursuant to clause (i)) as provided in the following paragraphs of this Section
4.13. The amount of such Excess Net Available Cash required to be applied during
the applicable period and not applied as so required by the end of such period
shall constitute "Excess Proceeds."
If, as of the first day of any calendar month, the aggregate
amount of Excess Proceeds not theretofore subject to an Excess Proceeds Offer
(as defined below) totals at least $5 million, the Company must, not later than
the fifteenth Business Day of such month, make an offer (an "Excess Proceeds
Offer") to purchase from the Holders on a pro rata basis an aggregate principal
amount of Securities equal to the Excess Proceeds (rounded down to the nearest
multiple of $1,000) on such date, at a purchase price equal to 100% of the
principal amount of such Securities, plus, in each case, accrued interest (if
any) to the date of purchase (the "Excess Proceeds Payment").
If any Excess Net Available Cash is used to repay either
Securities or Existing Securities, the Company will make an offer to repurchase
Existing Securities or Securities, as the case may be, on a pro rata basis.
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(b) In the event of the transfer of substantially all (but not
all) the property and assets of the Company as an entirety to a Person in a
transaction permitted under Section 5.1, the Successor Company shall be deemed
to have sold the properties and assets of the Company not so transferred for
purposes of this Section 4.13, and shall comply with the provisions of this
Section 4.13 with respect to such deemed sale as if it were an Asset Disposition
and the Successor Company shall be deemed to have received Net Available Cash in
an amount equal to the fair market value (as determined in good faith by the
Board of Directors) of the properties and assets not so transferred or sold.
(c) The Company shall commence an Excess Proceeds Offer by
mailing a notice to the Trustee and each Holder stating:
(i) that the Excess Proceeds Offer is being made pursuant to
this Section 4.13 and that all Securities validly tendered will be
accepted for payment on a pro rata basis;
(ii) the purchase price and the date of purchase (which shall
be a Business Day no earlier than 30 days nor later than 40 days from
the date such notice is mailed) (the "Excess Proceeds Payment Date");
(iii) that any Security not tendered will continue to accrue
interest as provided in this Indenture;
(iv) that, unless the Company defaults in the payment of the
Excess Proceeds Payment, any Security accepted for payment pursuant to
the Excess Proceeds Offer shall cease to accrue interest after the
Excess Proceeds Payment Date;
(v) that Holders electing to have a Security purchased
pursuant to the Excess Proceeds Offer will be required to surrender the
Security, together with the form entitled "Option of the Holder to
Elect Purchase" on the reverse side of the Security completed, to the
Paying Agent at the address specified in the notice prior to the close
of business on the Business Day immediately preceding the Excess
Proceeds Payment Date;
(vi) that Holders will be entitled to withdraw their election
if the Paying Agent receives, not later than the close of business on
the third Business Day immediately preceding the Excess Proceeds
Payment Date, a telegram, telex, facsimile transmission or letter
setting forth the name of such Holder, the principal amount of
Securities delivered for purchase and a statement that such Holder is
withdrawing his election to have such Securities purchased; and
(vii) that Holders whose Securities are being purchased only
in part will be issued new Securities equal in principal amount to the
unpurchased portion of the Securities surrendered; provided, however,
that each Security purchased and each new Security issued shall be in
an original principal amount of $1,000 or integral multiples thereof.
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On or prior to the date notice is mailed to the Trustee and
each Holder, the Company shall furnish the Trustee with an Officers' Certificate
stating the amount of the Excess Proceeds Payment.
(d) On the Excess Proceeds Payment Date, the Company shall:
(i) accept for payment on a pro rata basis Securities or
portions thereof tendered pursuant to the Excess Proceeds Offer;
(ii) deposit with the Paying Agent money sufficient to pay the
purchase price of all Securities or portions thereof so accepted; and
(iii) deliver, or cause to be delivered, to the Trustee,
Securities or portions thereof so accepted together with an Officers'
Certificate specifying the Securities or portions thereof accepted for
payment by the Company.
The Paying Agent shall promptly mail to the Holders of
Securities so accepted payment in an amount equal to the purchase price, and the
Trustee shall promptly authenticate and mail to such Holders a new Security
equal in principal amount to any unpurchased portion of the Security
surrendered; provided, however, that each Security purchased and each new
Security issued shall be in an original principal amount of $1,000 or integral
multiples thereof.
The Company will publicly announce the results of the Excess
Proceeds Offer as soon as practicable after the Excess Proceeds Payment Date.
For purposes of this Section 4.13, the Trustee shall act as the Paying Agent.
(e) The Company will comply, to the extent applicable, with
the requirements of Section 14(e) of the Exchange Act and any other applicable
laws or regulations thereunder in the event that such Excess Proceeds are
received by the Company under this Section 4.13 and the Company is required to
repurchase Securities as described above. To the extent that the provisions of
any applicable laws or regulations conflict with the provisions of this Section
4.13, the Company shall comply with the applicable laws and regulations and
shall not be deemed to have breached its obligations under this Section 4.13 by
virtue thereof.
Section 4.14. Limitation on Affiliate Transactions.
(a) The Company shall not, and shall not permit any Restricted
Subsidiary to, enter into or permit to exist any transaction or series of
transactions (including the purchase, sale,
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lease or exchange of any property, employee compensation arrangements or the
rendering of any service) with any Affiliate of the Company (an "Affiliate
Transaction") unless the terms thereof are no less favorable to the Company or
any Restricted Subsidiary than those which could be obtained at the time of such
transaction in arm's-length dealings with a Person who is not such an Affiliate.
In addition, the Company shall not, and shall not permit any
Restricted Subsidiary to, enter into any Affiliate transaction unless: (i) with
respect to such Affiliate Transaction involving the aggregate value,
remuneration or other consideration of more than $1 million but less than or
equal to $5 million, the Company has obtained approval of a majority of the
Board of Directors of the Company (including a majority of the disinterested
directors); (ii) with respect to such Affiliate Transaction involving the
aggregate value, remuneration or other consideration of more than $5 million,
the Company has delivered to the Trustee an opinion of a nationally recognized
investment banking firm to the effect that such Affiliate Transaction is fair to
the Company or such Restricted Subsidiary, as the case may be, from a financial
point of view; (iii) any issuance of securities or other payments, awards or
grants in cash, securities or otherwise pursuant to, or the funding of,
employment arrangements, stock options and stock ownership plans approved by the
Board of Directors; (iv) the grant of stock options or similar rights to
employees and directors of the Company pursuant to plans approved by the Board
of Directors; (v) any Affiliate Transaction between the Company and a Wholly
Owned Subsidiary or between Wholly Owned Subsidiaries; and (vi) any transaction
entered into by the Company or any Restricted Subsidiary with the Plan.
Section 4.15. Change of Control.
(a) Upon the occurrence of a Change of Control, each Holder
shall have the right to require that the Company repurchase such Holder's
Securities at a purchase price in cash equal to 101% of the principal amount
thereof plus accrued and unpaid interest, if any, to the date of purchase
(subject to the right of holders of record on the relevant record date to
receive interest on the relevant interest payment date), in accordance with the
terms contemplated in Section 4.15(b).
(b) Within 30 days following any Change of Control, the
Company shall mail a notice to each Holder with a copy to the Trustee stating:
(1) that a Change of Control has occurred and that such
Holder has the right to require the Company to purchase such Holder's
Securities at a purchase price in cash equal to 101% of the principal
amount thereof plus accrued and unpaid interest, if any, to the date of
purchase (subject to the right of holders of record on the relevant
record date to receive interest on the relevant interest payment date);
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(2) the circumstances and relevant facts regarding such
Change of Control (including information with respect to pro forma
historical income, cash flow and capitalization after giving effect to
such Change of Control);
(3) the repurchase date (which shall be no earlier than 30
days nor later than 60 days from the date such notice is mailed) (the
"Change of Control Payment Date"); and
(4) the instructions determined by the Company, consistent
with this Section 4.15, that a Holder must follow in order to have its
Securities purchased.
(c) Holders electing to have a Security purchased will be
required to surrender the Security, with an appropriate form duly completed, to
the Company at the address specified in the notice at least 10 Business Days
prior to the purchase date. Holders will be entitled to withdraw their election
if the Trustee or the Company receives not later than three Business Days prior
to the purchase date, a telegram, telex, facsimile transmission or letter
setting forth the name of the Holder, the principal amount of the Security which
was delivered for purchase by the Holder and a statement that such Holder is
withdrawing his election to have such Security purchased.
(d) On the purchase date, all Securities purchased by the
Company under this Section shall be delivered by the Trustee for cancellation,
and the Company shall pay the purchase price plus accrued and unpaid interest,
if any, to the Holders entitled thereto.
(e) The Company shall comply, to the extent applicable, with
the requirement of Section 14(e) of the Exchange Act and any other applicable
laws or regulations in connection with the purchase of Securities pursuant to
this Section 4.15. To the extent that the provisions of any applicable laws or
regulations conflict with the provisions of this Section 4.15, the Company shall
comply with the applicable laws and regulations and shall not be deemed to have
breached its obligations under this Section 4.15 by virtue thereof.
Section 4.16. Limitation on Liens.
The Company shall not, and shall not permit any Restricted
Subsidiary to, directly or indirectly, Incur or permit to exist any Lien of any
nature whatsoever on any of its properties (including Capital Stock of a
Restricted Subsidiary), whether owned at the Existing Securities Issue Date or
thereafter acquired, other than Permitted Liens, without effectively providing
that the Securities shall be secured equally and ratably with (or prior to) the
obligations so secured for so long as such obligations are so secured.
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Section 4.17. Limitation on Sale/Leaseback Transactions.
The Company shall not, and shall not permit any Restricted
Subsidiary to, enter into any Sale/Leaseback Transaction with respect to any
property unless (i) the Company or such Restricted Subsidiary would be entitled
to create a Lien on such property without equally and ratably securing the
Securities pursuant to Section 4.16 or (ii) the net proceeds of such sale are at
least equal to the fair value (as determined by the Board of Directors) of such
property and the Company or such Restricted Subsidiary shall apply or cause to
be applied an amount in cash equal to the net proceeds of such sale to the
retirement, within 30 days of the effective date of such Sale/Leaseback
Transaction, of Senior Indebtedness of the Company (including the Securities) or
Indebtedness or Preferred Stock of a Restricted Subsidiary.
Section 4.18. Further Instruments and Acts.
Upon request of the Trustee, the Company will execute and
deliver such further instruments and do such further acts as may be reasonably
necessary or proper to carry out more effectively the purpose of this Indenture.
ARTICLE 5
SUCCESSOR COMPANY
Section 5.1. When Company May Merge or Transfer Assets.
The Company shall not consolidate with or merge with or into,
or convey, transfer or lease all or substantially all its assets to, any Person,
unless:
(1) the resulting, surviving or transferee Person (the
"Successor Company") shall be a Person organized and existing under the
laws of the United States of America, any state thereof or the District
of Columbia and the Successor Company (if not the Company) shall
expressly assume, by an indenture supplemental to this Indenture,
executed and delivered to the Trustee, in form reasonably satisfactory
to the Trustee, all the obligations of the Company under the Securities
and this Indenture;
(2) immediately after giving effect to such transaction (and
treating any Indebtedness which becomes an obligation of the Successor
Company or any Subsidiary as a result of such transaction as having
been Incurred by such Successor Company or such Subsidiary at the time
of such transaction), no Event of Default shall have occurred and be
continuing;
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(3) immediately after giving effect to such transaction, the
Consolidated Coverage Ratio of the Successor Company is at least 1:1;
provided, however, that, if the Consolidated Coverage Ratio of the
Company before giving effect to such transaction is within a range set
forth in column (A) below, then the Consolidated Coverage Ratio of the
Successor Company shall be at least equal to the lesser of (1) the
ratio determined by multiplying the relevant percentage set forth in
column (B) below by the Consolidated Coverage Ratio prior to such
transaction and (2) the relevant ratio set forth in column (C) below:
<TABLE>
<CAPTION>
(A) (B) (C)
<S> <C> <C>
1.11:1 to 1.99:1........... 90% 1.50:1
2.00:1 to 2.99:1........... 80% 2.10:1
3.00:1 to 3.99:1........... 70% 2.40:1
4.00:1 or greater................ 60% 2.50:1;
and
</TABLE>
(4) immediately after giving effect to such transaction, the
Successor Company shall have Consolidated Net Worth in an amount which
is not less than the Consolidated Net Worth of the Company prior to
such transaction.
The Company shall deliver to the Trustee prior to the
consummation of the proposed transaction an Officers' Certificate to the
foregoing effect and an Opinion of Counsel stating that the proposed transaction
and such supplemental indenture comply with this Indenture.
Section 5.2. Successor Corporation Substituted.
The Successor Company shall be the successor to the Company
and shall succeed to, and be substituted for, and may exercise every right and
power of, the Company under this Indenture, but the predecessor Company in the
case of a conveyance, transfer or lease shall not be released from the
obligation to pay the principal of and interest on the Securities.
ARTICLE 6
DEFAULTS AND REMEDIES
Section 6.1. Events of Default.
An "Event of Default" occurs if:
(1) the Company defaults in any payment of interest on any
Security when the same becomes due and payable, and such default
continues for a period of 30 days;
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(2) the Company (i) defaults in the payment of the principal
of any Security when the same becomes due and payable at its Stated
Maturity, upon redemption, upon declaration or otherwise, or (ii) fails
to purchase Securities when required pursuant to this Indenture or the
Securities;
(3) the Company fails to comply with Section 4.15 or 5.1;
(4) the Company fails to perform or observe any of the
covenants, conditions or agreements on the part of the Company in this
Indenture (other than a covenant, condition or agreement a Default in
whose performance or whose breach is elsewhere in this Section 6.1
specifically dealt with) or in the Securities, and such failure
continues for 30 days after the notice specified below;
(5) Indebtedness of the Company or any Restricted Subsidiary
is not paid within any applicable grace period after final maturity or
is accelerated by the holders thereof because of a default and the
total amount of such Indebtedness unpaid or accelerated exceeds
$5,000,000 (or its foreign currency equivalent) with respect to any
individual Indebtedness or, together with all Indebtedness unpaid or
accelerated, aggregates $10 million (or its foreign currency
equivalent);
(6) the Company or any Restricted Subsidiary pursuant to or
within the meaning of any Bankruptcy Law:
(A) commences a voluntary case;
(B) consents to the entry of an order for relief
against it in an involuntary case;
(C) consents to the appointment of a Custodian of
it or for any substantial part of its property; or
(D) makes a general assignment for the benefit of
its creditors;
or takes any comparable action under any foreign laws relating to
insolvency;
(7) a court of competent jurisdiction enters an order or
decree under any Bankruptcy Law that:
(A) is for relief against the Company or any
Restricted Subsidiary in an involuntary case;
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(B) appoints a Custodian of the Company or any
Restricted Subsidiary or for any substantial part of its
property; or
(C) orders the winding up or liquidation of the
Company or any Restricted Subsidiary;
or any similar relief is granted under any foreign laws and the order
or decree remains unstayed and in effect for 60 days; or
(8) any judgment or decree for the payment of money in excess
of $5,000,000 (or its foreign currency equivalent) (to the extent not
covered by insurance) with respect to any individual judgment or decree
or aggregating $10 million (or its foreign currency equivalent) is
entered against the Company or any Restricted Subsidiary and there is a
period of 60 days following the entry of such judgment or decree during
which such judgment or decree is not discharged, waived or the
execution thereof stayed.
The foregoing will constitute Events of Default whatever the
reason for any such Event of Default and whether it is voluntary or involuntary
or is effected by operation of law or pursuant to any judgment, decree or order
of any court or any order, rule or regulation of any administrative or
governmental body.
The term "Custodian" means any receiver, trustee, assignee,
liquidator, custodian or similar official under any Bankruptcy Law.
A Default under clause (3) of this Section is not an Event of
Default until the Trustee or the Holders of at least 25% in principal amount of
the Securities notify the Company of the Default. Such Notice must specify the
Default and state that such notice is a "Notice of Default."
A Default under clause (4) of this Section is not an Event of
Default until the Trustee or the Holders of at least 25% in principal amount of
the Securities notify the Company of the Default and the Company does not cure
such Default within the time specified after receipt of such Notice. Such Notice
must specify the Default, demand that it be remedied and state that such Notice
is a "Notice of Default."
The Company shall deliver to the Trustee, within 30 days after
the occurrence thereof, written notice in the form of an Officers' Certificate
of any event which with the giving of notice and the lapse of time would become
an Event of Default under clause (4) of this Section, its status and what action
the Company is taking or proposes to take with respect thereto.
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Section 6.2. Acceleration.
If an Event of Default (other than an Event of Default
specified in Section 6.1(6) or (7) with respect to the Company) occurs and is
continuing, the Trustee by notice to the Company or the Holders of at least 25%
in principal amount of the Securities by notice to the Company, may declare the
principal of and accrued interest on all the Securities to be due and payable.
Upon such a declaration, such principal and interest shall be due and payable
immediately. If an Event of Default specified in Section 6.1(6) or (7) with
respect to the Company occurs, the principal of and interest on all the
Securities shall ipso facto become and be immediately due and payable without
any declaration or other act on the part of the Trustee or any Securityholders.
The Holders of a majority in principal amount of the Securities by notice to the
Trustee may rescind an acceleration and its consequences if the rescission would
not conflict with any judgment or decree and if all existing Events of Default
have been cured or waived except nonpayment of principal or interest that has
become due solely because of acceleration. No such rescission shall affect any
subsequent Default or impair any right consequent thereto.
Section 6.3. Other Remedies.
If an Event of Default occurs and is continuing, the Trustee
may pursue any available remedy to collect the payment of principal of or
interest on the Securities or to enforce the performance of any provision of the
Securities or this Indenture.
The Trustee may maintain a proceeding even if it does not
possess any of the Securities or does not produce any of them in the proceeding.
A delay or omission by the Trustee or any Securityholder in exercising any right
or remedy accruing upon an Event of Default shall not impair the right or remedy
or constitute a waiver of or acquiescence in the Event of Default. No remedy is
exclusive of any other remedy. All available remedies are cumulative.
Section 6.4. Waiver of Past Defaults.
The Holders of a majority in principal amount of the
Securities by notice to the Trustee may waive an existing Default and its
consequences except (i) a Default in the payment of the principal of or interest
on a Security or (ii) a Default in respect of a provision that under Section 9.2
cannot be amended without the consent of each Securityholder affected. When a
Default is waived, it is deemed cured, but no such waiver shall extend to any
subsequent or other Default or impair any consequent right.
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Section 6.5. Control by Majority.
The Holders of a majority in principal amount of the
Securities may direct the time, method and place of conducting any proceeding
for any remedy available to the Trustee or of exercising any trust or power
conferred on the Trustee. However, the Trustee may refuse to follow any
direction that conflicts with law or this Indenture or, subject to Section 7.1,
that the Trustee determines is unduly prejudicial to the rights of other
Securityholders or would involve the Trustee in personal liability; provided,
however, that the Trustee may take any other action deemed proper by the Trustee
that is not inconsistent with such direction. Prior to taking any action
hereunder, the Trustee shall be entitled to indemnification satisfactory to it
in its sole discretion against all losses and expenses caused by taking or not
taking such action.
Section 6.6. Limitation on Suits.
A Securityholder may not pursue any remedy with respect to
this Indenture or the Securities unless:
(1) the Holder gives to the Trustee written notice stating
that an Event of Default is continuing;
(2) the Holders of at least 25% in principal amount of the
Securities make a written request to the Trustee to pursue the remedy;
(3) such Holder or Holders offer to the Trustee reasonable
security or indemnity against any loss, liability or expense;
(4) the Trustee does not comply with the request within 60
days after receipt of the request and the offer of security or
indemnity; and
(5) the Holders of a majority in principal amount of the
Securities do not give the trustee a direction inconsistent with the
request during such 60-day period.
A Securityholder may not use this Indenture to prejudice the
rights of another Securityholder or to obtain a preference or priority over
another Securityholder.
Section 6.7. Rights of Holders To Receive Payment.
Notwithstanding any other provision of this Indenture, the
right of any Holder to receive payment of principal of and interest on those
Securities held by such Holder, on or after the respective due dates expressed
in the Securities, or to bring suit for the enforcement of any such payment on
or after such respective dates, shall not be impaired or affected without the
consent of such Holder.
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Section 6.8. Collection Suit by Trustee.
If an Event of Default in payment of interest or principal
specified in Section 6.1(1) or (2) occurs and is continuing, the Trustee may
recover judgment in its own name and as trustee of an express trust against the
Company for the whole amount of principal and interest remaining unpaid
(together with interest on such unpaid interest to the extent lawful) and the
amounts provided for in Section 7.7.
Section 6.9. Trustee May File Proofs of Claim.
The trustee may file such proofs of claim and other papers or
documents as may be necessary or advisable in order to have the claims of the
Trustee and the Securityholders allowed in any judicial proceedings relative to
the Company, its creditors or its property and, unless prohibited by law or
applicable regulations, may vote on behalf of the Holders in any election of a
trustee in bankruptcy or other person performing similar functions, and any
Custodian in any such judicial proceeding is hereby authorized by each Holder to
make payments to the Trustee and, in the event that the Trustee shall consent to
the making of such payments directly to the Holders, to pay to the Trustee any
amount due it for the reasonable compensation, expenses, disbursements and
advances of the Trustee, its agents and its counsel, and any other amounts due
the Trustee under Section 7.7.
Section 6.10. Priorities.
If the Trustee collects any money or property pursuant to this
Article 6, it shall pay out the money or property in the following order:
FIRST: to the Trustee for amounts due under Section 7.7;
SECOND: to Securityholders for amounts due and unpaid on the
Securities for principal and interest, ratably, without preference or
priority of any kind, according to the amounts due and payable on the
Securities for principal and interest, respectively; and
THIRD: to the Company.
The Trustee may fix a record date and payment date for any
payment to Securityholders pursuant to this Section. At least 15 days before
such record date, the Trustee shall mail to each Securityholder and the Company
a notice that states the record date, the payment date and amount to be paid.
<PAGE> 66
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Section 6.11. Undertaking for Costs.
In any suit for the enforcement of any right or remedy under
this Indenture or in any suit against the Trustee for any action taken or
omitted by it as Trustee, a court in its discretion may require the filing by
any party litigant in the suit of an undertaking to pay the costs of the suit,
and the court in its discretion may assess reasonable costs, including
reasonable attorneys' fees, against any party litigant in the suit, having due
regard to the merits and good faith of the claims or defenses made by the party
litigant. This Section does not apply to a suit by the Trustee, a suit by a
Holder pursuant to Section 6.7 or a suit by Holders of more than 10% in
principal amount of the Securities.
Section 6.12. Waiver of Stay or Extension Laws.
The Company (to the extent it may lawfully do so) shall not at
any time insist upon, or plead, or in any manner whatsoever claim or take the
benefit or advantage of, any stay or extension law wherever enacted, now or at
any time hereafter in force, which may affect the covenants or the performance
of this Indenture; and the Company (to the extent that it may lawfully do so)
hereby expressly waives all benefit or advantage of any such law, and shall not
hinder, delay or impede the execution of any power herein granted to the
Trustee, but shall suffer and permit the execution of every such power as though
no such law had been enacted.
ARTICLE 7
TRUSTEE
Section 7.1. Duties of Trustee.
(1) If an Event of Default has occurred and is continuing,
the Trustee shall exercise such of the rights and powers vested in it by this
Indenture, and use the same degree of care and skill in their exercise, as a
prudent person would exercise or use under the circumstances in the conduct of
his own affairs.
(2) Except during the continuance of an Event of Default:
(a) The Trustee need perform only those duties that are
specifically set forth in this Indenture and no others, and no implied
covenants or obligations shall be read into this Indenture against the
Trustee.
(b) In the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the
correctness of the opinions expressed therein, upon certificates or
opinions furnished to the Trustee and conforming to the requirements of
this Indenture. However, in the case of any such certificates or
opinions which by any
<PAGE> 67
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provision hereof are specifically required to be furnished to the
Trustee, the Trustee shall examine the certificates and opinions to
determine whether or not they conform to the requirements of this
Indenture.
(3) The Trustee may not be relieved from liabilities for its
own negligent action, its own negligent failure to act, or its own willful
misconduct, except that:
(a) This paragraph does not limit the effect of paragraph (2)
of this Section.
(b) The Trustee shall not be liable for any error of judgment
made in good faith by a Responsible Officer, unless it is proved that
the Trustee was negligent in ascertaining the pertinent facts.
(c) The Trustee shall not be liable with respect to any action
it takes or omits to take in good faith in accordance with a direction
received by it pursuant to Section 6.5.
(4) Whether or not therein expressly so provided, every
provision of this Indenture that in any way relates to the Trustee is subject to
paragraphs (1), (2), (3) and (5) of this Section.
(5) No provision of this Indenture shall require the Trustee
to expend or risk its own funds or incur any liability. In case an Event of
Default occurs and is continuing, the Trustee will be under no obligation to
exercise any of the rights or powers under this Indenture at the request or
direction of any of the Holders unless such Holders have offered to the Trustee
reasonable indemnity or security against any loss, liability or expense.
(6) The Trustee shall not be liable for interest on any money
received by it except as the Trustee may agree in writing with the Company.
Money held in trust by the Trustee need not be segregated from other funds
except to the extent required by law.
Section 7.2. Rights of Trustee.
(1) The Trustee may rely on any document believed by it to be
genuine and to have been signed or presented by the proper Person. The Trustee
need not investigate any fact or matter stated in the document.
(2) Before the Trustee acts or refrains from acting, it may
require an Officers' Certificate or an Opinion of Counsel or both. The Trustee
shall not be liable for any action it takes or omits to take in good faith in
reliance on such Officers' Certificate or Opinion of Counsel. The Trustee may
consult with counsel of its selection and the advice of such counsel (to be
confirmed in writing) or any Opinion of Counsel shall be full and complete
authorization and protection in respect of any action taken, suffered or omitted
by it hereunder in good faith and in reliance thereon.
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(3) The Trustee may act through agents or attorneys and shall
not be responsible for the misconduct or negligence of any agent or attorney
appointed with due care.
(4) The Trustee shall not be liable for any action it takes
or omits to take in good faith which it believes to be authorized or within its
rights or powers conferred upon it by this Indenture.
(5) Unless otherwise specifically provided in this Indenture,
any demand, request, direction or notice from the Company shall be sufficient if
signed by an Officer of the Company.
Section 7.3. Individual Rights of Trustee.
The Trustee in its individual or any other capacity may become
the owner or pledgee of Securities and may otherwise deal with the Company or an
Affiliate with the same rights it would have if it were not Trustee. Any Paying
Agent may do the same with like rights. However, the Trustee is subject to
Sections 7.10 and 7.11.
Section 7.4. Trustee's Disclaimer.
The Trustee makes no representation as to the validity or
adequacy of this Indenture or the Securities, it shall not be accountable for
the Company's use of the proceeds from the Securities or any money paid to the
Company or upon the Company's direction under any provision hereof, it shall not
be responsible for the use or application of any money received by any Paying
Agent other than the Trustee and it shall not be responsible for any statement
or recital herein or any statement in the Securities other than its certificate
of authentication.
Section 7.5. Notice of Defaults.
If a Default occurs and is continuing, the Trustee shall mail
to Securityholders a notice of the Default, if known to the Trustee, within 90
days after it occurs. In the absence of notice to the contrary, the Trustee
shall be entitled to assume that such obligations are outstanding. Except in the
case of a Default in payment on any Security (including the failure to make a
mandatory redemption pursuant hereto), the Trustee may withhold the notice if
and so long as a committee of its Responsible Officers in good faith determines
that withholding the notice is not opposed to the interests of Securityholders.
<PAGE> 69
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Section 7.6. Reports by Trustee to Holders.
Within 60 days after each December 15, beginning with the
December 15 following the date of this Indenture, the Trustee shall mail to
Securityholders a brief report dated as of such reporting date that complies
with TIA Section 313(a), if such a report is required pursuant to TIA Section
313(a). The Trustee also shall comply with TIA Section 313(b). The Trustee shall
also transmit by mail all reports as required by TIA Section 313(c).
Commencing if and when this Indenture is qualified under the
TIA, a copy of each report at the time of its mailing to Securityholders shall
be filed with the SEC and each stock exchange on which the Securities are
listed. The Company or any other obligor upon the Securities shall promptly
notify the Trustee when the Securities are listed on any stock exchange.
Section 7.7. Compensation and Indemnity.
The Company shall pay to the Trustee from time to time such
compensation as shall be agreed in writing from time to time by the Company and
the Trustee for its acceptance of this Indenture and services hereunder. The
Trustee's compensation shall not be limited by any law on compensation of a
trustee of an express trust. The Company shall reimburse the Trustee upon
request for all reasonable disbursements, advances and expenses incurred by it.
Such expenses shall include the reasonable compensation, disbursements and
expenses of the Trustee's agents and counsel. The obligations of the Company
under this Section 7.7 to compensate and indemnify the Trustee and its agents
and to reimburse the Trustee for its reasonable expenses shall survive the
termination of the Company's obligations hereunder and the satisfaction and
discharge of this Indenture.
The Company shall indemnify the Trustee, its employees,
officers, directors and agents, and any predecessor trustee against any and all
losses, liabilities, damages, claims, or expenses, including taxes (other than
taxes based on the income of the Trustee), incurred by it arising out of or in
connection with the acceptance or administration of its duties under this
Indenture, except as set forth in the next paragraph. The Trustee shall notify
the Company promptly of any claim for which it may seek indemnity. The Company
shall defend the claim and the Trustee shall cooperate in the defense. The
Trustee may have separate counsel and the Company shall pay the reasonable fees
and expenses of such counsel. The Company need not pay for any settlement made
without its consent, which consent shall not be unreasonably withheld.
The Company need not reimburse any expense or indemnify
against any loss or liability incurred by the Trustee through negligence or bad
faith.
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To secure the Company's payment obligations in this Section,
the Trustee shall have a Lien prior to the Securities on all money or property
held or collected by the Trustee, except that held in trust to pay principal and
interest on particular Securities. Such Lien shall survive the satisfaction and
discharge of this Indenture and the resignation or removal of the Trustee.
Compensation, reimbursement and indemnification to the Trustee under this
Section is not subordinated to Senior Indebtedness.
When the Trustee incurs expenses or renders services after an
Event of Default specified in Section 6.1(6) or (7) with respect to the Company
occurs, the expenses and the compensation for the services are intended to
constitute expenses of administration under any Bankruptcy Law.
Section 7.8. Replacement of Trustee.
A resignation or removal of the Trustee and appointment of a
successor Trustee shall become effective only upon the successor Trustee's
acceptance of appointment as provided in this Section.
The Trustee may resign and be discharged from the trust hereby
created by so notifying the Company. The Holders of a majority in principal
amount of the then outstanding Securities may remove the Trustee by so notifying
the Trustee and the Company. The Company may remove the Trustee if:
(1) the Trustee fails to comply with Section 7.10;
(2) the Trustee is adjudged a bankrupt or an insolvent or an
order for relief is entered with respect to the Trustee under any
Bankruptcy Law;
(3) a custodian or public officer takes charge of the Trustee
or its property; or
(4) the Trustee becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in
the office of Trustee for any reason, the Company and any other obligor upon the
Securities shall promptly appoint a successor Trustee.
If a successor Trustee does not take office within 10 days
after the retiring Trustee resigns or is removed, the retiring Trustee, the
Company or the Holders of at least 10% in principal amount of the then
outstanding Securities may petition any court of competent jurisdiction for the
appointment of a successor Trustee.
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If the Trustee after written request by any Securityholder who
has been a Securityholder for at least six months fails to comply with Section
7.10, such Securityholder may petition any court of competent jurisdiction for
the removal of the Trustee and the appointment of a successor Trustee.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company. Thereupon the
resignation or removal of the retiring Trustee shall become effective, and the
successor Trustee shall have all the rights, powers and duties of the Trustee
under this Indenture. The successor Trustee shall mail a notice of its
succession to Securityholders. The retiring Trustee shall promptly transfer all
property held by it as Trustee to the successor Trustee, subject to the Lien
provided for in Section 7.7. Notwithstanding replacement of the Trustee pursuant
to this Section 7.8, the Company's obligations under Section 7.7 thereof shall
continue for the benefit of the retiring Trustee.
Section 7.9. Successor Trustee by Merger, etc.
If the Trustee consolidates, merges or converts into, or
transfers all or substantially all of its corporate trust business to, another
corporation, the successor corporation without any further act shall be the
successor Trustee.
Section 7.10. Eligibility; Disqualification.
There shall at all times be a Trustee hereunder which shall be
a corporation organized and doing business under the laws of the United States
of America or of any state thereof authorized under such laws to exercise
corporate trustee power, shall be subject to supervision or examination by
Federal or state authority and shall have a combined capital and surplus of at
least $50,000,000 as set forth in its most recent published annual report of
condition. No obligor upon the Securities or any Affiliate of such obligor shall
serve as trustee upon the Securities.
This Indenture shall always have a Trustee who satisfies the
requirements of TIA Section 310(a)(1). The Trustee is subject to TIA Section
310(b) regarding disqualification of a trustee upon acquiring any conflicting
interest.
Section 7.11. Preferential Collection of Claims Against
Company.
The Trustee is subject to TIA Section 311(a), excluding any
creditor relationship listed in TIA Section 311(b). A trustee who has resigned
or been removed shall be subject to TIA Section 311(a) to the extent indicated
therein.
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ARTICLE 8
DISCHARGE OF INDENTURE
Section 8.1. Legal Defeasance and Covenant Defeasance of the
Securities.
(a) The Company may, at its option by Board resolution, at any
time, with respect to the Securities, elect to have either paragraph (b) or
paragraph (c) below be applied to the outstanding Securities upon compliance
with the conditions set forth in paragraph (d).
(b) Upon the Company's exercise under paragraph (a) of the
option applicable to this paragraph (b), the Company shall be deemed to have
been released and discharged from its obligations with respect to the
outstanding Securities on the date the conditions set forth below are satisfied
(hereinafter, "legal defeasance"). For this purpose, such defeasance means that
the Company shall be deemed to have paid and discharged the entire indebtedness
represented by the outstanding Securities, which shall thereafter be deemed to
be "outstanding" only for the purposes of the Sections of and matters under this
Indenture referred to in (i) and (ii) below, and to have satisfied all its other
obligations under such Securities and this Indenture insofar as such Securities
are concerned, except for the following which shall survive until otherwise
terminated or discharged hereunder: (i) the rights of Holders of outstanding
securities to receive solely from the trust fund described in paragraph (d)
below and as more fully set forth in such paragraph, payments in respect of the
principal of, premium, if any, and interest on such Securities when such
payments are due and (ii) obligations listed in Section 8.3
(c) Upon the Company's exercise under paragraph (a) of the
option applicable to this paragraph (c), the Company shall be released and
discharged from its obligations under any covenant contained in Article 5 and in
Sections 4.3 through 4.17 with respect to the outstanding Securities on and
after the date the conditions set forth below are satisfied (hereinafter,
"covenant defeasance"), and the Securities shall thereafter be deemed to be not
"outstanding" for the purpose of any direction, waiver, consent or declaration
or act of Holders (and the consequences of any thereof) in connection with such
covenants, but shall continue to be deemed "outstanding" for all other purposes
hereunder. For this purpose, such covenant defeasance means that, with respect
to the outstanding Securities, the Company may omit to comply with and shall
have no liability in respect of any term, condition or limitation set forth in
any such covenant, whether directly or indirectly, by reason of any reference
elsewhere herein to any such covenant or by reason of any reference in any such
covenant to any other provision herein or in any other document and such
omission to comply shall not constitute a Default or an Event of Default under
Section 6.1(3) or 6.1(4), nor shall any event referred to in Section 6.1(5) or
6.1(8) thereafter constitute a Default or an Event of Default thereunder but,
except as specified above, the remainder of this Indenture and such Securities
shall be unaffected thereby.
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(d) The following shall be the conditions to application of
either paragraph (b) or paragraph (c) above to the outstanding Securities;
(1) The Company shall have irrevocably deposited in trust
with the Trustee, pursuant to an irrevocable trust and security
agreement in form and substance satisfactory to the Trustee, cash or
U.S. Government Obligations maturing as to principal and interest at
such times, or a combination thereof, in such amounts as are
sufficient, without consideration of the reinvestment of such interest
and after payment of all Federal, state and local taxes or other
charges or assessments in respect thereof payable by the Trustee, in
the opinion of a nationally recognized firm of independent public
accountants expressed in a written certification thereof (in form and
substance reasonably satisfactory to the Trustee) delivered to the
Trustee, to pay the principal of, premium, if any, and interest on the
outstanding Securities on the dates on which any such payments are due
and payable in accordance with the terms of this Indenture and of the
Securities;
(2) (i) No Event of Default shall have occurred or be
continuing on the date of such deposit, and (ii) no Default or Event of
Default under Section 6.1(6) or 6.1(7) shall occur on or before the
123rd day after the date of such deposit;
(3) Such deposit will not result in a Default under this
Indenture or a breach or violation of, or constitute a default under,
any other instrument or agreement to which the Company is a party or by
which it or its property is bound;
(4) In the case of a legal defeasance under paragraph (b)
above, the Company has delivered to the Trustee an Opinion of Counsel
stating that (i) the Company has received from, or there has been
published by, the Internal Revenue Service a ruling, or (ii) since the
date of this Indenture there has been a change in the applicable
federal income tax law, in either case to the effect that, and based
thereon such opinion shall confirm that, the Holders of the Securities
will not recognize income, gain or loss for federal income tax purposes
as a result of such deposit, defeasance and discharge and will be
subject to federal income tax on the same amounts and in the same
manner and at the same times as would have been the case if such
deposit, defeasance and discharge had not occurred; and, in the case of
a covenant defeasance under paragraph (c) above, the Company shall
deliver to the Trustee an Officers' Certificate and an Opinion of
Counsel, in form and substance reasonably satisfactory to the Trustee,
to the effect that Holders of the Securities will not recognize income,
gain or loss for federal income tax purposes as a result of such
deposit and defeasance and will be subject to federal income tax on the
same amounts, in the same manner and at the same times as would have
been the case if such deposit and defeasance had not occurred;
<PAGE> 74
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(5) The Holders shall have a perfected security interest
under applicable law in the case or U.S. Government Obligations
deposited pursuant to Section 8.1(d)(1) above;
(6) The Company shall have delivered to the Trustee an
Opinion of Counsel, in form and substance reasonably satisfactory to
the Trustee, to the effect that, after the passage of 123 days
following the deposit, the trust funds will not be subject to any
applicable bankruptcy, insolvency, reorganization or similar law
affecting creditors' rights generally; and
(7) The Company has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent specified herein relating to the defeasance contemplated by
this Section 8.1 have been complied with; provided, however, that no
deposit under clause (1) above shall be effective to terminate the
obligations of the Company or any Subsidiary Guarantor under the
Securities or this Indenture prior to 123 days following any such
deposit.
In connection with the issuance of debt securities the
proceeds of which will be used to redeem all the Securities then outstanding,
none of Sections 4.9, 4.11 and 4.16 shall be violated by the issuance of such
debt securities to the extent the Company complies with all of the provisions of
this Section 8.1(d) other than Section 8.1(d)(2)(ii). The Company and the
Trustee shall use best efforts to ensure that the deposit referred to in Section
8.1(d)(1) does not result in the Company, the Trustee or the trust becoming or
being deemed an investment company under the Investment Company Act of 1940. In
the event that such deposit does result in the Company, the Trustee or the trust
becoming or being deemed an investment company, the Company shall bear all
related expenses of registration and reporting under the Investment Company Act
of 1940 for the duration of the trust.
Section 8.2. Termination of Obligations upon Cancellation of
the Securities.
In addition to the Company's rights under Section 8.1, the
Company may terminate all of its obligations under this Indenture (subject to
Section 8.3) when:
(a) (1) all Securities theretofore authenticated and
delivered (other than Securities which have been destroyed, lost or
stolen and which have been replaced or paid as provided in Section 2.7)
have been delivered to the Trustee for cancellation; (2) the Company
has paid or caused to be paid all other sums payable hereunder and
under the Securities by the Company; and (3) the Company has delivered
to the Trustee an Officers' Certificate, stating that all conditions
precedent specified herein relating to the satisfaction and discharge
of this Indenture have been complied with; or
<PAGE> 75
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(b) (1) the Securities not previously delivered to the
Trustee for cancellation will have become due and payable or are by
their terms to become due and payable within one year or are to be
called for redemption under arrangements satisfactory to the Trustee
upon delivery of notice; (2) the Company will have irrevocably
deposited with the Trustee, as trust funds, cash, in an amount
sufficient to pay principal of and interest on the outstanding
Securities, to maturity or redemption, as the case may be; (3) such
deposit will not result in a breach or violation of or constitute a
default under, any agreement or instrument pursuant to which the
Company or any Subsidiary is a party or by which it or its property is
bound; and (4) and the Company has delivered to the Trustee an
Officers' Certificate and an Opinion of Counsel, each stating that all
conditions related to such defeasance have been complied with.
Section 8.3. Survival of Certain Obligations.
Notwithstanding the satisfaction and discharge of this
Indenture and of the Securities referred to in Section 8.1 or 8.2, the
respective obligations of the Company, and the Trustee under Sections 2.2, 2.3,
2.4, 2.5, 2.6, 2.7, 2.14, 3.7, 4.2, 6.7, 7.7, 7.8, 8.5, 8.6 and 8.7 and shall
survive until the Securities are no longer outstanding, and thereafter the
obligations of the Company and the Trustee under Sections 7.7, 8.5 and 8.6 shall
survive. Nothing contained in this Article 8 shall abrogate any of the
obligations or duties of the Trustee under this Indenture.
Section 8.4. Acknowledgment of Discharge by Trustee.
Subject to Section 8.7, after (i) the conditions of Section
8.1 or 8.2 have been satisfied, (ii) the Company has paid or caused to be paid
all other sums payable hereunder by the Company and (iii) the Company has
delivered to the Trustee an Officers' Certificate and an Opinion of Counsel,
each stating that all conditions precedent referred to in clause (i) above
relating to the satisfaction and discharge of this Indenture have been complied
with, the Trustee upon written request shall acknowledge in writing the
discharge of the Company's obligations under this Indenture except for those
surviving obligations specified in Section 8.3.
Section 8.5. Application of Trust Assets.
The Trustee shall hold any cash or U.S. Government Obligations
deposited with it in the irrevocable trust established pursuant to Section 8.1
or 8.2. as the case may be. The Trustee shall apply the deposited cash or the
U.S. Government Obligations, together with earnings thereon, through the Paying
Agent, in accordance with this Indenture and the terms of the irrevocable trust
agreement established pursuant to Section 8.1 or 8.2, as the case may be, to the
payment of principal of, premium, if any, and interest on the Securities. The
cash or U.S. Government Obligations so held in trust and deposited with the
Trustee in compliance with Section 8.1 or 8.2, as the case may be, shall not be
part of the trust estate under this Indenture, but shall constitute a separate
trust fund for the benefit of all holders entitled thereto.
<PAGE> 76
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Section 8.6. Repayment to the Company; Unclaimed Money.
Upon termination of the trust established pursuant to Section
8.1 or 8.2, as the case may be, the Trustee and the Paying Agent shall promptly
pay to the Company upon request any excess cash or U.S. Government Obligations
held by them. Additionally, if money for the payment of principal, premium, if
any, or interest remains unclaimed for two years, the Trustee and the Paying
Agents will pay the money back to the Company forthwith. After that, all
liability of the Trustee and such Paying Agents with respect to such money shall
cease.
The Trustee and the Paying Agent shall pay to the Company upon
request, and, if applicable, in accordance with the cash or U.S. Government
Obligations held by them for the payment of principal of, premium, if any, or
interest on the Securities that remain unclaimed for two years after the date on
which such payment shall have become due. After payment to the Company, Holders
entitled to such payment must look to the Company for such payment as general
creditors unless an applicable abandoned property law designates another person.
Section 8.7. Reinstatement.
If the Trustee or Paying Agent is unable to apply any cash or
U.S. Government Obligations in accordance with Section 8.1 or 8.2 by reason of
any legal proceeding or by reason of any order or judgment of any court or
governmental authority enjoining, restraining or otherwise prohibiting such
application, the Company's obligations under this Indenture and the Securities
shall be revived and reinstated as though no deposit had occurred pursuant to
Section 8.1 or 8.2 until such time as the Trustee or Paying Agent is permitted
to apply all such cash or U.S. Government Obligations in accordance with Section
8.1 or 8.2, as the case may be; provided that if the Company makes any payment
of principal of, premium, if any, or interest on an Securities following the
reinstatement of its obligations, the Company shall be subrogated to the rights
of the Holders of such Securities to receive such payment from the money held by
the Trustee or the Paying Agent.
ARTICLE 9
Amendments
Section 9.1. Without Consent of Holders.
The Company and the Trustee may amend or enter into an
indenture or indentures supplemental hereto without the consent of any
Securityholder:
<PAGE> 77
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(1) to cure any ambiguity, defect or inconsistency;
(2) to comply with Section 5.2;
(3) to comply with any requirements of the SEC in connection
with the qualification of this Indenture under the TIA as then in
effect;
(4) to provide for uncertificated Securities in addition to or
in place of certificated Securities;
(5) to make any change that does not materially adversely
affect the legal rights hereunder of any Securityholder;
(6) to secure the Securities and to make intercreditor
arrangements with respect to any such Security, unless the incurrence
of such obligations or the security thereof is prohibited by this
Indenture;
(7) to evidence or to provide for a replacement Trustee under
Section 7.8; or
(8) to add to the covenants and agreements of the Company for
the benefit of the Holders and to surrender any right or power herein
conferred on the Company.
Upon the request of the Company, accompanied by a resolution
of the Board of Directors authorizing the execution of any such amendment or
supplemental indenture, and upon receipt by the Trustee of the documents
described in Section 9.6 hereof, the Trustee shall join with the Company in the
execution of any amendment or supplemental indenture authorized or permitted by
the terms of this Indenture and to make any further appropriate agreements and
stipulations which may be therein contained, but the Trustees shall not be
obligated to enter into such amendment or supplemental indenture which affects
its own rights, duties or immunities under this Indenture or otherwise.
Section 9.2. With Consent of Holders.
The Company and the Trustee may amend or enter into an
indenture or indentures supplemental hereto with the written consent of the
Holders of at least a majority in aggregate principal amount of the then
outstanding Securities. The Holders of a majority in principal amount of the
Securities then outstanding may, or the Trustee with the written consent of the
holders of at least a majority in principal amount of the then outstanding
Securities may, waive compliance in a particular instance by the Company with
any provision of this Indenture or the Securities.
<PAGE> 78
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Upon the request of the Company, accompanied by a resolution
of the Board of Directors authorizing the execution of any such amendment or
supplemental indenture, and upon the filing with the Trustee of evidence of the
consent of the Securityholders as aforesaid, and upon receipt by the Trustee of
the documents described in Section 9.6 hereof, the Trustee shall join with the
Company in the execution of such amendment or supplemental indenture unless such
amendment or supplemental indenture affects the Trustee's own rights, duties or
immunities under this Indenture or otherwise, in which case the Trustee may in
its discretion, but shall not be obligated to, enter into such amendment or
supplemental indenture.
It shall not be necessary for the consent of the Holders under
this Section to approve the particular form of any proposed amendment,
supplemental indenture or waiver, but it shall be sufficient if such consent
approves the substance thereof.
After an amendment, supplemental indenture or waiver under
this Section becomes effective, the Company shall mail to the Holders of each
Security affected thereby a copy of such amendment, supplemental indenture or
waiver and a notice briefly describing the amendment, supplemental indenture or
waiver. Any failure of the Company to mail such notice, or any defect therein,
shall not, however, in any way impair or affect the validity of any such
amendment, supplemental indenture or waiver.
Notwithstanding the first paragraph of this Section 9.2,
without the consent of each Securityholder affected, an amendment, supplemental
indenture or waiver under this Section shall not:
(1) reduce the principal amount of Securities whose Holders
must consent to an amendment, supplemental indenture or waiver of any
provision of this Indenture or the Securities;
(2) reduce the rate of or change the time for payment of
interest, including default interest, on any Security;
(3) reduce the principal of, any installment of interest on or
any premium with respect to any Security, change the Stated Maturity of
any Security or change the periods during which Securities may be
redeemed in accordance with any provision of this Indenture or the
Securities;
(4) make any Security payable in currency other than that
stated in the Security;
(5) make any change in the amendment and waiver provisions
contained in this Article 9; or
<PAGE> 79
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(6) waive a Default or an Event of Default in the payment of
principal of or interest on (including default interest), or redemption
payment with respect to, any Security, except as provided in Section
6.1 hereof as in effect on the date hereof.
Section 9.3. Compliance with Trust Indenture Act.
Every amendment to or waiver of this Indenture or the
Securities shall be set forth in a supplemental indenture that complies with the
TIA as then in effect.
Section 9.4. Revocation and Effect of Consents.
Until an amendment, supplemental indenture or waiver becomes
effective, a consent to it by a Holder of a Security is a continuing consent by
the Holder and every subsequent Holder of a Security or portion of a Security
that evidences the same debt as the consenting Holder's Security, even if
notation of the consent is not made on any Security. However, any such Holder or
subsequent Holder may revoke the consent as to his Security or portion of a
Security if the Trustee receives written notice of revocation before the date
the amendment, supplemental indenture or waiver becomes effective. An amendment,
supplemental indenture or waiver becomes effective in accordance with its terms
and thereafter binds every Securityholder.
The Company may, but shall not be obligated to, fix a record
date for the purpose of determining the Holders entitled to consent to any
amendment, supplemental indenture or waiver. If a record date is fixed, those
persons who were Holders at such record date (or their duly designated proxies),
and only those persons, shall be entitled to consent to such amendment,
supplemental indenture or waiver or to revoke any consent previously given,
whether or not such persons continue to be Holders after such record date. No
such consent shall be valid or effective for more than 120 days after such
record date.
Section 9.5. Notation on or Exchange of Securities.
The Trustee may place an appropriate notation about an
amendment, supplemental indenture or waiver on any Security thereafter
authenticated. The Company in exchange for all Securities may issue and the
Trustee shall authenticate new Securities that reflect the amendment,
supplemental indenture or waiver.
Section 9.6. Trustee to Sign Amendments, etc.
The Trustee shall sign any amendment, waiver or supplemental
indenture authorized pursuant to this Article 9 if the amendment does not
adversely affect the rights, duties, liabilities or immunities of the Trustee.
If it does, the Trustee may, but need not, sign it. In signing or refusing to
sign such amendment, waiver or supplemental indenture, the Trustee shall
<PAGE> 80
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be entitled to receive and, subject to Section 7.1, shall be fully protected in
relying upon, an Officers' Certificate and an Opinion of Counsel as conclusive
evidence that such amendment, waiver or supplemental indenture is authorized or
permitted by this Indenture, that it is not inconsistent herewith, and that it
will be valid and binding upon the Company in accordance with its terms.
ARTICLE 10
MISCELLANEOUS
Section 10.1. Trust Indenture Act Controls.
If any provision of this Indenture limits, qualifies or
conflicts with the duties imposed by operation of subsection (c) of Section 318
of the TIA, the imposed duties shall control.
Section 10.2. Notices.
Any notice or communication by the Company or the Trustee to
the others is duly given if in writing and delivered in person or mailed by
first-class mail (registered or certified, return receipt requested), telecopier
or overnight air courier guaranteeing next day delivery, to the other's address:
If to the Company:
Westinghouse Air Brake Company
1001 Air Brake Avenue
Wilmerding, Pennsylvania 15148
Attention: Robert Brooks
Telephone No.: (412) 825-1315
Telecopier No.: (412) 825-1156
With a copy to:
Reed Smith Shaw & McClay
435 Sixth Avenue
Pittsburgh, Pennsylvania 15219
Attention: David L. DeNinno, Esq.
Telephone No.: (412) 288-3214
Telecopier No.: (412) 288-3218
<PAGE> 81
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If to the Trustee:
The Bank of New York
101 Barclay Street, Floor 21 West
New York, New York 10286
Attention: Corporate Trust Administration
Telephone No.: (212) 815-2588
Telecopier No.: (212) 815-5915
The Company, any other obligor upon the Securities or the
Trustee by notice to the others may designate additional or different addresses
for subsequent notices or communications.
All notices and communications (other than those sent to
Securityholders) shall be deemed to have been duly given: at the time delivered
by hand, if personally delivered; five Business Days after being deposited in
the mail, postage prepaid, if mailed; when receipt acknowledged, if telecopies;
and the next Business Day after timely delivery to the courier, if sent by
overnight air courier guaranteeing next day delivery.
Any notice or communication to a Securityholder shall be
mailed by first-class mail to his address shown on the register kept by the
Registrar. Failure to mail a notice or communication to a Securityholder or any
defect in it shall not affect its sufficiency with respect to other
Securityholders.
If a notice or communication is mailed in the manner provided
above within the time prescribed, it is duly given, whether or not the addressee
receives it.
If the Company (or any other obligor upon the Securities)
mails a notice or communication to Securityholders, it shall mail a copy to the
Trustee at the same time.
Section 10.3. Communication by Holders with Other Holders.
Securityholders may communicate pursuant to TIA Section 312(b)
with other Securityholders with respect to their rights under this Indenture or
the Securities. The Company, the Trustee, the Registrar and anyone else shall
have the protection of TIA Section 312(c).
<PAGE> 82
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Section 10.4. Certificate and Opinion as to Conditions
Precedent.
Upon any request or application by the Company (or any other
obligor upon the Securities) to the Trustee to take any action under this
Indenture, the Company (or such other obligor) shall furnish to the Trustee:
(1) an Officers' Certificate (which shall include the
statements set forth in Section 10.5) stating that, in the opinion of
the signers, all conditions precedent and covenants, if any, provided
for in this Indenture relating to the proposed action have been
complied with; and
(2) An Opinion of Counsel (which shall include the statements
set forth in Section 10.5) stating that, in the opinion of such
counsel, all such conditions precedent and covenants have been complied
with.
Section 10.5. Statements Required in Certificate or Opinion.
Each certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture shall include:
(1) a statement that the Person making such certificate or
opinion has read such covenant or condition;
(2) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions
contained in such certificate or opinion are based;
(3) a statement that, in the opinion of such Person, he has
made such examination or investigation as is necessary to enable him to
express an informed opinion as to whether or not such covenant or
condition has been complied with; and
(4) a statement as to whether or not, in the opinion of such
Person, such condition or covenant has been complied with.
Section 10.6. Rules by Trustee and Agents.
The Trustee may make reasonable rules for action by or at a
meeting of Securityholders. The Registrar or Paying Agent may make reasonable
rules and set reasonable requirements for its functions.
<PAGE> 83
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Section 10.7. No Recourse Against Others.
No recourse under or upon any obligation, covenant or
agreement contained in this Indenture, or in any security, or because of any
indebtedness evidenced thereby, shall be had against any stockholder, officer or
director, as such, of the Company or any successor, under any rule of law,
statute or institutional provision or by the enforcement of any assessment or by
any legal or equitable proceeding or otherwise, all such liability being
expressly waived and released by the acceptance of the Securities by the Holders
thereof and as part of the consideration for the issue of the Securities.
Section 10.8. GOVERNING LAW.
THIS INDENTURE AND EACH SECURITY SHALL BE DEEMED TO BE A
CONTRACT UNDER THE LAWS OF THE STATE OF NEW YORK AND FOR ALL PURPOSES SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF SUCH STATE, WITHOUT
REGARD TO THE PRINCIPLES OF CONFLICTS OF LAWS.
Section 10.9. No Adverse Interpretation of Other Agreements.
This Indenture may not be used to interpret another indenture,
loan or debt agreement of the Company or a Subsidiary. Any such indenture, loan
or debt agreement may not be used to interpret this Indenture.
Section 10.10. Successors.
All agreements of the Company in this Indenture and the
Securities shall bind its successors and assigns, whether so expressed or not.
All agreements of the Trustee in this Indenture shall bind its successors and
assigns, whether so expressed or not.
Section 10.11. Severability.
In case any provision in this Indenture or in the Securities
shall be invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions shall not in any way be affected or
impaired thereby.
Section 10.12. Counterpart Originals.
The parties may sign any number of copies of this Indenture.
Each signed copy shall be an original, but all of them together represent the
same agreement. One signed copy is enough to prove this Indenture.
<PAGE> 84
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Section 10.13. Variable Provisions.
The Company initially appoints the Trustee as Paying Agent and
Registrar.
Section 10.14. Provisions of Indenture for the Sole Benefit of
Parties and Securityholders.
Nothing in this Indenture or in the Securities, expressed or
implied, shall give or be construed to give to any Person, firm or corporation,
other than the parties hereto and their successors and the Holders of the
Securities, any legal or equitable right, remedy or claim under this Indenture
or under any covenant or provision herein contained, all such covenants and
provisions being for the sole benefit of the parties hereto and their successors
and of the Holders of the Securities.
Section 10.15. Table of Contents, Headings, etc.
The Table of Contents, Cross-Reference Table and Headings of
the Articles and Sections of this Indenture have been inserted for convenience
of reference only, are not to be considered a part hereof and shall in no way
modify or restrict any of the terms or provisions hereof.
<PAGE> 85
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IN WITNESS WHEREOF, the parties hereto have caused this
Indenture to be duly executed as of January 12, 1999.
WESTINGHOUSE AIR BRAKE COMPANY
By: /s/ Robert J. Brooks
--------------------------------
Title: Vice-President
Attest:
By:
------------------------- (SEAL)
Title:
THE BANK OF NEW YORK, as Trustee
By: /s/ Iliana Acevedo
--------------------------------
Name: Iliana Acevedo
Title: Assistant Treasurer
<PAGE> 86
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IN WITNESS WHEREOF, the parties hereto have caused this
Indenture to be duly executed as of January 12, 1999.
WESTINGHOUSE AIR BRAKE COMPANY
By: /s/ Alvaro Garcia-Tunon
--------------------------------
Title: Vice President -
Corporate Planning
Attest:
By:
-------------------------- (SEAL)
Title:
THE BANK OF NEW YORK, as Trustee
By: /s/ Iliana Acevedo
---------------------------
Name: Iliana Acevedo
Title: Assistant Treasurer
<PAGE> 87
EXHIBIT A
[FORM OF SERIES B1 SECURITY]
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR THE SECURITIES LAWS OF ANY STATE
OR OTHER JURISDICTION. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION
HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR
OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH
TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, SUCH REGISTRATION.
THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES TO
OFFER, SELL OR OTHERWISE TRANSFER SUCH SECURITY, PRIOR TO THE DATE (THE "RESALE
RESTRICTION TERMINATION DATE") WHICH IS TWO YEARS AFTER THE LATER OF THE
ORIGINAL ISSUE DATE HEREOF AND THE LAST DATE ON WHICH THE ISSUER OR ANY
AFFILIATE OF THE ISSUER WAS THE OWNER OF THIS SECURITY (OR ANY PREDECESSOR OF
SUCH SECURITY), ONLY (A) TO THE ISSUER, (B) PURSUANT TO A REGISTRATION STATEMENT
THAT HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) FOR SO LONG AS
THE SECURITIES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144A, TO A PERSON IT
REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A
UNDER THE SECURITIES ACT THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT
OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS
BEING MADE IN RELIANCE ON RULE 144A, (D) PURSUANT TO OFFERS AND SALES THAT OCCUR
OUTSIDE THE UNITED STATES WITHIN THE MEANING OF REGULATION S UNDER THE
SECURITIES ACT, (E) TO AN "ACCREDITED INVESTOR" WITHIN THE MEANING OF RULE
501(a)(1), (2), (3) OR (7) UNDER THE SECURITIES ACT THAT IS AN INSTITUTIONAL
INVESTOR ACQUIRING THE SECURITY FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF AN
INSTITUTIONAL ACCREDITED INVESTOR, IN EACH CASE IN A MINIMUM PRINCIPAL AMOUNT OF
THE SECURITIES OF $250,000, FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO OR
FOR OFFER OR SALE IN CONNECTION WITH ANY DISTRIBUTION IN VIOLATION OF THE
SECURITIES ACT OR (F) PURSUANT TO ANY OTHER AVAILABLE EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO THE ISSUER'S AND THE
TRUSTEE'S RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER PURSUANT TO CLAUSES
(D), (E) OR (F) TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION
AND/OR OTHER INFORMATION SATISFACTORY TO EACH OF THEM. THIS LEGEND WILL BE
REMOVED UPON THE REQUEST OF THE HOLDER AFTER THE RESALE RESTRICTION TERMINATION
DATE.
A-1
<PAGE> 88
[FORM OF SERIES B1 SECURITY]
$
CUSIP No. _________
9-3/8% Senior Note Due 2005, Series B1
WESTINGHOUSE AIR BRAKE COMPANY, a Delaware corporation,
promises to pay to CEDE & CO., or registered assigns, the principal sum of _____
Dollars on June 15, 2005.
Interest Payment Dates: June 15 and December 15.
Record Dates: June 1 and December 1.
Additional provisions of this Security are set forth on the
other side of this Security.
Dated:
WESTINGHOUSE AIR BRAKE COMPANY
By:
--------------------------
Title: President
--------------------------
Title: Secretary
TRUSTEE'S CERTIFICATE OF
AUTHENTICATION
THE BANK OF NEW YORK
as Trustee, certifies
that this is one of the
Securities referred to
in the Indenture.
Dated:
By:
---------------------------
Authorized Signatory
A-2
<PAGE> 89
[FORM OF REVERSE SIDE OF SECURITY]
9-3/8% Note Due 2005, Series B1
1. Interest
WESTINGHOUSE AIR BRAKE COMPANY, a Delaware corporation (such
corporation, and its successors and assigns under the Indenture hereinafter
referred to, being herein called the "Company"), promises to pay interest on the
principal amount of this Security at the rate per annum shown above. The Company
will pay interest semiannually on June 15 and December 15 of each year. Interest
on the Securities will accrue from the most recent date to which interest has
been paid or, if no interest has been paid, from January 12, 1999. Interest will
be computed on the basis of a 360-day year of twelve-30-day months. The Company
shall pay interest on overdue principal at the rate borne by the Securities plus
1% per annum, and it shall pay interest on overdue installments of interest at
the same rate to the extent lawful.
2. Method of Payment
The Company will pay interest on the Securities (except
defaulted interest) to the persons who are registered holders of Securities at
the close of business on the June 1 or December 1 next preceding the interest
payment date even if Securities are canceled after the record date and on or
before the interest payment date. Holders must surrender Securities to a Paying
Agent to collect principal payments. The Company will pay principal and interest
in money of the United States that at the time of payment is legal tender for
payment of public and private debts. However, the Company may pay principal and
interest by check payable in such money. It may mail an interest check to a
Holder's registered address.
3. Paying Agent and Registrar
Initially, The Bank of New York, a New York banking
corporation (the "Trustee"), will act as Paying Agent and Registrar. The Company
may appoint and change any Paying Agent, Registrar or co-registrar without
notice. The Company or any of its Subsidiaries may act as Paying Agent,
Registrar or co-registrar.
4. Indenture
The Company issued the Securities under an Indenture dated as
of January 12, 1999 (the "Indenture"), between the Company and the Trustee. The
terms of the Securities include those stated in the Indenture and those made
part of the Indenture by reference to the Trust Indenture Act of 1939 (15 U.S.C.
Sections 77aaa-7bbbb) as in effect on the date of the Indenture (the "Act").
Capitalized terms used herein and not defined herein have the meanings ascribed
thereto in the Indenture. The Securities are subject to all such terms, and
Securityholders are referred to the Indenture and the Act for a statement of
those terms.
A-3
<PAGE> 90
The Securities are general unsecured obligations of the
Company limited to $75,000,000 aggregate principal amount subject to Section 2.7
of the Indenture). The Indenture imposes certain limitations on the Incurrence
of Indebtedness by the Company and certain of its Subsidiaries, the payment of
dividends and other distributions and acquisitions or retirements of the
Company's Capital Stock and Subordinated Obligations, the sale or transfer of
assets and Subsidiary stock, the Incurrence of Liens by the Company and certain
of its subsidiaries, Sale/Leaseback transactions and transactions with
Affiliates. In addition, the Indenture limits the ability of the Company and
certain of its Subsidiaries to restrict distributions and dividends from
Subsidiaries.
5. Optional Redemption
Except as set forth in this paragraph 5, the Company may not
redeem any of the Securities prior to June 15, 2000. At any time on or after
June 15, 2000, the Company may, at its option, redeem outstanding Securities, in
whole or in part, at a Redemption Price equal to a percentage of the principal
amount thereof, as set forth in the immediately succeeding paragraph, plus all
accrued and unpaid interest thereon to the Redemption Date (subject to the right
of Holders of record on the relevant record date to receive interest due on the
relevant interest payment date.
The Redemption Price as a percentage of principal amount shall
be as follows, if the Securities are redeemed during the 12-month period
commencing on or after June 15 of the years set forth below:
<TABLE>
<CAPTION>
Year Percentage
---- ----------
<S> <C>
2000................................... 104.688
2001................................... 102.344
2002 and thereafter.................... 100.000
</TABLE>
6. Notice of Redemption
Notice of redemption will be mailed at least 30 days but not
more than 60 days before the redemption date to each Holder of Securities to be
redeemed at his registered address. Securities in denominations larger than
$1,000 may be redeemed in part but only in whole multiples of $1,000. If money
sufficient to pay the redemption price of and accrued interest on all Securities
(or portions thereof) to be redeemed on the redemption date is deposited with
the Paying Agent or before the redemption date and certain other conditions are
satisfied, on and after such redemption date interest ceases to accrue on such
Securities (or such portions thereof) called for redemption.
A-4
<PAGE> 91
7. Put Provisions
Upon a Change of Control, any Holder of Securities will have
the right to cause the Company to repurchase all or any part of the Securities
of such Holder at a repurchase price equal to 101% of the principal amount of
the Securities to be repurchased plus accrued interest to the date of repurchase
as provided in, and subject to the terms of, the Indenture.
8. Offer to Purchase
If the Company consummates any Asset Disposition, the Company
may be required, subject to the terms and conditions of the Indenture, to
utilize a certain portion of the proceeds received from such Asset Disposition
to offer to repurchase Securities at a repurchase price equal to 100% of the
principal amount of the Securities to be repurchased plus accrued interest to
the date of repurchase.
9. Denominations; Transfer; Exchange
The Securities are in registered form without coupons in
denominations of $1,000 and integral multiples of $1,000. A Holder may transfer
or exchange Securities in accordance with the Indenture. No service charge shall
be made for any such registration of transfer or exchange, but the Registrar and
the Trustee may require a Holder, among other things, to furnish appropriate
endorsements and transfer documents and to pay any taxes and fees required by
law or permitted by the Indenture. The Registrar need not exchange or register
the transfer of any Security or portion of a Security selected for redemption.
Also, it need not exchange or register the transfer of any Securities for a
period of 15 days before a selection of Securities to be redeemed or during the
period between a record date and the next succeeding interest payment date.
10. Persons Deemed Owners
The registered holder of this Security may be treated as the
owner of it for all purposes.
11. Unclaimed Money
If money for the payment of principal, premium, if any, or
interest remains unclaimed for two years after the date on which such payment
became due, the Trustee and the Paying Agents will pay the money back to the
Company at its request. After that, all liability of the Trustee and such Paying
Agents with respect to such money shall cease, and Holders entitled to the money
must look only to the Company for payment.
A-5
<PAGE> 92
12. Defeasance
Subject to certain conditions, the Company at any time may
terminate some or all of its obligations under the Securities and the Indenture
if the Company deposits with the Trustee money or U.S. Government Obligations
for the payment of principal and interest on the Securities to redemption or
maturity, as the case may be.
13. Amendment, Waiver
Subject to certain exceptions set forth in the Indenture, (i)
the Indenture or the Securities may be amended with the written consent of the
Holders of at least a majority in principal amount outstanding of the Securities
and (ii) any default or noncompliance with any provision may be waived with the
written consent of the Holders of a majority in principal amount outstanding of
the Securities. Subject to certain exceptions set forth in the Indenture,
without the consent of any Securityholder, the Company and the Trustee may amend
the Indenture or the Securities to cure any ambiguity, defect or inconsistency,
or to comply with Article 5 of the Indenture, or to comply with any requirements
of the SEC in connection with qualifying the Indenture under the Act, or to
provide for uncertificated Securities in addition to or in place of certificated
Securities, or to make any change that does not materially adversely affect the
legal rights of any Securityholder, or to secure the Securities, or to provide
for a replacement Trustee, or to add additional covenants and agreements of the
Company for the benefit of the Securityholders or to surrender rights and powers
reserved to the Company in the Indenture.
14. Defaults and Remedies
Under the Indenture, Events of Default include (i) default for
30 days in payment of interest on the Securities; (ii) default in payment of
principal on the Securities at maturity, upon redemption pursuant to paragraph 5
of the Securities, upon declaration or otherwise, or failure by the Company to
purchase Securities when required; (iii) failure by the Company to perform or
observe any of the covenants, conditions or agreements on the part of the
Company in the Indenture, in all cases subject to notice and in certain cases
subject to lapse of time; (iv) certain accelerations (including failure to pay
within any grace period after finial maturity) of other Indebtedness of the
Company or any Restricted Subsidiary if the amount accelerated (or so unpaid)
exceeds $5,000,000 (or its foreign currency equivalent) with respect to any
individual indebtedness or, together with all Indebtedness unpaid or
accelerated, aggregates $10 million (or its foreign currency equivalent); (v)
certain events of bankruptcy or insolvency with respect to the Company; and (vi)
certain judgments or decrees for the payment of money in excess of $5,000,000
(or its foreign currency equivalent) with respect to any individual judgment or
decree or aggregating $10 million (or its foreign currency equivalent) are
entered against the Company or any Restricted Subsidiary and there is a period
of 60 days following the entry of such judgment or decree during which such
judgment or decree is not discharged, waived or the execution thereof stayed. If
an Event of Default (other than an Event of Default relating to certain events
of bankruptcy or insolvency with respect to the Company) occurs and is
A-6
<PAGE> 93
continuing, the Trustee by notice to the Company, or the Holders of at least 25%
in principal amount of the Securities by notice to the Company and the Trustee,
may declare the principal of and accrued interest on all the Securities to be
due and payable. Certain events of bankruptcy or insolvency are Events of
Default which will result in the Securities being due and payable immediately
upon the occurrence of such Events of Default.
Securityholders may not enforce the Indenture or the
Securities except as provided in the Indenture. The Trustee may refuse to
enforce the Indenture or the Securities unless it receives reasonable indemnity
or security. Subject to certain limitations, Holders of a majority in principal
amount of the Securities may direct the Trustee in its exercise of any trust or
power. The Trustee may withhold from Securityholders notice of any continuing
Default (except a Default in payment of principal or interest) if it determines
that withholding notice is not opposed to their interest.
15. Trustee Dealings with the Company
Subject to certain limitations imposed by the Act, the Trustee
under the Indenture, in its individual or any other capacity, may become the
owner or pledges of Securities and may otherwise deal with and collect
obligations owed to it by the Company or its affiliates and may otherwise deal
with the Company or its affiliates with the same rights it would have if it were
not Trustee.
16. No Recourse Against Others
A director, officer, employee or stockholder, as such, of the
Company or the Trustee shall not have any liability for any obligations of the
Company under the Securities or the Indenture or for any claim based on, in
respect of or by reason of such obligations or their creation. By accepting a
Security, each Securityholder waives and releases all such liability. The waiver
and release are part of the consideration for the issue of the Securities.
17. Authentication
This Security shall not be valid until an authorized signatory
of the Trustee (or an authenticating agent) manually signs the certificate of
authentication on the other side of this Security.
18. Abbreviations
Customary abbreviations may be used in the name of a
Securityholder or an assignee, such as TEN COM (=tenants in common), TEN
ENT(=tenants by the entirety), JT TEN (=joint tenants with rights of
survivorships and not as tenants in common), CUST (=custodian), and U/G/M/A
(=Uniform Gift to Minors Act).
A-7
<PAGE> 94
19. CUSIP Numbers
Pursuant to a recommendation promulgated by the Committee on
Uniform Security Identification Procedures the Company has caused CUSIP numbers
to be printed on the Securities and has directed the Trustee to use CUSIP
numbers in notices of redemption as a convenience to Securityholders. No
representation is made as to the accuracy of such numbers either as printed on
the Securities or as contained in any notice of redemption and reliance may be
placed only on the other identification numbers placed thereon.
The Company will furnish to any Securityholder upon written
request and without charge to the Securityholder a copy of the indenture which
has in it the text of this Security in larger type. Requests may be made to:
Westinghouse Air Brake Company, 1000 Air Brake Avenue, Wilmerding, Pennsylvania
15148, Attention of Chief Financial Officer.
20. Registration Rights
Pursuant to the Registration Rights Agreement, the Company
will be obligated upon the occurrence of certain events to consummate an
exchange offer pursuant to which the Holder of this Security shall have the
right to exchange this Security for a 9-3/8% Senior Subordinated Note due 2005,
Series B2, of the Company (an "Unrestricted Security") which has been registered
under the Securities Act, in like principal amount and having terms identical in
all material respects to this Security. The Holders shall be entitled to receive
certain additional interest payments in the event such exchange offer is not
consummated and upon certain other conditions, all pursuant to and in accordance
with the terms of the Registration Rights Agreement.
21. Governing Law
The Indenture and this Security shall be governed by and
construed in accordance with the laws of the State of New York without regard to
the application of principles of conflicts of laws. Each of the parties hereto
and thereto agrees to submit to the jurisdiction of the courts of the State of
New York in any action or proceeding arising out of or relating to the Indenture
and this Security.
A-8
<PAGE> 95
ASSIGNMENT FORM
To assign this Security, fill in the form below:
I or we assign and transfer this Security to
(Print or type assignee's name, address and zip code)
(Insert assignee's soc. sec. or tax I.D. No.)
and irrevocably appoint agent to transfer this Security on the
books of the Company. The agent may substitute another to act for him.
- --------------------------------------------------------------------------------
Date: Your
------------------------ Signature:
-------------------------
- --------------------------------------------------------------------------------
Sign exactly as your name appears on the other side of this Security.
A-9
<PAGE> 96
OPTION OF HOLDER TO ELECT REPURCHASE
If you want to elect to have this Security repurchased by the
Company pursuant to Section 4.13 or Section 4.15 of the Indenture, check the
appropriate box:
Section 4.13 [ ]
Section 4.15 [ ]
If you want to elect to have only part of this Security
repurchased by the Company pursuant to Section 4.13 or Section 4.15 of the
Indenture, state the amount: $_____________
Dated: Signed:
------------------------ --------------------------------
(Signed exactly as name appears
on the other side of this
Security)
A-10
<PAGE> 97
EXHIBIT B
[FORM OF SERIES B2 SECURITY]
$
CUSIP No. _________
9-3/8% Senior Note Due 2005, Series B2
WESTINGHOUSE AIR BRAKE COMPANY, a Delaware corporation,
promises to pay to CEDE & CO., or registered assigns, the principal sum of _____
Dollars on June 15, 2005.
Interest Payment Dates: June 15 and December 15.
Record Dates: June 1 and December 1.
Additional provisions of this Security are set forth on the
other side of this Security.
Dated:
WESTINGHOUSE AIR BRAKE COMPANY
By:
----------------------------------
Title: President
----------------------------------
Title: Secretary
TRUSTEE'S CERTIFICATE OF
AUTHENTICATION
THE BANK OF NEW YORK
as Trustee, certifies
that this is one of the
Securities referred to
in the Indenture.
Dated:
By:
---------------------------
Authorized Signatory
B-1
<PAGE> 98
[FORM OF REVERSE SIDE OF SECURITY]
9-3/8% Senior Note Due 2005, Series B2
1. Interest
WESTINGHOUSE AIR BRAKE COMPANY, a Delaware corporation (such
corporation, and its successors and assigns under the Indenture hereinafter
referred to, being herein called the "Company"), promises to pay interest on the
principal amount of this Security at the rate per annum shown above. The Company
will pay interest semiannually on June 15 and December 15 of each year. Interest
on the Securities will accrue from the most recent date to which interest has
been paid or, if no interest has been paid, from January 12, 1999. Interest will
be computed on the basis of a 360-day year of twelve-30-day months. The Company
shall pay interest on overdue principal at the rate borne by the Securities plus
1% per annum, and it shall pay interest on overdue installments of interest at
the same rate to the extent lawful.
2. Method of Payment
The Company will pay interest on the Securities (except
defaulted interest) to the persons who are registered holders of Securities at
the close of business on the June 1 or December 1 next preceding the interest
payment date even if Securities are canceled after the record date and on or
before the interest payment date. Holders must surrender Securities to a Paying
Agent to collect principal payments. The Company will pay principal and interest
in money of the United States that at the time of payment is legal tender for
payment of public and private debts. However, the Company may pay principal and
interest by check payable in such money. It may mail an interest check to a
Holder's registered address.
3. Paying Agent and Registrar
Initially, The Bank of New York, a New York banking
corporation (the "Trustee"), will act as Paying Agent and Registrar. The Company
may appoint and change any Paying Agent, Registrar or co-registrar without
notice. The Company or any of its Subsidiaries may act as Paying Agent,
Registrar or co-registrar.
4. Indenture
The Company issued the Securities under an Indenture dated as
of January 12, 1999 (the "Indenture"), between the Company and the Trustee. The
terms of the Securities include those stated in the Indenture and those made
part of the Indenture by reference to the Trust Indenture Act of 1939 (15 U.S.C.
Sections 77aaa-7bbbb) as in effect on the date of the Indenture
B-2
<PAGE> 99
(the "Act"). Capitalized terms used herein and not defined herein have the
meanings ascribed thereto in the Indenture. The Securities are subject to all
such terms, and Securityholders are referred to the Indenture and the Act for a
statement of those terms.
The Securities are general unsecured obligations of the
Company limited to $75,000,000 aggregate principal amount subject to Section 2.7
of the Indenture). The Indenture imposes certain limitations on the Incurrence
of Indebtedness by the Company and certain of its Subsidiaries, the payment of
dividends and other distributions and acquisitions or retirements of the
Company's Capital Stock and Subordinated Obligations, the sale or transfer of
assets and Subsidiary stock, the Incurrence of Liens by the Company and certain
of its subsidiaries, Sale/Leaseback transactions and transactions with
Affiliates. In addition, the Indenture limits the ability of the Company and
certain of its Subsidiaries to restrict distributions and dividends from
Subsidiaries.
5. Optional Redemption
Except as set forth in this paragraph 5, the Company may not
redeem any of the Securities prior to June 15, 2000. At any time on or after
June 15, 2000, the Company may, at its option, redeem outstanding Securities, in
whole or in part, at a Redemption Price equal to a percentage of the principal
amount thereof, as set forth in the immediately succeeding paragraph, plus all
accrued and unpaid interest thereon to the Redemption Date (subject to the right
of Holders of record on the relevant record date to receive interest due on the
relevant interest payment date.
The Redemption Price as a percentage of principal amount shall
be as follows, if the Securities are redeemed during the 12-month period
commencing on or after June 15 of the years set forth below:
<TABLE>
<CAPTION>
Year Percentage
---- ----------
<S> <C>
2000................................... 104.688
2001................................... 102.344
2002 and thereafter.................... 100.000
</TABLE>
6. Notice of Redemption
Notice of redemption will be mailed at least 30 days but not
more than 60 days before the redemption date to each Holder of Securities to be
redeemed at his registered address. Securities in denominations larger than
$1,000 may be redeemed in part but only in whole multiples of $1,000. If money
sufficient to pay the redemption price of and accrued interest on all Securities
(or portions thereof) to be redeemed on the redemption date is deposited with
the Paying Agent or before the redemption date and certain other conditions are
satisfied, on and after such redemption date interest ceases to accrue on such
Securities (or such portions thereof) called for redemption.
B-3
<PAGE> 100
7. Put Provisions
Upon a Change of Control, any Holder of Securities will have
the right to cause the Company to repurchase all or any part of the Securities
of such Holder at a repurchase price equal to 101% of the principal amount of
the Securities to be repurchased plus accrued interest to the date of repurchase
as provided in, and subject to the terms of, the Indenture.
8. Offer to Purchase
If the Company consummates any Asset Disposition, the Company
may be required, subject to the terms and conditions of the Indenture, to
utilize a certain portion of the proceeds received from such Asset Disposition
to offer to repurchase Securities at a repurchase price equal to 100% of the
principal amount of the Securities to be repurchased plus accrued interest to
the date of repurchase.
9. Denominations; Transfer; Exchange
The Securities are in registered form without coupons in
denominations of $1,000 and integral multiples of $1,000. A Holder may transfer
or exchange Securities in accordance with the Indenture. No service charge shall
be made for any such registration of transfer or exchange, but the Registrar and
the Trustee may require a Holder, among other things, to furnish appropriate
endorsements and transfer documents and to pay any taxes and fees required by
law or permitted by the Indenture. The Registrar need not exchange or register
the transfer of any Security or portion of a Security selected for redemption.
Also, it need not exchange or register the transfer of any Securities for a
period of 15 days before a selection of Securities to be redeemed or during the
period between a record date and the next succeeding interest payment date.
10. Persons Deemed Owners
The registered holder of this Security may be treated as the
owner of it for all purposes.
11. Unclaimed Money
If money for the payment of principal, premium, if any, or
interest remains unclaimed for two years after the date on which such payment
became due, the Trustee and the Paying Agents will pay the money back to the
Company at its request. After that, all liability of the Trustee and such Paying
Agents with respect to such money shall cease, and Holders entitled to the money
must look only to the Company for payment.
B-4
<PAGE> 101
12. Defeasance
Subject to certain conditions, the Company at any time may
terminate some or all of its obligations under the Securities and the Indenture
if the Company deposits with the Trustee money or U.S. Government Obligations
for the payment of principal and interest on the Securities to redemption or
maturity, as the case may be.
13. Amendment, Waiver
Subject to certain exceptions set forth in the Indenture, (i)
the Indenture or the Securities may be amended with the written consent of the
Holders of at least a majority in principal amount outstanding of the Securities
and (ii) any default or noncompliance with any provision may be waived with the
written consent of the Holders of a majority in principal amount outstanding of
the Securities. Subject to certain exceptions set forth in the Indenture,
without the consent of any Securityholder, the Company and the Trustee may amend
the Indenture or the Securities to cure any ambiguity, defect or inconsistency,
or to comply with Article 5 of the Indenture, or to comply with any requirements
of the SEC in connection with qualifying the Indenture under the Act, or to
provide for uncertificated Securities in addition to or in place of certificated
Securities, or to make any change that does not materially adversely affect the
legal rights of any Securityholder, or to secure the Securities, or to provide
for a replacement Trustee, or to add additional covenants and agreements of the
Company for the benefit of the Securityholders or to surrender rights and powers
reserved to the Company in the Indenture.
14. Defaults and Remedies
Under the Indenture, Events of Default include (i) default for
30 days in payment of interest on the Securities; (ii) default in payment of
principal on the Securities at maturity, upon redemption pursuant to paragraph 5
of the Securities, upon declaration or otherwise, or failure by the Company to
purchase Securities when required; (iii) failure by the Company to perform or
observe any of the covenants, conditions or agreements on the part of the
Company in the Indenture, in all cases subject to notice and in certain cases
subject to lapse of time; (iv) certain accelerations (including failure to pay
within any grace period after finial maturity) of other Indebtedness of the
Company or any Restricted Subsidiary if the amount accelerated (or so unpaid)
exceeds $5,000,000 (or its foreign currency equivalent) with respect to any
individual indebtedness or, together with all Indebtedness unpaid or
accelerated, aggregates $10 million (or its foreign currency equivalent); (v)
certain events of bankruptcy or insolvency with respect to the Company; and (vi)
certain judgments or decrees for the payment of money in excess of $5,000,000
(or its foreign currency equivalent) with respect to any individual judgment or
decree
B-5
<PAGE> 102
or aggregating $10 million (or its foreign currency equivalent) are entered
against the Company or any Restricted Subsidiary and there is a period of 60
days following the entry of such judgment or decree during which such judgment
or decree is not discharged, waived or the execution thereof stayed. If an Event
of Default (other than an Event of Default relating to certain events of
bankruptcy or insolvency with respect to the Company) occurs and is continuing,
the Trustee by notice to the Company, or the Holders of at least 25% in
principal amount of the Securities by notice to the Company and the Trustee, may
declare the principal of and accrued interest on all the Securities to be due
and payable. Certain events of bankruptcy or insolvency are Events of Default
which will result in the Securities being due and payable immediately upon the
occurrence of such Events of Default.
Securityholders may not enforce the Indenture or the
Securities except as provided in the Indenture. The Trustee may refuse to
enforce the Indenture or the Securities unless it receives reasonable indemnity
or security. Subject to certain limitations, Holders of a majority in principal
amount of the Securities may direct the Trustee in its exercise of any trust or
power. The Trustee may withhold from Securityholders notice of any continuing
Default (except a Default in payment of principal or interest) if it determines
that withholding notice is not opposed to their interest.
15. Trustee Dealings with the Company
Subject to certain limitations imposed by the Act, the Trustee
under the Indenture, in its individual or any other capacity, may become the
owner or pledges of Securities and may otherwise deal with and collect
obligations owed to it by the Company or its affiliates and may otherwise deal
with the Company or its affiliates with the same rights it would have if it were
not Trustee.
16. No Recourse Against Others
A director, officer, employee or stockholder, as such, of the
Company or the Trustee shall not have any liability for any obligations of the
Company under the Securities or the Indenture or for any claim based on, in
respect of or by reason of such obligations or their creation. By accepting a
Security, each Securityholder waives and releases all such liability. The waiver
and release are part of the consideration for the issue of the Securities.
17. Authentication
This Security shall not be valid until an authorized signatory
of the Trustee (or an authenticating agent) manually signs the certificate of
authentication on the other side of this Security.
B-6
<PAGE> 103
18. Abbreviations
Customary abbreviations may be used in the name of a
Securityholder or an assignee, such as TEN COM (=tenants in common), TEN
ENT(=tenants by the entirety), JT TEN (=joint tenants with rights of
survivorships and not as tenants in common), CUST (=custodian), and U/G/M/A
(=Uniform Gift to Minors Act).
19. CUSIP Numbers
Pursuant to a recommendation promulgated by the Committee on
Uniform Security Identification Procedures the Company has caused CUSIP numbers
to be printed on the Securities and has directed the Trustee to use CUSIP
numbers in notices of redemption as a convenience to Securityholders. No
representation is made as to the accuracy of such numbers either as printed on
the Securities or as contained in any notice of redemption and reliance may be
placed only on the other identification numbers placed thereon.
The Company will furnish to any Securityholder upon written
request and without charge to the Securityholder a copy of the indenture which
has in it the text of this Security in larger type. Requests may be made to:
Westinghouse Air Brake Company, 1000 Air Brake Avenue, Wilmerding, Pennsylvania
15148, Attention of Chief Financial Officer.
20. Governing Law
The Indenture and this Security shall be governed by and
construed in accordance with the laws of the State of New York without regard to
the application of principles of conflicts of laws. Each of the parties hereto
and thereto agrees to submit to the jurisdiction of the courts of the State of
New York in any action or proceeding arising out of or relating to the Indenture
and this Security.
B-7
<PAGE> 104
ASSIGNMENT FORM
To assign this Security, fill in the form below:
I or we assign and transfer this Security to
(Print or type assignee's name, address and zip code)
(Insert assignee's soc. sec. or tax I.D. No.)
and irrevocably appoint agent to transfer this Security on the
books of the Company. The agent may substitute another to act for him.
- --------------------------------------------------------------------------------
Date:
----------------------- Your
Signature:
-------------------------
- --------------------------------------------------------------------------------
Sign exactly as your name appears on the other side of this Security.
B-8
<PAGE> 105
OPTION OF HOLDER TO ELECT REPURCHASE
If you want to elect to have this Security repurchased by the
Company pursuant to Section 4.13 or Section 4.15 of the Indenture, check the
appropriate box:
Section 4.13 [ ]
Section 4.15 [ ]
If you want to elect to have only part of this Security
repurchased by the Company pursuant to Section 4.13 or Section 4.15 of the
Indenture, state the amount: $_____________
Dated: Signed:
------------------------- ----------------------------
(Signed exactly as name
appears on the other side
of this Security)
B-9
<PAGE> 106
EXHIBIT C
FORM OF LEGEND FOR GLOBAL SECURITIES
Any Global Security authenticated and delivered hereunder
shall bear a legend (which would be in addition to any other legends required in
the case of a Restricted Security) in substantially the following form:
THIS SECURITY IS A GLOBAL SECURITY WITHIN THE MEANING OF THE
INDENTURE HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF A DEPOSITORY
OR A NOMINEE OF A DEPOSITORY OR A SUCCESSOR DEPOSITORY. THIS SECURITY IS NOT
EXCHANGEABLE FOR SECURITIES REGISTERED IN THE NAME OF A PERSON OTHER THAN THE
DEPOSITORY OR ITS NOMINEE EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE
INDENTURE, AND NO TRANSFER OF THIS SECURITY (OTHER THAN A TRANSFER OF THIS
SECURITY AS A WHOLE BY THE DEPOSITORY TO A NOMINEE OF THE DEPOSITORY OR BY A
NOMINEE OF THE DEPOSITORY TO THE DEPOSITORY OR ANOTHER NOMINEE OF THE
DEPOSITORY) MAY BE REGISTERED EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED IN
THE INDENTURE.
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"),
TO THE ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT,
AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH
OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY
PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR
VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED
OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO
TRANSFERS IN WHOLE, BUT NOT IN PART, TO NOMINEES OF CEDE & CO. OR TO A SUCCESSOR
THEREOF OR SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL
SECURITY SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS
SET FORTH IN SECTION 2.16 OF THE INDENTURE.
C-1
<PAGE> 107
EXHIBIT D
CERTIFICATE TO BE DELIVERED UPON EXCHANGE
OR REGISTRATION OF TRANSFER OF SECURITIES
Re: 9-3/8% Senior Notes due 2005 (the "Securities")
of Westinghouse Air Brake Company
This Certificate relates to $_______ principal amount of
Securities held in the form of* [ ] a beneficial interest in a Global Security
or* [ ] Physical Securities by ______ (the "Transferor").
The Transferor:*
[ ] has requested by written order that the Registrar deliver in
exchange for its beneficial interest in the Global Security held by the
Depositary a Physical Security or Physical Securities in definitive, registered
form of authorized denominations and an aggregate number equal to its beneficial
interest in such Global Security (or the portion thereof indicated above); or
[ ] has requested that the Registrar by written order to exchange or
register the transfer of a Physical Security or Physical Securities.
In connection with such request and in respect of each such
Security, the Transferor does hereby certify that the Transferor is familiar
with the Indenture relating to the above captioned Securities and the
restrictions on transfers thereof as provided in Section 2.16 of such Indenture,
and that the transfer of the Securities does not require Registration under the
Securities Act of 1933, as amended (the "Act"), because:*
[ ] Such Security is being acquired for the Transferor's own account,
without transfer (in satisfaction of Section 2.16 of the Indenture); or
[ ] such Security is being transferred to a "qualified institutional
buyer" (as defined in Rule 144A under the Act), in reliance on Rule 144A; or
[ ] such Security is being transferred to an institutional "accredited
investor" (within the meaning of Rule 501(a)(1), (2), (3) or (7) under the Act)
which delivers a certificate to the Trustee in the form of Exhibit E to the
Indenture; or
[ ] such Security is being transferred in reliance on Rule 144 under
the Act; or
D-1
<PAGE> 108
[ ] such Security is being transferred in reliance on and in compliance
with an exemption from the Registration requirements of the Act other than Rule
144A or Rule 144 under the Act to a person other than an institutional
"accredited investor." An Opinion of Counsel to the effect that such transfer
does not require Registration under the Securities Act accompanies this
certification.
--------------------------------
[INSERT NAME OF TRANSFEROR]
By:
----------------------------
[Authorized Signatory]
Date:
---------------------------------
*Check applicable box.
D-2
<PAGE> 109
EXHIBIT E
FORM OF TRANSFEREE LETTER OF REPRESENTATION
WESTINGHOUSE AIR BRAKE COMPANY
c/o THE BANK OF NEW YORK
101 Barclay Street,
Floor 21 West New York, New York 10286
Ladies and Gentlemen:
This certificate is delivered to request a transfer of
$________ principal amount of the 9-3/8% Senior Notes due 2005 (the
"Securities") of WESTINGHOUSE AIR BRAKE COMPANY (the "Company"). Upon transfer,
the Securities would be registered in the name of the new beneficial owner as
follows:
Name:________________________________________
Address: ____________________________________
Taxpayer ID Number: _________________________
The undersigned represents and warrants to you that:
1. We are an institutional "accredited investor" (as defined
in Rule 501(a)(1), (2), (3) or (7) under the Securities Act of 1933 (the
"Securities Act")) purchasing for our own account or for the account of such an
institutional "accredited investor" at least $250,000 principal amount of the
Securities, and we are acquiring the Securities not with a view to, or for offer
or sale in connection with, any distribution in violation of the Securities Act.
We have such knowledge and experience in financial and business matters as to be
capable of evaluating the merits and risk of our investment in the Securities
and we invest in or purchase securities similar to the Securities in the normal
course of our business. We and any accounts for which we are acting are each
able to bear the economic risk of our or its investment.
2. We understand that the Securities have not been registered
under the Securities Act and, unless so registered, may not be sold except as
permitted in the following sentence. We agree on our own behalf and on behalf of
any investor account for which we are purchasing Securities to offer, sell or
otherwise transfer such Securities prior to the date which is two years after
the later of the date of original issue and the last date on which the Company
or any affiliate of the Company was the owner of such Securities (or any
predecessor thereto) (the "Resale Restriction Termination Date") only (a) to the
Company, (b) pursuant to a registration
E-1
<PAGE> 110
statement which has been declared effective under the Securities Act, (c) in a
transaction complying with the requirements of Rule 144A under the Securities
Act, to a person we reasonably believe is a qualified institutional buyer under
Rule 144A (a "QIB") that purchases for its own account or for the account of a
QIB and to whom notice is given that the transfer is being made in reliance on
Rule 144A, (d) pursuant to offers and sales that occur outside the United States
within the meaning of Regulation S under the Securities Act, (e) to an
institutional "accredited investor" within the meaning of Rule 501(a)(1), (2),
(3) or (7) under the Securities Act that is purchasing for its own account or
for the account of such an institutional "accredited investor," in each case in
a minimum principal amount of Securities of $250,000, or (f) pursuant to any
other available exemption from the registration requirements of the Securities
Act, subject in each of the foregoing cases to any requirement of law that the
disposition of our property or the property of such investor account or accounts
be at all times within our or their control and in compliance with any
applicable state securities laws. The foregoing restrictions on resale will not
apply subsequent to the Resale Restriction Termination Date. If any resale or
other transfer of the Securities is proposed to be made pursuant to clause (e)
above prior to the Resale Restriction Termination Date, the transferor shall
deliver a letter from the transferee substantially in the form of this letter to
the Company and the Trustee, which shall provide, among other things, that the
transferee is an institutional "accredited investor" within the meaning of Rule
501(a)(1), (2), (3) or (7) under the Securities Act and that it is acquiring
such Securities for investment purposes and not for distribution in violation of
the Securities Act. Each purchaser acknowledges that the Company and the Trustee
reserve the right prior to any offer, sale or other transfer prior to the Resale
Restriction Termination Date of the Securities pursuant to clause (d), (e) or
(f) above to require the delivery of an opinion of counsel, certificates and/or
other information satisfactory to the Company and the Trustee.
Dated: _________________ TRANSFEREE: ________________________
By: ________________________________
E-2
<PAGE> 111
EXHIBIT F
Form of Certificate To Be
Delivered in Connection
with Regulation S Transfers
---------------, ----
WESTINGHOUSE AIR BRAKE COMPANY
c/o THE BANK OF NEW YORK
101 Barclay Street,
Floor 21 West
New York, New York 10286
Re: WESTINGHOUSE AIR BRAKE COMPANY
(the "Company") 9-3/8% Senior
Notes due 2005 (the "Securities")
Ladies and Gentlemen:
In connection with our proposed sale of $_________________
aggregate principal amount of the Securities, we confirm that such sale has been
effected pursuant to and in accordance with Regulation S under the Securities
Act of 1933, as amended (the "Securities Act"), and, accordingly, we represent
that:
(1) the offer of the Securities was not made to a person in
the United States;
(2) either (a) at the time the buy offer was originated, the
transferee was outside the United States or we and any person acting on
our behalf reasonably believed that the transferee was outside the
United States, or (b) the transaction was executed in, on or through
the facilities of a designated off-shore securities market and neither
we nor any person acting on our behalf knows that the transaction has
been prearranged with a buyer in the United States;
(3) no directed selling efforts have been made in the United
States in contravention of the requirements of Rule 903(b) or Rule
904(b) of Regulation S, as applicable;
(4) the transaction is not part of a plan or scheme to evade
the registration requirements of the Securities Act; and
F-1
<PAGE> 112
(5) we have advised the transferee of the transfer
restrictions applicable to the Securities.
You and the Company are entitled to rely upon this letter and
are irrevocably authorized to produce this letter or a copy hereof to any
interested party in any administrative or legal proceedings or official inquiry
with respect to the matters covered hereby. Defined terms used herein without
definition have the respective meanings provided in Regulation S.
Very truly yours,
[Name of Transferor]
By:
-----------------------------
[Authorized Signatory]
F-2
<PAGE> 1
EXHIBIT 10.5
EXECUTION COPY
================================================================================
CREDIT AGREEMENT
Dated as of June 30, 1998,
and Amended and Restated as of October 2, 1998
Among
WESTINGHOUSE AIR BRAKE COMPANY,
THE FINANCIAL INSTITUTIONS LISTED ON SCHEDULE 2.01,
THE CHASE MANHATTAN BANK,
as Swingline Lender,
Administrative Agent and Collateral Agent,
CHASE MANHATTAN BANK DELAWARE,
as Issuing Bank,
THE BANK OF NEW YORK,
as Documentation Agent
================================================================================
<PAGE> 2
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Page
----
<S> <C> <C>
ARTICLE I. DEFINITIONS
SECTION 1.01. Defined Terms.............................................................................2
SECTION 1.02. Terms Generally..........................................................................25
ARTICLE II. THE CREDITS
SECTION 2.01. Commitments..............................................................................25
SECTION 2.02. Loans....................................................................................26
SECTION 2.03. Borrowing Procedure......................................................................27
SECTION 2.04. Evidence of Debt; Repayment of Loans.....................................................28
SECTION 2.05. Fees.....................................................................................29
SECTION 2.06. Interest on Loans........................................................................30
SECTION 2.07. Default Interest.........................................................................30
SECTION 2.08. Alternate Rate of Interest...............................................................31
SECTION 2.09. Termination and Reduction of Commitments.................................................31
SECTION 2.10. Conversion and Continuation of Borrowings................................................31
SECTION 2.11. Repayment of Term Borrowings.............................................................33
SECTION 2.12. Prepayment...............................................................................34
SECTION 2.13. Reserve Requirements; Change in Circumstances............................................36
SECTION 2.14. Change in Legality.......................................................................38
SECTION 2.15. Indemnity................................................................................39
SECTION 2.16. Pro Rata Treatment.......................................................................40
SECTION 2.17. Sharing of Setoffs.......................................................................40
SECTION 2.18. Payments.................................................................................41
SECTION 2.19. Taxes....................................................................................41
SECTION 2.20. Swingline Loans..........................................................................44
SECTION 2.21. Letters of Credit........................................................................45
SECTION 2.22. Unavailability of ECU....................................................................50
ARTICLE III. REPRESENTATIONS AND WARRANTIES
SECTION 3.01. Organization; Powers.....................................................................50
SECTION 3.02. Authorization............................................................................51
SECTION 3.03. Enforceability...........................................................................51
SECTION 3.04. Approvals................................................................................51
SECTION 3.05. Financial Statements.....................................................................51
SECTION 3.06. No Material Adverse Change...............................................................52
SECTION 3.07. Title to Properties; Possession Under Leases.............................................52
</TABLE>
<PAGE> 3
<TABLE>
<S> <C> <C>
SECTION 3.08. Subsidiaries.............................................................................53
SECTION 3.09. Litigation; Compliance with Laws.........................................................53
SECTION 3.10. Agreements...............................................................................53
SECTION 3.11. Federal Reserve Regulations..............................................................53
SECTION 3.12. Investment Company Act; Public Utility Holding Company Act...............................54
SECTION 3.13. Use of Proceeds..........................................................................54
SECTION 3.14. Tax Returns..............................................................................54
SECTION 3.15. No Material Misstatements................................................................54
SECTION 3.16. Employee Benefit Plans...................................................................54
SECTION 3.17. Environmental Matters....................................................................55
SECTION 3.18. Insurance................................................................................56
SECTION 3.19. Solvency.................................................................................56
SECTION 3.20. Labor Matters............................................................................56
SECTION 3.21. Security Documents.......................................................................56
SECTION 3.22. Location of Real Property and Leased Premises............................................57
SECTION 3.23. Year 2000 Compliance.....................................................................57
ARTICLE IV. CONDITIONS OF LENDING
SECTION 4.01. All Credit Events........................................................................57
SECTION 4.02. First Credit Event.......................................................................58
ARTICLE V. AFFIRMATIVE COVENANTS
SECTION 5.01. Existence; Businesses and Properties.....................................................61
SECTION 5.02. Insurance................................................................................62
SECTION 5.03. Obligations and Taxes....................................................................62
SECTION 5.04. Financial Statements, Reports, etc.......................................................63
SECTION 5.05. Litigation and Other Notices.............................................................64
SECTION 5.06. ERISA....................................................................................64
SECTION 5.07. Maintaining Records; Access to Properties and Inspections................................65
SECTION 5.08. Use of Proceeds..........................................................................65
SECTION 5.09. Compliance with Environmental Laws.......................................................65
SECTION 5.10. Preparation of Environmental Reports.....................................................65
SECTION 5.11. Further Assurances.......................................................................65
SECTION 5.12. Material Contracts.......................................................................66
SECTION 5.13. Post-Closing Matters.....................................................................66
ARTICLE VI. NEGATIVE COVENANTS
SECTION 6.01. Indebtedness.............................................................................67
SECTION 6.02. Liens....................................................................................68
SECTION 6.03. Sale and Leaseback Transactions..........................................................70
SECTION 6.04. Investments, Loans and Advances..........................................................70
SECTION 6.05. Mergers, Consolidations, Sales of Assets and Acquisitions................................71
SECTION 6.06. Dividends and Distributions..............................................................72
SECTION 6.07. Transactions with Affiliates.............................................................72
SECTION 6.08. Business of Borrower and Subsidiaries....................................................72
SECTION 6.09. Limitations on Certain Debt Payments and Interest Payments...............................72
</TABLE>
<PAGE> 4
<TABLE>
<S> <C> <C>
SECTION 6.10. Amendment of Certain Documents; Certain Agreements.......................................73
SECTION 6.11. Limitation on Capital Lease Obligations..................................................73
SECTION 6.12. Capital Expenditures.....................................................................73
SECTION 6.13. Interest Expense Coverage Ratio..........................................................74
SECTION 6.14. Leverage Ratio...........................................................................74
SECTION 6.15. Asset Value of Guarantors................................................................75
ARTICLE VII. EVENTS OF DEFAULT...................................75
ARTICLE VIII. THE AGENTS......................................78
ARTICLE IX. MISCELLANEOUS
SECTION 9.01. Notices..................................................................................81
SECTION 9.02. Survival of Agreement....................................................................81
SECTION 9.03. Binding Effect...........................................................................81
SECTION 9.04. Successors and Assigns...................................................................82
SECTION 9.05. Expenses; Indemnity......................................................................85
SECTION 9.06. Right of Setoff..........................................................................85
SECTION 9.07. APPLICABLE LAW...........................................................................86
SECTION 9.08. Waivers; Amendment.......................................................................86
SECTION 9.09. Interest Rate Limitation.................................................................87
SECTION 9.10. Entire Agreement.........................................................................87
SECTION 9.11. WAIVER OF JURY TRIAL.....................................................................87
SECTION 9.12. Severability.............................................................................87
SECTION 9.13. Counterparts.............................................................................87
SECTION 9.14. Headings.................................................................................88
SECTION 9.15. Jurisdiction; Consent to Service of Process..............................................88
SECTION 9.16. Mortgaged Property Casualty and Condemnation.............................................88
SECTION 9.17. Confidentiality..........................................................................91
SECTION 9.18. Currencies...............................................................................92
SECTION 9.19. European Economic and Monetary Union.....................................................93
</TABLE>
<PAGE> 5
LIST OF EXHIBITS
EXHIBIT A Form of Administrative Questionnaire
EXHIBIT B Form of Assignment and Acceptance
EXHIBIT C Form of Borrowing Request
EXHIBIT D Form of Guarantee Agreement
EXHIBIT E Form of Intellectual Property Security Agreement
EXHIBIT F Form of Mortgage
EXHIBIT G Form of Pledge Agreement
EXHIBIT H Form of Security Agreement
EXHIBIT I Form of Opinion of Reed Smith Shaw & McClay LLP
EXHIBIT J Form of Indemnity, Subrogation and Contribution Agreement
LIST OF SCHEDULES
Schedule 1.01 Mortgaged Properties
Schedule 2.01 Commitments
Schedule 3.07(c) Notice of Condemnation
Schedule 3.07(d) Obligations In Respect of Mortgaged Properties
Schedule 3.08 Subsidiaries
Schedule 3.09 Litigation
Schedule 3.18 Insurance
Schedule 3.20 Labor Matters
Schedule 3.21 Filing Offices
Schedule 3.22(a) Owned Real Property
Schedule 3.22(b) Leased Real Property
Schedule 6.01 Indebtedness
Schedule 6.02 Liens
<PAGE> 6
CREDIT AGREEMENT dated as of June 30, 1998
and amended and restated as of October 2, 1998, among
WESTINGHOUSE AIR BRAKE COMPANY, a Delaware
corporation (the "Borrower"); the financial
institutions from time to time party hereto,
initially consisting of those listed on Schedule 2.01
(together with the Swingline Lender (as defined
below), the "Lenders"); THE CHASE MANHATTAN BANK, a
New York banking corporation, as swingline lender (in
such capacity, the "Swingline Lender") and as
administrative agent (in such capacity, the
"Administrative Agent") and collateral agent (in such
capacity, the "Collateral Agent") for the Lenders;
CHASE MANHATTAN BANK DELAWARE, a Delaware banking
corporation, as issuing bank (in such capacity, the
"Issuing Bank"); and THE BANK OF NEW YORK ("BNY"), a
New York banking corporation, as Documentation Agent
for the Lenders.
The Borrower has requested the Lenders to extend credit in the
form of (a) the continuation of outstanding June 1998 Term Loans (such term and
each other capitalized term used but not defined in this introductory statement
having the meaning given such term in Article I) in an aggregate principal
amount not in excess of $170,000,000, (b) September 1998 Term Loans in an
aggregate principal amount not in excess of $40,000,000 and (c) Revolving Loans,
at any time and from time to time prior to the Revolving Credit Maturity Date,
in an aggregate principal amount at any time outstanding not in excess of
$140,000,000 minus the L/C Exposure and Swingline Exposure at such time. The
Borrower has requested the Swingline Lender to extend credit, at any time and
from time to time prior to the Revolving Credit Maturity Date, in the form of
Swingline Loans in an aggregate principal amount at any time outstanding not in
excess of $5,000,000. The Borrower has requested the Issuing Bank to issue
Letters of Credit, in an aggregate face amount at any time outstanding not in
excess of $50,000,000, to support payment obligations incurred in the ordinary
course of business by the Borrower and its Subsidiaries.
On the Closing Date, the Borrower used proceeds of (a) the
June 1998 Term Borrowings and (b) a portion of the available Revolving Credit
Commitments solely to repay in full all loans outstanding under the Original
Credit Agreement and to pay fees, expenses, indemnities or other obligations of
the Borrower payable thereunder in connection with the repayment in full of such
loans or otherwise, in accordance with the terms of the Original Credit
Agreement.
<PAGE> 7
On the Effective Date, (a) the June 1998 Term Borrowings and
(b) the Revolving Credit Borrowings outstanding on such date will be continued.
The Borrower will use proceeds of (a) the September 1998 Term Borrowings, (b) a
portion of the available Revolving Credit Commitments and (c) the Rockwell
Senior Unsecured Credit Facility Loans to make the Rockwell Acquisition and to
pay fees and expenses incurred in connection therewith.
The proceeds of Revolving Credit Borrowings (other than
Revolving Credit Borrowings made on the Effective Date and used in accordance
with the immediately preceding paragraph) will be used by the Borrower for
general corporate purposes in the ordinary course of the Borrower's business,
including the making of Acquisitions.
The proceeds of Swingline Loans will be used by the Borrower
for general corporate purposes in the ordinary course of the Borrower's
business. Letters of Credit are to be used in the ordinary course of business.
The Lenders and the Swingline Lender are willing to extend
such credit to the Borrower and the Issuing Bank is willing to issue Letters of
Credit for the account of the Borrower on the terms and subject to the
conditions set forth herein. Accordingly, the parties hereto agree as follows:
ARTICLE I. DEFINITIONS
SECTION 1.01. Defined Terms. As used in this Agreement, the
following terms shall have the meanings specified below:
"ABR Borrowing" shall mean a Borrowing comprised of ABR Loans.
"ABR Loan" shall mean any ABR Term Loan, ABR Revolving Loan or
Swingline Loan.
"ABR Revolving Loan" shall mean any Revolving Loan bearing
interest at a rate determined by reference to the Alternate Base Rate in
accordance with the provisions of Article II.
"ABR Term Loan" shall mean any Term Loan bearing interest at a
rate determined by reference to the Alternate Base Rate in accordance with the
provisions of Article II.
"Acquisitions" shall have the meaning assigned to such term in
Section 6.05.
"Adjusted LIBO Rate" shall mean, 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 the product of
(a) the LIBO Rate in effect for such Interest Period and (b) Statutory Reserves.
<PAGE> 8
"Administration Agent Fees" shall have the meaning assigned to
such term in Section 2.05.
"Administrative Questionnaire" shall mean an Administrative
Questionnaire in the form of Exhibit A.
"Affiliate" shall mean, when used 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" shall have the meaning assigned to such term in
Article VIII.
"Aggregate Revolving Credit Exposure" shall mean the aggregate
amount of the Lenders' Revolving Credit Exposures.
"Alternate Base Rate" shall mean, for any day, a rate per
annum (rounded upwards, if necessary, to the next 1/16 of 1%) equal to the
greatest of (a) the Prime Rate in effect on such day, (b) the Base CD Rate in
effect on such day plus 1% and (c) the Federal Funds Effective Rate in effect on
such day plus 1/2 of 1%. If for any reason the Administrative Agent shall have
determined (which determination shall be conclusive absent manifest effort) that
it is unable to ascertain the Base CD Rate or the Federal Funds Effective Rate
or both for any reason, including the inability or failure of the Agent to
obtain sufficient quotations in accordance with the terms thereof, the Alternate
Base Rate shall be determined without regard to clause (b) or (c), or both, of
the first sentence of this definition, as appropriate, until the circumstances
giving rise to such inability no longer exist. Any change in the Alternate Base
Rate due to a change in the Prime Rate, the Three-Month Secondary CD Rate or the
Federal Funds Effective Rate shall be effective on the effective date of such
change in the Prime Rate, the Three-Month Secondary CD Rate or the Federal Funds
Effective Rate, respectively.
"Alternative Currency" shall mean any freely available
currency that is freely transferrable and freely convertible into Dollars and
requested by the Borrower and acceptable to the Issuing Bank and the
Administrative Agent.
"Alternative Currency L/C Exposure" shall mean, at any time,
the Assigned Dollar Value of the aggregate undrawn amount of all outstanding
Letters of Credit denominated in an Alternative Currency at such time.
"Amendment Agreement" shall mean the Amendment Agreement dated
as of October 2, 1998, among the Borrower, the Guarantors and the financial
institutions listed on the signature pages thereto.
<PAGE> 9
"Applicable Percentage" shall mean, with respect to any
Eurodollar Loan or ABR Loan, or with respect to the Commitment Fees, the
applicable percentage set forth below under the caption "Eurodollar Spread",
"ABR Spread" or "Fee Percentage", as applicable, based upon the ratios described
below:
<TABLE>
<CAPTION>
==============================================================================================
Eurodollar ABR Fee
Spread Spread Percentage
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Category 0
- ----------------------------------------------------------------------------------------------
Leverage Ratio of greater than or equal 1.50% 0.50% 0.375%
to 3.75 to 1.00
- ----------------------------------------------------------------------------------------------
Category 1
- ----------------------------------------------------------------------------------------------
Leverage Ratio of less than 3.75 to 1.25% 0.25% 0.375%
1.00 and greater than or equal to 3.25
to 1.00
- ----------------------------------------------------------------------------------------------
Category 2
- ----------------------------------------------------------------------------------------------
Leverage Ratio of less than 3.25 to 1.00% 0.00% 0.375%
1.00 and greater than or equal to 3.00
to 1.00
- ----------------------------------------------------------------------------------------------
Category 3
- ----------------------------------------------------------------------------------------------
Leverage Ratio of less than 3.00 to 0.875% 0.00% 0.300%
1.00 and greater than or equal to 2.00
to 1.00
- ----------------------------------------------------------------------------------------------
Category 4
- ----------------------------------------------------------------------------------------------
Leverage Ratio of less than 2.00 to 0.75% 0.00% 0.25%
1.00 and greater than or equal to 1.00
to 1.00
- ----------------------------------------------------------------------------------------------
Category 5
- ----------------------------------------------------------------------------------------------
Leverage Ratio of less than 1.00 to 1.00 0.625% 0.00% 0.25%
- ----------------------------------------------------------------------------------------------
</TABLE>
For purposes of the foregoing, the Applicable Percentage for
any date shall be (i) if such date is prior to the availability of financial
statements for the fiscal quarter of the Borrower ending June 30, 1998, as set
forth in Category 2, and (ii) otherwise, determined by reference to the Leverage
Ratio as of the last day of the Borrower's fiscal quarter most recently ended as
of such date. Any change in the Applicable Percentage shall become effective on
the first day on which financial statements with respect to such fiscal quarter
are available.
<PAGE> 10
"Assessment Rate" shall mean for any date the annual rate
(rounded upwards, if necessary, to the next 1/100 of 1%) most recently estimated
by the Administrative Agent as the then current net annual assessment rate that
will be employed in determining amounts payable by the Administrative Agent to
the Federal Deposit Insurance Corporation (or any successor) for insurance by
such Corporation (or such successor) of time deposits made in dollars at the
Administrative Agent's domestic offices.
"Assigned Dollar Value" shall mean (a) in respect of the
undrawn amount of any Letter of Credit denominated in an Alternative Currency,
the Dollar Equivalent thereof determined based upon the applicable Spot Exchange
Rate as of (i) the date of issuance of such Letter of Credit, until the first
Calculation Date thereafter and (ii) thereafter, the most recent Calculation
Date and (b) in respect of an L/C Disbursement denominated in an Alternative
Currency, the Dollar Equivalent thereof determined based upon the applicable
Spot Exchange Rate as of the date such L/C Disbursement was made.
"Assignment and Acceptance" shall mean an assignment and
acceptance entered into by a Lender and an assignee, and accepted by the
Administrative Agent, in the form of Exhibit B or such other form as shall be
approved by the Administrative Agent.
"Attributable Debt" in respect of a Sale and Leaseback
Transaction shall mean, at the time of determination, the present value
(discounted at the actual rate of interest implicit in such transaction) of the
obligation of the lessee for net rental payments during the remaining terms of
the lease included in such a Sale and Leaseback Transaction (including any
period for which such lease has been extended or may, at the option of the
lessor, be extended).
"Base CD Rate" shall mean the sum of (a) the product of (i)
the Three-Month Secondary CD Rate and (ii) Statutory Reserves and (b) the
Assessment Rate.
"Board" shall mean the Board of Governors of the Federal
Reserve System of the United States.
"Borrowing" shall mean a group of Loans of a single Type made
by the Lenders on a single date and as to which a single Interest Period is in
effect.
"Borrowing Request" shall mean a request by the Borrower in
accordance with the terms of Section 2.03 and in the form of Exhibit C.
<PAGE> 11
"Business Day" shall mean any day other than a Saturday,
Sunday or day on which banks in New York City are authorized or required by law
to close; provided, however, that when used in connection with a Eurodollar
Loan, the term "Business Day" shall also exclude any day on which banks are not
open for dealings in Dollar deposits in the London interbank market.
"Calculation Date" shall mean the last Business Day of each
calendar month.
"Capital Expenditures" shall mean, for any period, the sum of
all amounts that would, in accordance with GAAP, be included as additions to
property, plant and equipment and other capital expenditures on a consolidated
statement of cash flows for the Borrower for such period. Notwithstanding the
foregoing, the term "Capital Expenditures" shall not include capital
expenditures in respect of the reinvestment of sales proceeds, insurance
proceeds and condemnation proceeds received by the Borrower or any Subsidiary in
connection with the sale, transfer or other disposition of the Borrower's
business units, assets or properties, if (as contemplated by the definition of
the term "Prepayment Event") such reinvestment (including, in the case of
insurance proceeds, reinvestment in the form of restoration or replacement of
damaged property) shall have resulted in the event giving rise to the receipt of
such amounts not constituting a Prepayment Event.
"Capital Lease Obligations" of any Person shall mean the
obligations of such Person to pay rent or other amounts under any lease of (or
other arrangement conveying the right to use) real or personal property, or a
combination thereof, which obligations are required to be classified and
accounted for as capital leases on a balance sheet of such Person under GAAP,
and the amount of such obligations shall be the capitalized amount thereof
determined in accordance with GAAP.
"Cardo" shall mean Orekron Holding AB, a Swedish corporation
(formerly known as Investment AB Cardo).
"Cash Interest Expense" shall mean, for any period, the gross
interest expense of the Borrower and the Subsidiaries for such period, excluding
any fees (other than the Commitment Fee) and expenses payable or amortized
during such period by the Borrower in connection with the recapitalization
transactions of the Borrower and the Subsidiaries consummated on or about
January 31, 1995, less gross interest income of the Borrower and the
Subsidiaries for such period, in each case determined on a consolidated basis in
accordance with GAAP.
"Casualty" shall have the meaning assigned to such term in
Section 9.16.
A "Change in Control" shall be deemed to have occurred if (a)
any Person or group (within the meaning of Rule 13d-5 under the Securities
Exchange Act of 1934 as in effect on the Closing Date) (other than any (i)
Designated Person or (ii) combination of
<PAGE> 12
Designated Persons) shall own directly or indirectly, beneficially or of record,
shares representing more than 35% of the aggregate ordinary voting power
represented by the issued and outstanding capital stock of the Borrower; (b)
Designated Persons or a combination of Designated Persons shall cease to own,
beneficially and of record, shares representing more than 50% of the aggregate
ordinary voting power represented by the issued and outstanding capital stock of
the Borrower (35% if the Common Stock is registered pursuant to Section 12(b) or
12(g) of the Securities Exchange Act of 1934); or (c) the Continuing Directors
shall cease to occupy a majority of the seats (excluding vacant seats) on the
board of directors of the Borrower.
"Closing Date" shall mean the date on which the conditions
specified in Section 4.02 are satisfied (or waived in accordance with Section
9.08).
"Code" shall mean the Internal Revenue Code of 1986, as
amended from time to time.
"Collateral" shall mean all the "Collateral" as defined in any
Security Document and shall also include the Mortgaged Properties.
"Commitment" shall mean, with respect to any Lender, such
Lender's Revolving Credit Commitment, Term Loan Commitment and Swingline
Commitment and, with respect to the Issuing Bank, its L/C Commitment.
"Commitment Fee" shall have the meaning assigned to such term
in Section 2.05.
"Common Stock" shall mean the common stock, par value $.01 per
share, of the Borrower.
"Condemnation" shall have the meaning assigned to such term in
Section 9.16.
"Condemnation Proceeds" shall have the meaning assigned to
such term in Section 9.16.
"Confidential Information Memorandum" shall mean the
Confidential Information Memorandum of the Borrower dated May 1998.
"Continuing Directors" shall mean, collectively, (a) all
members of the board of directors of the Borrower who have held office
continuously since January 31, 1995, and (b) all members of the board of
directors of the Borrower who assumed office after January 31, 1995, and whose
election and nomination for election by the Borrower's shareholders was approved
by a vote of a majority of the then Continuing Directors.
<PAGE> 13
"Control" shall mean the possession, directly or indirectly,
of the power to direct or cause the direction of the management or policies of a
Person, whether through the ownership of voting securities, by contract or
otherwise, and the terms "Controlling" and "Controlled" shall have meanings
correlative thereto.
"Credit Event" shall have the meaning assigned to such term in
Section 4.01.
"Current Assets" shall mean, as of any date, the total assets
(excluding cash and cash equivalents) that would properly be classified as
current assets of the Borrower and its subsidiaries as of such date determined
on a consolidated basis in accordance with GAAP.
"Current Liabilities" shall mean, as of any date, the total
liabilities (excluding indebtedness for borrowed money) that would properly be
classified as current liabilities of the Borrower and its subsidiaries as of
such date determined on a consolidated basis in accordance with GAAP.
"Default" shall mean any event or condition which upon notice,
lapse of time or both would constitute an Event of Default.
"Designated Person" shall mean Incentive AB or SIH or any of
their respective subsidiaries, Vestar or Vestar Capital or any of their
respective Controlled Affiliates, the ESOP, the Voting Trust and any person or
entity holding a beneficial interest in the Voting Trust on January 31, 1995 (or
in the case of any such person or entity, their permitted transferees (as
defined in the Voting Trust Agreement)).
"Dollar Equivalent" shall mean, with respect to an amount of
any Alternative Currency on any date, the amount of Dollars that may be
purchased with such amount of such Alternative Currency at the Spot Exchange
Rate with respect to such Alternative Currency on such date.
"Dollars" or "$" shall mean lawful money of the United States
of America.
"Domestic Subsidiary" shall mean any Subsidiary incorporated
under the laws of the United States or any political subdivision thereof.
"EBITDA" shall mean, for any period, without duplication, the
sum of (a) Net Income for such period, (b) all Federal, state, local and foreign
income taxes deducted in determining such Net Income, (c) interest expense
deducted in determining such Net Income and (d) depreciation, amortization and
other noncash charges (including any charges resulting from the write-up of
inventory but not including accruals of charges which will be discharged in a
following accounting period in cash in the ordinary course of business) deducted
in determining such Net Income (and not already excluded from the definition of
the term "Net Income"). Solely for purposes of calculating the Leverage Ratio,
EBITDA
<PAGE> 14
shall include, without duplication, the sum of the amounts expressed in clauses
(a), (b), (c) and (d) above with respect to any Person or division or line of
business the assets of which, or shares or other equity interests in, are
acquired by the Borrower or any Subsidiary after the Closing Date in accordance
with Section 6.05(i) as if the related Acquisition had occurred on the first day
of the period for which EBITDA is being calculated hereunder.
"Effective Date" shall mean the Effective Date as defined in
the Amendment Agreement.
"environment" shall mean ambient air, surface water and
groundwater (including potable water, navigable water and wetlands), the land
surface or subsurface strata, the workplace or as otherwise defined in any
Environmental Law.
"Environmental Claim" shall mean any written accusation,
allegation, notice of violation, claim, demand, order, directive, cost recovery
action or other cause of action by, or on behalf of, any Governmental Authority
or any Person for damages, injunctive or equitable relief, personal injury
(including sickness, disease or death), Remedial Action costs, tangible or
intangible property damage, natural resource damages, nuisance, pollution, any
adverse effect on the environment caused by any Hazardous Material, or for
fines, penalties or restrictions, resulting from or based upon: (a) the
existence, or the continuation of the existence, of a Release (including sudden
or non-sudden, accidental or non-accidental Releases); (b) exposure to any
Hazardous Material; (c) the presence, use, handling, transportation, storage,
treatment or disposal of any Hazardous Material; or (d) the violation or alleged
violation of any Environmental Law or Environmental Permit.
"Environmental Law" shall mean any and all applicable present
and future treaties, laws, rules, regulations, codes, ordinances, orders,
decrees, judgments, injunctions, enforceable 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, Release or threatened Release of any Hazardous Material or to
health and safety matters, including the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended by the Superfund Amendments
and Reauthorization Act of 1986, 42 U.S.C. Section 9601 et seq. (collectively
"CERCLA"), the Solid Waste Disposal Act, as amended by the Resource Conservation
and Recovery Act of 1976 and Hazardous and Solid Amendments of 1984, 42 U.S.C.
Section 6901 et seq., the Federal Water Pollution Control Act, as amended by the
Clean Water Act of 1977, 33 U.S.C. Section 1251 et seq., the Clean Air Act of
1970, as amended 42 U.S.C. Section 7401 et seq., the Toxic Substances Control
Act of 1976, 15 U.S.C. Section 2601 et seq., the Occupational Safety and Health
Act of 1970, as amended, 29 U.S.C. Section 651 et seq., the Emergency Planning
and Community Right-to-Know Act of 1986, 42 U.S.C. Section 11001 et seq., the
Safe Drinking Water Act of 1974, as amended, 42 U.S.C. Section 300(f) et seq.,
the Hazardous Materials Transportation Act, 49 U.S.C. Section 1801 et seq., and
any similar or implementing state or local law, and all amendments or
regulations promulgated thereunder.
<PAGE> 15
"Environmental Permit" shall mean any applicable permit,
approval, authorization, certificate, license, variance, filing or permission
required by or from any Governmental Authority pursuant to any Environmental
Law.
"ERISA" shall mean the Employee Retirement Income Security Act
of 1974, as the same may be amended from time to time.
"ERISA Affiliate" shall mean any trade or business (whether or
not incorporated) that, together with the Borrower, 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.
"ESOP" shall mean collectively the Westinghouse Air Brake
Company Employee Stock Ownership Plan effective January 1, 1995, and the
Westinghouse Air Brake Company Employee Stock Ownership Trust established
effective January 1, 1995, pursuant to the Trust Agreement between the Borrower
and U.S. Trust Company of California, N.A., as Trustee (the "ESOP Trustee"), as
such plan and trust may be amended, modified or supplemented from time to time.
"ESOP Loan" shall mean the loan made by the Borrower to the
ESOP on January 31, 1995, in an aggregate principal amount equal to the ESOP
Purchase Amount.
"ESOP Note" shall mean the promissory note of the ESOP
evidencing the ESOP Loan.
"ESOP Purchase" shall mean the purchase on January 31, 1995,
by the ESOP of shares of Common Stock pursuant to the ESOP Purchase Agreement at
a price of $60,000 per share.
"ESOP Purchase Agreement" shall mean the stock purchase
agreement dated January 31, 1995 among the ESOP Trustee, the Borrower and the
other persons signatory thereto.
"ESOP Purchase Amount" shall mean the $140,040,000 paid by the
ESOP to effect the ESOP Purchase.
"Eurodollar Borrowing" shall mean a Borrowing comprised of
Eurodollar Loans.
"Eurodollar Loan" shall mean any Eurodollar Revolving Loan or
Eurodollar Term Loan.
<PAGE> 16
"Eurodollar Revolving Loan" shall mean any Revolving Loan
bearing interest at a rate determined by reference to the Adjusted LIBO Rate in
accordance with the provisions of Article II.
"Eurodollar Term Loan" shall mean any Term Loan bearing
interest at a rate determined by reference to the Adjusted LIBO Rate in
accordance with the provisions of Article II.
"Event of Default" shall have the meaning assigned to such
term in Article VII.
"Excess Cash Flow" shall mean, for any period, EBITDA for such
period, minus (a) the sum of (i) Capital Expenditures for such period and the
amount of Capital Expenditures that the Borrower has committed, pursuant to
arrangements satisfactory to the Administrative Agent, to make during the first
60 days of the next succeeding period, (ii) increases in Net Working Capital
during such period, (iii) decreases in Long-term Reserves during such period,
(iv) all Federal, state, local and foreign income taxes added back to Net Income
to determine EBITDA for such period, (v) Cash Interest Expense for such period,
(vi) all scheduled debt amortization during such period and all prepayments of
Term Loans pursuant to Section 2.12(a) during such period and (vii) cash amounts
expended by the Borrower to repurchase Common Stock from the ESOP for a
repurchase price in such period not in excess of the cash amount expended during
such period pursuant to clause (b) of Section 6.06 plus (b) the sum of (i)
decreases in Net Working Capital during such period and (ii) increases in
Long-term Reserves during such period.
"Exchange Notes" shall have the meaning set forth in the
Rockwell Senior Unsecured Credit Agreement.
"Existing Letters of Credit" shall mean all the letters of
credit that (a) were issued under the Original Credit Agreement and (b) are
outstanding on the Closing Date.
"Existing Swingline Loans" shall mean all the loans that (a)
were made in accordance with Section 2.20 hereunder prior to the Effective Date
and (b) are outstanding on the Effective Date.
"Federal Funds Effective Rate" shall mean, for any day, the
weighted average of the rates on overnight Federal funds transactions with
members of the Federal Reserve System arranged by Federal funds brokers, as
published on the next succeeding Business Day by the Federal Reserve Bank of New
York, or, if such rate is not so published for any day that is a Business Day,
the average of the quotations for the day for such transactions received by the
Administrative Agent from three Federal funds brokers of recognized standing
selected by it.
<PAGE> 17
"Fee Letter" shall mean the Fee Letter dated May 26, 1998,
among the Borrower, the Administrative Agent and Chase Securities Inc.
"Fees" shall mean the Commitment Fees, the Administration
Agent Fees, the L/C Participation Fees and the Issuing Bank Fees.
"Financial Officer" of any corporation shall mean the chief
financial officer, principal accounting officer, treasurer or controller of such
corporation.
"Foreign Subsidiary" shall mean any Subsidiary other than a
Domestic Subsidiary.
"GAAP" shall mean generally accepted accounting principles in
the United States applied on a consistent basis.
"Governmental Authority" shall mean any Federal, state, local
or foreign court or governmental agency, authority, instrumentality or
regulatory body.
"Guarantee" of or by any Person shall mean any obligation,
contingent or otherwise, of such Person guaranteeing or having the economic
effect of guaranteeing any Indebtedness of any other Person (the "primary
obligor") in any manner, whether directly or indirectly, and including any
obligation of such Person, direct or indirect, (a) to purchase or pay (or
advance or supply funds for the purchase or payment of) such Indebtedness or to
purchase (or to advance or supply funds for the purchase of) any security for
the payment of such Indebtedness, (b) to purchase or lease property, securities
or services for the purpose of assuring the owner of such Indebtedness of the
payment of such Indebtedness or (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; provided, however,
that the term "Guarantee" shall not include endorsements for collection or
deposit in the ordinary course of business.
"Guarantee Agreement" shall mean the Guarantee Agreement,
substantially in the form of Exhibit D, made by the Guarantors in favor of the
Collateral Agent for the benefit of the Secured Parties.
"Guarantor" shall mean each existing and each subsequently
acquired or organized Domestic Subsidiary.
"Hazardous Materials" shall mean all explosive or radioactive
substances or wastes, hazardous or toxic substances or wastes, pollutants,
solid, liquid or gaseous wastes, including petroleum or petroleum distillates,
friable asbestos or asbestos-containing materials, polychlorinated biphenyls
("PCBs") or PCB-containing materials or equipment, radon gas, infectious or
medical wastes regulated pursuant to any Environmental Law and all other
substances or wastes of any nature regulated pursuant to any Environmental Law.
<PAGE> 18
"Indebtedness" of any Person shall mean, without duplication,
(a) all obligations of such Person for borrowed money or with respect to
deposits or advances of any kind, (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, (d) all obligations of
such Person under conditional sale or other title retention agreements relating
to property or assets purchased by such Person, (e) all obligations of such
Person issued or assumed as the deferred purchase price of property or services
(excluding trade accounts payable and accrued obligations incurred in the
ordinary course of business), (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 obligations secured thereby have been assumed, (g)
all Guarantees by such Person of Indebtedness of others, (h) all Capital Lease
Obligations of such Person, (i) all obligations of such Person in respect of
interest rate protection agreements, foreign currency exchange agreements or
other interest or exchange rate hedging arrangements and (j) all obligations of
such Person as an account party in respect of (i) letters of credit and (ii)
bankers' acceptances. The Indebtedness of any Person shall include the
Indebtedness of any partnership or joint venture in which such Person is a
general partner or member, other than to the extent that the instrument or
agreement evidencing such Indebtedness expressly limits the liability of such
Person in respect thereof pursuant to provisions and terms reasonably
satisfactory to the Administrative Agent.
"Indemnity, Subrogation and Contribution Agreement" means the
Indemnity, Subrogation and Contribution Agreement, substantially in the form of
Exhibit J, among the Borrower, the Guarantors and the Administrative Agent.
"Insurance Proceeds" shall have the meaning assigned to such
term in Section 9.16.
"Intellectual Property Security Agreement" shall mean the
Intellectual Property Security Agreement, substantially in the form of Exhibit
E, between the Loan Parties and the Collateral Agent for the benefit of the
Secured Parties.
"Interest Expense Coverage Ratio" shall mean, for any period,
the ratio of (a) EBITDA for such period to (b) Cash Interest Expense for such
period.
"Interest Payment Date" shall mean, with respect to any 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
Period of more than three months' duration, each day that would have been an
Interest Payment Date had successive Interest Periods of three months' duration
been applicable to such Borrowing, and, in addition, the date of any refinancing
or conversion of such Borrowing with or to a Borrowing of a different Type.
<PAGE> 19
"Interest Period" shall mean (a) as to any Eurodollar
Borrowing, the period commencing on the date of such Borrowing or on the last
day of the immediately preceding Interest Period applicable to such Borrowing,
as the case may be, and ending on the numerically corresponding day (or, if
there is no numerically corresponding day, on the last day) in the calendar
month that is 1, 2, 3 or 6 months (or, if available to all the Lenders, 9 or 12
months) thereafter, as the Borrower may elect and (b) as to any ABR Borrowing,
the period commencing on the date of such Borrowing or on the last day of the
immediately preceding Interest Period applicable to such Borrowing, as the case
may be, and ending on the earliest of (i) the next succeeding March 31, June 30,
September 30 or December 31 and (ii) the Revolving Credit Maturity Date, the
June 1998 Term Loan Maturity Date or the September 1998 Term Loan Maturity Date,
as applicable; provided, however, that 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, in the case of a Eurodollar Borrowing only, 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. Interest
shall accrue from and including the first day of an Interest Period to but
excluding the last day of such Interest Period.
"Issuing Bank Fees" shall have the meaning assigned to such
term in Section 2.05.
"June 1998 Term Borrowing" shall mean a Borrowing comprised of
June 1998 Term Loans.
"June 1998 Term Loan Commitment" shall mean, with respect to
each Lender, the commitment of such Lender to make June 1998 Term Loans
hereunder as set forth in Schedule 2.01, or in the Assignment and Acceptance
pursuant to which such Lender assumed its June 1998 Term Loan Commitment, as
applicable, as the same may be (a) reduced from time to time pursuant to Section
2.09 and (b) reduced or increased from time to time pursuant to assignments by
or to such Lender pursuant to Section 9.04.
"June 1998 Term Loan Maturity Date" shall mean December 31,
2003.
"June 1998 Term Loan Repayment Date" shall have the meaning
assigned to such term in Section 2.11(a).
"June 1998 Term Loans" shall mean the term loans to the
Borrower continued by the Lenders pursuant to Section 2.01(a). Each June 1998
Term Loan shall be either a Eurodollar Term Loan or an ABR Term Loan.
<PAGE> 20
"L/C Commitment" shall mean the commitment of the Issuing Bank
to issue Letters of Credit pursuant to Section 2.21.
"L/C Disbursement" shall mean a payment or disbursement made
by the Issuing Bank pursuant to a Letter of Credit.
"L/C Exposure" shall mean at any time the sum of (a) the
aggregate undrawn amount of all outstanding Letters of Credit at such time that
are denominated in Dollars, plus the Assigned Dollar Value at such time of the
aggregate undrawn amount of all outstanding Letters of Credit at such time that
are denominated in Alternative Currencies, plus (b) the aggregate principal
amount of all L/C Disbursements denominated in Dollars that have not yet been
reimbursed at such time plus the Assigned Dollar Value at such time of the
aggregate principal amount of all L/C Disbursements denominated in Alternative
Currencies that have not yet been reimbursed at such time. The L/C Exposure of
any Revolving Credit Lender at any time shall mean its Pro Rata Percentage of
the aggregate L/C Exposure at such time.
"L/C Participation Fee" shall have the meaning assigned to
such term in Section 2.05.
"Letter of Credit" shall mean any letter of credit issued
pursuant to Section 2.21.
"Leverage Ratio" shall mean, as of any date, the ratio of (a)
the sum of (i) the aggregate principal amount of Loans and Senior Unsecured
Notes outstanding as of such date, (ii) the aggregate principal amount of the
Long-Term Pulse Seller Note outstanding as of such date, (iii) the aggregate
principal amount of the Rockwell Senior Unsecured Credit Facility Loans and
Exchange Notes outstanding as of such date and (iv) without duplication, the
aggregate principal amount of all other indebtedness for borrowed money of the
Borrower and the Subsidiaries outstanding as of such date, to (b) EBITDA for the
period of twelve consecutive fiscal months ended on such date.
"LIBO Rate" shall mean (a) the rate per annum for dollar
deposits approximately equal to the applicable Eurodollar Borrowing and for a
period comparable to the applicable Interest Period which appears on the
Telerate Page 3750 at approximately 11:00 a.m., London time, on the day that is
two Business Days prior to the first day of such Interest Period and (b) if no
such rate so appears on the Telerate Page 3750, the arithmetic mean, determined
by the Administrative Agent based on quotations provided by each of the
Reference Lenders, of the respective rates per annum at which dollar deposits
approximately equal to each Reference Lender's respective portion of the
applicable Eurodollar Borrowing and for a period comparable to the applicable
Interest Period are offered to the principal London office of such Reference
Lender in immediately available funds in the London interbank market at
approximately 11:00 a.m., London time, on the day that is two Business
<PAGE> 21
Days prior to the first day of such Interest Period. The term "Telerate Page
3750" shall mean the display designated as "Page 3750" on the Telerate Service
(or such other page as may replace such page on such service for the purpose of
displaying comparable rates). The term "Reference Lenders" shall mean The Chase
Manhattan Bank and BNY.
"Lien" shall mean, with respect to any asset, (a) any
mortgage, deed of trust, lien, pledge, encumbrance, charge or security interest
in or on such asset, (b) the interest of a vendor or a lessor under any
conditional sale agreement, capital lease or title retention agreement (or any
financing lease having substantially the same economic effect as any of the
foregoing) relating to such asset, (c) in the case of securities, any purchase
option, call or similar right of a third party with respect to such securities
and (d) any zoning or land use restrictions relating to such asset; and shall
include any agreement to give any of the foregoing.
"Loan Documents" shall mean this Agreement, the Letters of
Credit, the Guarantee Agreement, the Indemnity, Subrogation and Contribution
Agreement, the Security Documents and any Rate Protection Agreements.
"Loan Parties" shall mean the Borrower and the Guarantors.
"Loans" shall mean the Revolving Loans, the Term Loans and the
Swingline Loans.
"Long-Term Pulse Seller Note" shall mean the unsecured
promissory note of the Borrower issued in connection with the Pulse Acquisition
and dated as of January 31, 1995, that (a) has an interest rate equal to (i)
9.5% per annum through January 31, 1998, (ii) the Prime Rate on December 31,
1997, plus 1% per annum (but not in excess of 11.5% per annum) from February 1,
1998, through January 31, 2001, and (iii) the lowest of (A) the Prime Rate on
December 31, 2000, plus 1% per annum, (B) the rate applicable pursuant to clause
(ii) above plus 2% per annum and (C) 13% per annum, thereafter, (b) has a stated
maturity of not earlier than January 31, 2004, (c) does not have any payments of
principal due any earlier than the stated maturity, (d) has a principal amount
as of the Closing Date of $16,990,000, (e) may provide that the aggregate
principal amount thereof may be discharged in whole or in part through the
issuance of shares of Common Stock and (f) is subordinated to the Obligations
pursuant to the Pulse Subordination Agreement.
"Long-term Reserves" shall mean, as of any date, the
non-current liabilities of the Borrower and the Subsidiaries as of such date in
respect of (a) pension benefits, (b) post-retirement benefits other than
pensions, such as retirement health care and life insurance benefits, and (c)
post-employment benefits, in each case determined on a consolidated basis in
accordance with GAAP.
<PAGE> 22
"Management/Vestar Repurchase Agreement" shall mean the
Repurchase Agreement dated as of January 31, 1995, between the Borrower and the
Voting Trust.
"Margin Stock" shall have the meaning assigned to such term in
Regulation U.
"Material Adverse Effect" shall mean a (a) materially adverse
effect on the business, assets, operations, properties, financial condition,
contingent liabilities or material agreements of the Borrower and the
Subsidiaries taken as a whole, (b) material impairment of the ability of the
Borrower or any Subsidiary to perform any of its material obligations under any
Loan Document to which it is or will be a party or (c) material impairment of
the rights of or benefits available to the Lenders under any Loan Document.
"Moody's" shall mean Moody's Investors Service, Inc.
"Mortgaged Properties" shall mean the owned real properties
and leasehold and subleasehold interests of the Loan Parties specified on
Schedule 1.01.
"Mortgages" shall mean the mortgages, deeds of trust,
leasehold mortgages, assignments of leases and rents, modifications and other
security documents delivered pursuant to clause (i) of Section 4.02(j) or
pursuant to Section 5.11, each substantially in the form of Exhibit F.
"Multiemployer Plan" shall mean (a) a multiemployer plan as
defined in Section 4001(a)(3) of ERISA to which the Borrower or any Subsidiary
or ERISA Affiliate is making or accruing an obligation to make contributions and
(b) any multiemployer plan (as so defined) to which the Borrower or any
subsidiary or ERISA Affiliate has within any of the preceding five plan years
made or accrued an obligation to make contributions, but in the case of this
clause (b) only if the Borrower, a Subsidiary or an ERISA Affiliate of either
would be liable under Title IV of ERISA in respect of such plan.
"Net Cash Proceeds" shall mean, with respect to any Prepayment
Event or other event, (a) the gross proceeds in the form of cash or Permitted
Investments (including insurance proceeds, condemnation awards and payments from
time to time in respect of installment obligations, if applicable) received by
or on behalf of the Borrower or any Subsidiary in respect of such Prepayment
Event or other event less (b) the sum of (i) in the case of any Prepayment
Event, the amount, if any, of all taxes (other than income taxes) payable by the
Borrower or any Subsidiary in connection with such Prepayment Event and the
Borrower's good-faith best estimate of the amount of all income taxes payable in
connection with such Prepayment Event, (ii) in the case of a Prepayment Event
that is an asset sale or disposition, the amount of any reasonable reserve
established in accordance with GAAP against any liabilities associated with the
assets sold or disposed of and retained by the Borrower or any Subsidiary,
provided that the amount of any subsequent reduction of
<PAGE> 23
such reserve (other than in connection with a payment in respect of any such
liability) shall be deemed to be Net Cash Proceeds of a Prepayment Event
occurring on the date of such reduction, and (iii) reasonable and customary
fees, commissions and expenses and other costs paid by the Borrower or any
Subsidiary in connection with such Prepayment Event or other event, in each case
only to the extent not already deducted in arriving at the amount referred to in
clause (a) above.
"Net Income" shall mean, for any period, the aggregate net
income (or net deficit) of the Borrower and the Subsidiaries for such period
determined on a consolidated basis in accordance with GAAP, which shall be equal
to gross revenues for the Borrower and the Subsidiaries determined on a
consolidated basis during such period less the aggregate for the Borrower and
the Subsidiaries determined on a consolidated basis during such period of,
without duplication, (a) cost of goods sold, (b) interest expense, (c) operating
expenses, (d) selling, general and administrative expenses, (e) taxes, (f)
depreciation, depletion and amortization of properties and (g) any other items
that are treated as expense under GAAP, all computed in accordance with GAAP;
provided, however that the term "Net Income" shall exclude extraordinary gains
and losses from the sale of assets other than in the ordinary course of business
and other noncash income not otherwise excluded from the definition of the term
"Net Income" and any charge resulting from the write-up after the Closing Date
in the value of any asset.
"Net Working Capital" shall mean, as of any date, Current
Assets as of such date less Current Liabilities as of such date.
"Obligations" shall mean all obligations defined as
"Obligations" in the Guarantee Agreement and the Security Documents.
"Original Credit Agreement" shall mean the Credit Agreement
dated as of January 31, 1995, amended and restated as of February 15, 1995,
amended and restated as of June 9, 1995, amended and restated as of September
19, 1996, and subsequently amended, as in effect immediately prior to the
Closing Date, among the Borrower, the financial institutions party thereto, The
Chase Manhattan Bank, as swingline lender, administrative agent and collateral
agent, Chase Manhattan Bank Delaware, as issuing bank, and The Bank of New York,
as documentation agent.
"PBGC" shall mean the Pension Benefit Guaranty Corporation
referred to and defined in ERISA.
"Perfection Certificate" shall mean the Perfection Certificate
substantially in the form of Annex 2 to the Security Agreement.
<PAGE> 24
"Permitted Investments" shall mean:
(a) direct obligations of, or obligations the principal of and
interest on which are unconditionally guaranteed by, the United States
of America (or by any agency thereof to the extent such obligations are
backed by the full faith and credit of the United States of America),
in each case maturing within 90 days from the date of acquisition
thereof;
(b) without limiting the provisions of clause (d) below,
investments in commercial paper maturing within 90 days from the date
of acquisition thereof and having, at such date of acquisition, the
highest credit rating obtainable from Standard & Poor's or from
Moody's;
(c) investments in certificates of deposit, bankers'
acceptances and time deposits maturing within 90 days from the date of
acquisition thereof issued or guaranteed by or placed with, and money
market deposit accounts issued or offered by, (i) any domestic office
of the Administrative Agent or (ii) any domestic office of any other
commercial bank organized under the laws of the United States of
America or any State thereof, or any Lender that is a commercial bank,
that has a combined capital and surplus and undivided profits of not
less than $250,000,000 and that is rated (or the senior debt securities
of the holding company of such commercial bank are rated) A or better
by Standard & Poor's or A2 or better by Moody's or carrying an
equivalent rating by another nationally recognized rating agency if
neither of the two named rating agencies shall rate such commercial
bank (or the holding company of such commercial bank);
(d) investments in commercial paper maturing within 90 days
from the date of acquisition thereof and issued by (i) the holding
company of the Administrative Agent or (ii) the holding company of any
other commercial bank of recognized standing organized under the laws
of the United States of America or any state thereof, or any Lender
that is a commercial bank, that has (A) a combined capital and surplus
in excess of $250,000,000 and (B) commercial paper rated at least A-1
or the equivalent thereof by Standard & Poor's or at least P-I or the
equivalent thereof by Moody's, or carrying an equivalent rating by
another nationally recognized rating agency if neither of the two named
rating agencies rate such holding company;
(e) repurchase agreements having a term of seven days or fewer
with (i) any domestic office of the Administrative Agent or (ii) any
domestic office of any other commercial bank of recognized standing
organized under the laws of the United States of America or any state
thereof, or any Lender that is a commercial bank, that has a combined
capital and surplus and undivided profits of not less than $250,000,000
and that is rated (or the senior debt securities of the holding company
of such commercial bank are rated) A or better by Standard & Poor's or
A2 or better
<PAGE> 25
by Moody's or carrying an equivalent rating by another nationally
recognized rating agency if neither of the two named rating agencies
shall rate such commercial bank (or the holding company of such
commercial bank), and relating to marketable direct obligations issued
or unconditionally guaranteed by the United States but only if the
securities collateralizing such repurchase agreements are delivered to
or to the order of the Collateral Agent; and
(f) other investment instruments approved in writing by the
Required Lenders and offered by financial institutions that have a
combined capital and surplus and undivided profits of not less than
$250,000,000.
"Person" shall mean any natural person, corporation, business
trust, joint venture, association, company, limited liability company,
partnership or Governmental Authority.
"Plan" shall mean 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 that is maintained for current or former employees, or
any beneficiary thereof, of the Borrower, any Subsidiary or any ERISA Affiliate.
"Pledge Agreement" shall mean the Pledge Agreement,
substantially in the form of Exhibit G, among the Borrower, the Subsidiaries
party thereto and the Collateral Agent for the benefit of the Secured Parties.
"Prepayment Account" shall have the meaning assigned to such
term in Section 2.12.
"Prepayment Event" shall mean (a) any sale, transfer or other
disposition of any business units, assets or other properties of the Borrower or
any Subsidiary (including dispositions in the nature of casualties (to the
extent covered by insurance) or condemnations (including any Casualty or
Condemnation in respect of any Mortgaged Property, as contemplated by Section
9.16)) to the extent the proceeds thereof, combined with the proceeds of any
other such sale, transfer or other disposition (other than sales, transfers or
dispositions referred to in clauses (i) through (iv) below) that have not been
applied as a mandatory prepayment pursuant to Section 2.12(c), are in excess of
$5,000,000 in the aggregate, (b) the issuance or incurrence by the Borrower or
any Subsidiary of any Indebtedness (excluding any Indebtedness incurred in
accordance with Section 6.01), or the issuance or sale by the Borrower or any
Subsidiary of any debt securities or any obligations convertible into or
exchangeable for, or giving any Person or entity any right, option or warrant to
acquire from the Borrower or any Subsidiary any Indebtedness or any such debt
securities or any such convertible or exchangeable obligations (excluding the
Long-Term Pulse Seller Note), other than Rockwell Prepayment Indebtedness, or
(c) the issuance or sale
<PAGE> 26
by the Borrower or any Subsidiary of any equity securities or any obligations
convertible into or exchangeable for, or giving any Person any right, option or
warrant to acquire from the Borrower or any Subsidiary, any equity securities or
any such convertible or exchangeable obligations. Notwithstanding the foregoing,
the term "Prepayment Event" shall not include:
(i) sales, transfers and other dispositions of used or surplus
equipment, vehicles and other assets in the ordinary course of business
permitted by Section 6.05(b), except to the extent the proceeds thereof
are in excess of $3,000,000 in the aggregate in any fiscal year;
provided, however, that to the extent that the Borrower shall have
reinvested on the date of such Prepayment Event (or certified to the
Administrative Agent that it intends to reinvest within twelve months
of such Prepayment Event) any of such excess proceeds in equipment,
vehicles or other assets used in the principal lines of business of the
Borrower, the resultant Prepayment Event shall be reduced by the amount
so reinvested or to be reinvested;
(ii) sales of inventory in the ordinary course of business;
(iii) the receipt of insurance or condemnation proceeds (other
than Condemnation Proceeds and Insurance Proceeds in respect of
Mortgaged Properties), except to the extent in excess of $3,000,000 in
the aggregate in any fiscal year; provided, however, that to the extent
that the Borrower shall have reinvested on the date of such Prepayment
Event (or certified to the Administrative Agent that it intends to
reinvest within twelve months of such Prepayment Event) any of such
excess proceeds in equipment, vehicles or other assets used in the
Borrower's principal lines of business, the resultant Prepayment Event
shall be reduced by the amount so reinvested or to be reinvested;
(iv) the receipt of Condemnation Proceeds and Insurance
Proceeds in respect of Mortgaged Properties to the extent that (A) such
Condemnation Proceeds or Insurance Proceeds are used to restore, repair
or locate, acquire and replace the related Mortgaged Property in
accordance with Section 9.16, (B) such Condemnation Proceeds or
Insurance Proceeds, pursuant to Section 9.16, are not otherwise
required to be applied as a mandatory prepayment pursuant to Section
2.12(c) or (C) to the extent permitted by Section 9.16, (I) such
Condemnation Proceeds or Insurance Proceeds are reinvested in
equipment, vehicles or other assets used in the Borrower's principal
lines of business within twelve months after the receipt thereof and
(II) the Borrower, pending such reinvestment, has deposited such
amounts in an escrow account with the Collateral Agent as contemplated
in Section 9.16; and
(v) the receipt of Net Cash Proceeds in an aggregate amount
not in excess of $150,000,000 in respect of any of the events described
in preceding clause (c) to the extent that such Net Cash Proceeds are
used in the making of an Acquisition pursuant to Section 6.05(i)
substantially contemporaneous with the receipt of such Net Cash
Proceeds.
<PAGE> 27
"Prime Rate" shall mean the rate of interest per annum
publicly announced from time to time by the Administrative Agent as its prime
rate in effect at its principal office in New York City; each change in the
Prime Rate shall be effective on the date such change is publicly announced as
being effective.
"Pro Rata Percentage" of any Revolving Credit Lender at any
time shall mean the percentage of the Total Revolving Credit Commitment
represented by such Lender's Revolving Credit Commitment.
"Properties" shall have the meaning assigned to such term in
Section 3.17.
"Pulse Acquisition" shall mean the acquisition on January 31,
1995 by Pulse Acquisition Corp. of certain assets of Pulse Electronics Inc. and
Pulse Embedded Computer Systems, Inc. for an aggregate purchase price equal to
$54,900,000 payable in the form of the Long-Term Pulse Seller Notes.
"Pulse Subordination Agreement" shall mean the Subordination
Agreement dated as of January 31, 1995 by and among the Borrower, Pulse
Electronics, Inc., Pulse Embedded Computer Systems, Inc., certain shareholders
of Pulse Electronics, Inc., Cardo and the Administrative Agent.
"Rate Protection Agreements" shall mean any interest rate swap
agreement, interest rate cap agreement, interest rate collar agreement or
similar agreement entered into by the Borrower to provide protection to the
Borrower and the Subsidiaries against fluctuations in interest rates. Each Rate
Protection Agreement shall be on terms (including terms relating to the
calculation of payments for early termination) reasonably satisfactory to the
Administrative Agent with a counterparty that is either reasonably satisfactory
to the Administrative Agent or a Lender.
"Recapitalization Documents" shall mean (a) the Loan
Documents, (b) the ESOP Note, (c) the Management/Vestar Repurchase Agreement,
(d) the Repurchase and Exchange Agreement, (e) the ESOP Purchase Agreement, (f)
the Pulse Subordination Agreement, (g) the Stockholders Agreement dated January
31, 1995, among Cardo, SIH, the Voting Trust and the Borrower and (h) the
constitutive documents of the ESOP.
"Register" shall have the meaning assigned to such term in
Section 9.04(d).
"Regulation G" shall mean Regulation G of the Board as from
time to time in effect and all official rulings and interpretations thereunder
or thereof.
<PAGE> 28
"Regulation U" shall mean Regulation U of the Board as from
time to time in effect and all official rulings and interpretations thereunder
or thereof.
"Regulation X" shall mean Regulation X of the Board as from
time to time in effect and all official rulings and interpretations thereunder
or thereof.
"Release" shall mean any spilling, leaking, pumping, pouring,
emitting, emptying, discharging, injecting, escaping, leaching, dumping,
disposing or depositing, or threat thereof, of any Hazardous Material in, into,
onto or through the environment.
"Remedial Action" shall mean (a) "remedial action" as such
term is defined in CERCLA, 42 U.S.C. Section 9601(24), and (b) all other actions
required by any Governmental Authority or voluntarily undertaken to (i) clean
up, remove, treat, abate or in any other way address any Hazardous Material in
the environment, (ii) prevent the Release, or minimize the further Release of
any Hazardous Material so it does not migrate or endanger or threaten to
endanger public health, welfare or the environment, or (iii) perform studies and
investigations in connection with, or as a precondition to, actions described in
clauses (i) or (ii) above.
"Reportable Event" shall mean any reportable event as defined
in Section 4043 of ERISA or the regulations issued thereunder with respect to a
Plan (other than an event as to which the 30-day notice requirement has been
waived).
"Repurchase and Exchange Agreement" shall mean the Repurchase
and Exchange Agreement dated January 31, 1995, among the Borrower, Cardo and
SIH.
"Required Lenders" shall mean, at any time, Lenders having
Loans (excluding Swingline Loans), L/C Exposures, Swingline Exposures and unused
Revolving Credit Commitments representing in excess of 50% of the sum of all
Loans outstanding (excluding Swingline Loans), L/C Exposures, Swingline
Exposures and unused Revolving Credit Commitments at such time.
"Responsible Officer" of any corporation shall mean any
executive officer or Financial Officer of such corporation and any other officer
or similar official thereof responsible for the administration of the
obligations of such corporation in respect of this Agreement.
"Revolving Credit Borrowing" shall mean a Borrowing comprised
of Revolving Loans.
"Revolving Credit Commitment" shall mean, with respect to any
Lender, the commitment of such Lender to make Revolving Loans hereunder as set
forth on Schedule 2.01, or in the Assignment and Acceptance pursuant to which
such Lender assumed
<PAGE> 29
its Revolving Credit Commitment, as applicable, as the same may be (a) reduced
from time to time pursuant to Section 2.09 and (b) reduced or increased from
time to time pursuant to assignments by or to such Lender pursuant to Section
9.04.
"Revolving Credit Exposure" shall mean, with respect to any
Lender at any time, the aggregate principal amount at such time of all
outstanding Revolving Loans of such Lender, plus the aggregate amount at such
time of such Lender's L/C Exposure, plus the aggregate amount at such time of
such Lender's Swingline Exposure.
"Revolving Credit Lender" shall mean a Lender with a Revolving
Credit Commitment.
"Revolving Credit Maturity Date" shall mean December 31, 2003.
"Revolving Loans" shall mean the revolving loans made by the
Lenders to the Borrower pursuant to Section 2.01(c). Each Revolving Loan shall
be a Eurodollar Revolving Loan or an ABR Revolving Loan.
"Rockwell" shall mean Rockwell Collins, Inc., a Delaware
corporation.
"Rockwell Acquisition" shall mean the acquisition from
Rockwell on October 5, 1998, by the Borrower of all of the common shares, no par
value, of Technical Service and Marketing, L.L.C., a Delaware limited liability
company, and substantially all of the assets and certain of the related
liabilities of Rockwell's Railroad Electronics division for cash consideration
of $80,000,000 (subject to purchase price adjustments specified in the Sale
Agreement) pursuant to the Sale Agreement, which shall be financed with the
proceeds of (a) the September 1998 Term Borrowings, (b) a portion of the
available Revolving Credit Commitments and (c) the Rockwell Senior Unsecured
Credit Facility Loans.
"Rockwell Prepayment Indebtedness" shall mean (a) unsecured
Indebtedness, (b) unsecured debt securities and (c) obligations convertible or
exchangeable for, or rights, options or warrants to acquire, (i) unsecured
Indebtedness or unsecured debt securities or (ii) obligations convertible into
or exchangeable for unsecured Indebtedness or unsecured debt securities, in each
case up to the amount whereby the Net Cash Proceeds therefrom equal the Rockwell
Senior Unsecured Credit Facility Loans and Exchange Notes then outstanding (and
other amounts, if any, then due and payable under the Rockwell Senior Unsecured
Credit Facility Loan Documents) at the time of the related issuance, incurrence
or sale, as applicable.
"Rockwell Senior Unsecured Credit Agreement" shall mean the
credit agreement dated as of October 2, 1998, as such credit agreement may be
amended, waived or otherwise modified thereafter, among the Borrower, the
financial institutions party thereto, The Chase Manhattan Bank, as
administrative agent, and The Bank of New York, as documentation agent.
<PAGE> 30
"Rockwell Senior Unsecured Credit Facility" shall mean the
senior unsecured credit facility of the Borrower documented by the Rockwell
Senior Unsecured Credit Agreement.
"Rockwell Senior Unsecured Credit Facility Loan Documents"
shall mean (a) the Rockwell Senior Unsecured Credit Agreement and (b) the
indenture relating to the Exchange Notes.
"Rockwell Senior Unsecured Credit Facility Loans" shall mean
the loans drawn by the Borrower under the Rockwell Senior Unsecured Credit
Facility on the Effective Date in aggregate principal amounts not in excess of
$30,000,000, the proceeds of which shall be used by the Borrower to finance, in
part, the Rockwell Acquisition and to pay fees and expenses in connection
therewith.
"Sale Agreement" shall mean the sale agreement dated as of
August 7, 1998, between the Borrower and Rockwell relating to the Rockwell
Acquisition.
"Sale and Leaseback Transaction" shall have the meaning
assigned such term in Section 6.03.
"Secured Parties" shall have the meaning assigned to such term
in the Security Agreement.
"Security Agreement" shall mean the Security Agreement,
substantially in the form of Exhibit H, among the Borrower, the Subsidiaries
party thereto and the Collateral Agent for the benefit of the Secured Parties.
"Security Documents" shall mean the Mortgages, the Security
Agreement, the Pledge Agreement, the Intellectual Property Security Agreement
and each of the security agreements, mortgages and other instruments and
documents executed and delivered pursuant to any of the foregoing or pursuant to
Section 5.11.
"Senior Unsecured Notes" shall mean $100,000,000 aggregate
principal amount of the senior unsecured notes of the Borrower due 2005 issued
on or about June 9, 1995 pursuant to the indenture between the Borrower and BNY,
as Trustee.
"September Confidential Information Memorandum" shall mean the
Confidential Information Memorandum of the Borrower dated September 1998.
"September Fee Letter" shall mean the Fee Letter dated
September 3, 1998, among the Borrower, the Administrative Agent and Chase
Securities Inc.
<PAGE> 31
"September 1998 Term Borrowing" shall mean a Borrowing
comprised of September 1998 Term Loans.
"September 1998 Term Loan Commitment" shall mean, with respect
to each Lender, the commitment of such Lender to make September 1998 Term Loans
hereunder as set forth in Schedule 2.01, or in the Assignment and Acceptance
pursuant to which such Lender assumed its September 1998 Term Loan Commitment,
as applicable, as the same may be (a) reduced from time to time pursuant to
Section 2.09 and (b) reduced or increased from time to time pursuant to
assignments by or to such Lender pursuant to Section 9.04.
"September 1998 Term Loan Maturity Date" shall mean December
31, 2003.
"September 1998 Term Loan Repayment Date" shall have the
meaning assigned to such term in Section 2.11(b).
"September 1998 Term Loans" shall mean the term loans made by
the Lenders to the Borrower pursuant to Section 2.01(b). Each September 1998
Term Loan shall be either a Eurodollar Term Loan or an ABR Term Loan.
"SIH" shall mean Scandinavian Incentive Holding B.V., a
Netherlands corporation.
"Spot Exchange Rate" shall mean, on any day, with respect to
any Alternative Currency, the spot rate at which Dollars are offered for such
Alternative Currency on such day by the Administrative Agent in London or in the
interbank market where its foreign currency exchange operations in respect of
such Alternative Currency are then being conducted at approximately 11:00 a.m.
(local time). Notwithstanding the foregoing, if for any reason at the time of
any determination of the Spot Exchange Rate as described above, no such 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.
"Standard & Poor's" shall mean Standard & Poor's Corporation.
"Statutory Reserves" shall mean 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 percentages
(including any marginal, special, emergency or supplemental reserves) expressed
as a decimal established by the Board and any other banking authority, domestic
or foreign, to which the Administrative Agent or any Lender (including any
branch, Affiliate, or other Funding Office making or holding a Loan) is subject
(a) with respect to the Base CD Rate, for new negotiable nonpersonal time
deposits in dollars of over $100,000 with maturities approximately equal to
three months, and
<PAGE> 32
(b) with respect to the Adjusted LIBO Rate, for Eurocurrency Liabilities (as
defined in Regulation D of the Board). Such reserve percentages shall include
those imposed pursuant to such Regulation D. Eurodollar Loans shall be deemed to
constitute Eurocurrency Liabilities and 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 such Regulation D.
Statutory Reserves shall be adjusted automatically on and as of the effective
date of any change in any reserve percentage.
"subsidiary" shall mean, with respect to any Person (herein
referred to as the "parent"), any corporation, partnership, company, limited
liability company, association or other business entity (a) of which securities
or other ownership interests representing more than 50% of the equity or more
than 50% of the ordinary voting power or more than 50% of the general
partnership interests are, at the time any determination is being made, owned,
controlled or held, or (b) that is, at the time any determination is made,
otherwise Controlled, by the parent or one or more subsidiaries of the parent or
by the parent and one or more subsidiaries of the parent.
"Subsidiary" shall mean any subsidiary of the Borrower.
"Swingline Commitment" shall mean the commitment of the
Swingline Lender to make loans pursuant to Section 2.20 as set forth on Schedule
2.01, as the same may be reduced from time to time pursuant to Section 2.09.
"Swingline Exposure" shall mean at any time the aggregate
principal amount at such time of all outstanding Swingline Loans. The Swingline
Exposure of any Revolving Credit Lender at any time shall equal its Pro Rata
Percentage of the aggregate Swingline Exposure at such time.
"Swingline Loan" shall mean any loan made by the Swingline
Lender pursuant to Section 2.20.
"Term Borrowing" shall mean a Borrowing comprised of Term
Loans.
"Term Loan Commitment" shall mean, with respect to any Lender,
the commitment of such Lender to make Term Loans hereunder as set forth on
Schedule 2.01, or in the Assignment and Acceptance pursuant to which such Lender
assumed its Term Loan Commitment, as applicable, as the same may be (a) reduced
from time to time pursuant to Section 2.09 and (b) reduced or increased from
time to time pursuant to assignments by or to such Lender pursuant to Section
9.04.
"Term Loan Repayment Date" shall mean a June 1998 Term Loan
Repayment Date or a September 1998 Term Loan Repayment Date.
<PAGE> 33
"Term Loans" shall mean the June 1998 Term Loans and the
September 1998 Term Loans.
"Three-Month Secondary CD Rate" shall mean, for any day, the
secondary market rate for three-month certificates of deposit reported as being
in effect on such day (or, if such day shall not be a Business Day, the next
preceding Business Day) by the Board through the public information telephone
line of the Federal Reserve Bank of New York (which rate will, under the current
practices of the Board, be published in Federal Reserve Statistical Release
H.15(519) during the week following such day), or, if such rate shall not be so
reported on such day or such next preceding Business Day, the average of the
secondary market quotations for three-month certificates of deposit of major
money center banks in New York City received at approximately 10:00 a.m., New
York City time, on such day (or, if such day shall not be a Business Day, on the
next preceding Business Day) by the Administrative Agent from three New York
City negotiable certificate of deposit dealers of recognized standing selected
by it.
"Total Revolving Credit Commitment" shall mean, at any time,
the aggregate amount of the Revolving Credit Commitments, as in effect at such
time.
"Transactions" shall mean (a) the execution, delivery and
performance by each Loan Party of each of the Loan Documents and the borrowings
hereunder on the Closing Date, (b) the repayment in full of all loans
outstanding under the Original Credit Agreement and the payment of any fees,
expenses, indemnities or other obligations of the Borrower payable thereunder in
connection with the repayment in full of such loans or otherwise, in accordance
with the terms of the Original Credit Agreement and (c) the assumption by the
Borrower of reimbursement obligations in respect of Existing Letters of Credit.
"Type", when used in respect of any Loan or Borrowing, shall
refer to the Rate by reference to which interest on such Loan or on the Loans
comprising such Borrowing is determined. For purposes hereof, the term "Rate"
shall include the Adjusted LIBO Rate and the Alternate Base Rate.
"Vestar" shall mean Vestar/WABCO Investors, L.P., a Delaware
limited partnership.
"Vestar Capital" shall mean Vestar Capital Partners, Inc., a
Delaware corporation.
"Voting Trust" shall mean the voting trust established
pursuant to the Voting Trust Agreement.
<PAGE> 34
"Voting Trust Agreement" shall mean the Voting
Trust/Disposition Agreement, dated as of January 9, 1990, as amended as of
February 28, 1990, and March 9, 1990, and as amended on January 31, 1995, by and
between the Persons named therein.
"Withdrawal Liability" shall mean liability to a Multiemployer
Plan as a result of a complete or partial withdrawal from such Multiemployer
Plan, as such terms are defined in Part I of Subtitle E of Title IV of ERISA.
SECTION 1.02. Terms Generally. The definitions in Section 1.01
shall apply equally to both 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".
All references herein to Articles, Sections, Exhibits and Schedules shall be
deemed references to Articles and Sections of, and Exhibits and Schedules to,
this Agreement unless the context shall otherwise require. Except as otherwise
expressly provided herein, (a) any reference in this Agreement to any Loan
Document shall mean such document as amended, restated, supplemented or
otherwise modified from time to time and (b) all terms of an accounting or
financial nature shall be construed in accordance with GAAP, as in effect from
time to time; provided, however, that (i) for purposes of determining compliance
with the covenants contained in Article VI, all accounting terms herein shall be
interpreted and all accounting determinations hereunder shall be made in
accordance with GAAP as in effect on the Closing Date and applied on a basis
consistent with the application used in the financial statements referred to in
Section 3.05(a) and (ii) for purposes of calculating the Fixed Charge Coverage
Ratio, Interest Expense Ratio, Leverage Ratio and Excess Cash Flow, the non-cash
accounting effects of the ESOP shall not be taken into account.
ARTICLE II. THE CREDITS
SECTION 2.01. Commitments. On the terms and subject to the
conditions and relying upon the representations and warranties herein set forth:
(a) each Lender having a June 1998 Term Loan Commitment agrees
severally and not jointly to continue the June 1998 Term Loans
outstanding on the Effective Date, the aggregate principal amount of
which equals such Lender's June 1998 Term Loan Commitment;
(b) each Lender having a September 1998 Term Loan Commitment
agrees severally and not jointly to make September 1998 Term Loans to
the Borrower on the Effective Date in an aggregate principal amount not
to exceed such Lender's September 1998 Term Loan Commitment; and
<PAGE> 35
(c) each Lender having a Revolving Credit Commitment agrees
severally and not jointly to continue the Revolving Loans outstanding
on the Effective Date and to make Revolving Loans to the Borrower, at
any time and from time to time on or after the Effective Date, and
until the earlier of the Revolving Credit Maturity Date and the
termination of the Revolving Credit Commitment of such Lender in
accordance with the terms hereof, in an aggregate principal amount at
any time outstanding that will not result in (i) such Lender's
Revolving Credit Exposure exceeding (ii) such Lender's Revolving Credit
Commitment.
Within the limits set forth in clause (c) of the preceding
sentence, the Borrower may borrow, pay or prepay and reborrow Revolving Loans on
or after the Effective Date and prior to the Revolving Credit Maturity Date,
subject to the terms, conditions and limitations set forth herein. Amounts paid
or prepaid in respect of Term Loans may not be reborrowed.
SECTION 2.02. Loans. (a) Each Loan (other than a Swingline
Loan, as to which this Section 2.02 shall not apply) shall be made as part of a
Borrowing consisting of Loans made by the Lenders ratably in accordance with
their respective Term Loan Commitments or Revolving Credit Commitments, as
applicable; provided, however, that the failure of any Lender to make any Loan
shall not in itself relieve any other Lender of its obligation to lend hereunder
(it being understood, however, that no Lender shall be responsible for the
failure of any other Lender to make any Loan required to be made by such other
Lender). The Loans comprising each Borrowing shall be in an aggregate principal
amount that is (i) an integral multiple of $1,000,000 and, in the case of
Eurodollar Borrowings, not less than $5,000,000 or (ii) equal to the remaining
available balance of the applicable Commitments.
(b) Subject to Sections 2.08 and 2.14, each Borrowing shall be
comprised entirely of ABR Loans or Eurodollar Loans as the Borrower may request
pursuant to Section 2.03. Each Lender may at its option make any Eurodollar Loan
by causing any domestic or foreign branch or Affiliate of such Lender to make
such Loan; provided, however, that any exercise of such option shall not (i)
affect the obligation of the Borrower to repay such Loan in accordance with the
terms of this Agreement or (ii) impose any additional obligation on the part of
the Borrower pursuant to Section 2.13 or 2.19. Borrowings of more than one Type
may be outstanding at the same time; provided, however, that the Borrower shall
not be entitled to request any Borrowing that, if made, would result in more
than twelve Eurodollar Borrowings outstanding hereunder at any one time. For
purposes of the foregoing, Borrowings having different Interest Periods,
regardless of whether they commence on the same date, shall be considered
separate Borrowings.
(c) Each Lender shall make each Loan to be made by it
hereunder on the proposed date thereof by wire transfer to such account in New
York City as the Administrative Agent may designate in federal funds not later
than 12:00 (noon), New York
<PAGE> 36
City time, and the Administrative Agent shall by 3:00 p.m., New York City time,
credit the amounts so received to the general deposit account with the
Administrative Agent of the Borrower or, if a Borrowing shall not occur on such
date because any condition precedent herein specified shall not have been met,
return the amounts so received to the respective Lenders on such date.
(d) Unless the Administrative Agent shall have received notice
from a Lender prior to the date of any Borrowing that such Lender will not make
available to the Administrative Agent such Lender's portion of such Borrowing,
the Administrative Agent may assume that such Lender has made such portion
available to the Administrative Agent on the date of such Borrowing in
accordance with paragraph (c) above and the Administrative Agent may, in
reliance upon such assumption, make available to the Borrower on such date a
corresponding amount. If the Administrative Agent shall have so made funds
available then, to the extent that such Lender shall not have made such portion
available to the Administrative Agent, such Lender and the Borrower severally
agree to repay to the Administrative Agent forthwith on demand such
corresponding amount together with interest thereon, for each day from the date
such amount is made available to the Borrower until the date such amount is
repaid to the Administrative Agent at (i) in the case of the Borrower, the
interest rate applicable at the time to the Loans comprising such Borrowing and
(ii) in the case of such Lender, a rate determined by the Administrative Agent
to represent its cost of overnight or short-term funds (which determination
shall be conclusive absent manifest error). If such Lender shall repay to the
Administrative Agent such corresponding amount, such amount shall constitute
such Lender's Loan as part of such Borrowing for purposes of this Agreement.
(e) Notwithstanding any other provision of this Agreement, the
Borrower shall not be entitled to request any Revolving Credit Borrowing if the
Interest Period requested with respect thereto would end after the Revolving
Credit Maturity Date.
(f) If the Issuing Bank shall not have received from the
Borrower the payment required to be made by Section 2.21(e) within three hours
after the Borrower shall have received notice from the Issuing Bank that payment
of a draft presented under any Letter of Credit will be made, or, if the
Borrower shall have received such notice later than 2:00 p.m., New York City
time, on any Business Day, not later than 10:00 a.m., New York City time, on the
immediately following Business Day, as provided in Section 2.21(e), the Issuing
Bank will promptly notify the Administrative Agent of the L/C Disbursement and
the Administrative Agent will promptly notify each Revolving Credit Lender of
such L/C Disbursement and its Pro Rata Percentage thereof. Each Revolving Credit
Lender shall pay by wire transfer of immediately available funds to the
Administrative Agent not later than 2:00 p.m., New York City time, on such date
(or, if such Revolving Credit Lender shall have received such notice later than
12:00 (noon), New York City time, on any day, not later than 10:00 a.m., New
York City time, on the immediately following Business Day), an amount equal to
such Lender's Pro Rata Percentage of such L/C Disbursement (or, in the case of
an
<PAGE> 37
L/C Disbursement denominated in an Alternative Currency, such Lender's Pro Rata
Percentage of the Assigned Dollar Value of such L/C Disbursement) (it being
understood that such amount shall be deemed to constitute an ABR Revolving Loan
of such Lender and such payment shall be deemed to have reduced the L/C
Exposure), and the Administrative Agent will promptly pay to the Issuing Bank
amounts so received by it from the Revolving Credit Lenders. The Administrative
Agent will promptly pay to the Issuing Bank any amounts received by it from the
Borrower pursuant to Section 2.21(e) prior to the time that any Revolving Credit
Lender makes any payment pursuant to this paragraph (f); any such amounts
received by the Administrative Agent thereafter will be remitted on the day of
receipt by the Administrative Agent to the Revolving Credit Lenders that shall
have made such payments and to the Issuing Bank, as their interests may appear.
If any Revolving Credit Lender shall not have made its Pro Rata Percentage of
such L/C Disbursement available to the Administrative Agent as provided above,
such Lender agrees to pay interest on such amount, for each day from and
including the date such amount is required to be paid in accordance with this
paragraph (f) to but excluding the date such amount is paid, to the
Administrative Agent at, for the first such day, the Federal Funds Effective
Rate, and for each day thereafter, the Alternate Base Rate.
SECTION 2.03. Borrowing Procedure. In order to request a
Borrowing (other than a Swingline Loan, as to which this Section 2.03 shall not
apply, and other than a deemed Borrowing of ABR Loans pursuant to Section
2.02(f)), the Borrower shall give telephonic notice to the Administrative Agent
(promptly confirmed by delivery of a duly completed Borrowing Request) (a) in
the case of a Eurodollar Borrowing, not later than 11:00 a.m., New York City
time, three Business Days before a proposed Borrowing, and (b) in the case of an
ABR Borrowing, not later than 10:00 a.m., New York City time, on the Business
Day of such proposed Borrowing; provided, however, that Borrowing Requests with
respect to Borrowings to be made on the Effective Date may, at the discretion of
the Administrative Agent, be delivered later than the times specified above.
Each Borrowing Request shall be irrevocable, signed by or on behalf of the
Borrower and shall specify the following information: (a) whether the Borrowing
then being requested is to be a June 1998 Term Borrowing, September 1998 Term
Borrowing or a Revolving Credit Borrowing, and whether such Borrowing is to be a
Eurodollar Borrowing or an ABR Borrowing; (b) the date of such Borrowing (which
shall be a Business Day) and the amount thereof; and (c) if such Borrowing is to
be a Eurodollar Borrowing, the Interest Period with respect thereto; provided,
however, that, notwithstanding any contrary specification in any Borrowing
Request, each requested Borrowing shall comply with the requirements set forth
in Section 2.02. If no election as to the Type of Borrowing is specified in any
such notice, then the requested Borrowing shall be an ABR Borrowing. If no
Interest Period with respect to any Eurodollar Borrowing is specified in any
such notice, then the Borrower shall be deemed to have selected an Interest
Period of one month's duration. If the Borrower shall not have delivered a
Borrowing Request in accordance with this Section 2.03 prior to the end of the
Interest Period then in effect for any Revolving Credit Borrowing and requesting
that such Borrowing be refinanced, then the Borrower shall (unless the Borrower
has notified the
<PAGE> 38
Administrative Agent, not less than three Business Days prior to the end of such
Interest Period, that such Borrowing is to be repaid at the end of such Interest
Period) be deemed to have delivered a Borrowing Request requesting that such
Borrowing be refinanced with a new Borrowing of equivalent amount, and such new
Borrowing shall be an ABR Borrowing. The Administrative Agent will promptly
advise the applicable Lenders of any notice given pursuant to this Section 2.03
(and the contents thereof) and of each Lender's portion of the requested
Borrowing.
SECTION 2.04. Evidence of Debt; Repayment of Loans. (a) The
Borrower hereby unconditionally promises to pay to the Administrative Agent for
the account of each Lender (i) the then-unpaid principal amount of each
Revolving Loan and Swingline Loan of such Lender on the Revolving Credit
Maturity Date (or such earlier date on which the Revolving Loans and Swingline
Loans shall become due and payable pursuant to Article VII) and (ii) the
principal amount of the Term Loans of such Lender as provided in Section 2.11
(or the then-unpaid principal amount of such Term Loans on the date that the
Term Loans shall become due and payable pursuant to Article VII). Each Loan
shall bear interest from and including the date of the first Borrowing hereunder
on the outstanding principal balance thereof as set forth in Section 2.06.
(b) Each Lender shall maintain in accordance with its usual
practice an account or accounts evidencing the indebtedness of the Borrower to
such Lender resulting from each Loan made by such Lender from time to time,
including the amounts of principal and interest payable and paid such Lender
from time to time under this Agreement.
(c) The Administrative Agent shall maintain accounts in which
it will record (i) the amount of each Loan made hereunder, the Type 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 the Borrower to each
Lender hereunder and (iii) the amount of any sum received by the Administrative
Agent hereunder from the Borrower and each Lender's share thereof.
(d) The entries made in the accounts maintained pursuant to
paragraphs (b) and (c) above shall, to the extent permitted by applicable law,
be prima facie evidence of the existence and amounts of the obligations of the
Borrower therein recorded; provided, however, that the failure of any Lender or
the Administrative Agent to maintain such accounts or any error therein shall
not in any manner affect the obligations of the Borrower to repay (with the
applicable interest) the Loans in accordance with the terms of this Agreement.
(e) Notwithstanding any other provision of this Agreement, in
the event any Lender shall request a note payable to such Lender and its
registered assigns, the Borrower will issue such a note and the interests
represented by such note shall at all times (including after any assignment of
all or part of such interests pursuant to Section 9.04) be represented by one or
more notes payable to the payee named therein or its registered assigns.
<PAGE> 39
SECTION 2.05. Fees. (a) The Borrower agrees to pay to each
Lender, through the Administrative Agent, on the Closing Date, on the last day
of March, June, September and December in each year and on each date on which
any Commitment of such Lender shall expire or be terminated as provided herein,
a commitment fee (a "Commitment Fee") equal to the Applicable Percentage per
annum (as set forth under the heading "Fee Percentage" in the table within the
definition of the term "Applicable Percentage") in effect from time to time on
the average daily unused amount of the Revolving Credit Commitment of such
Lender during the preceding quarter (or other period commencing with the date of
acceptance by the Borrower of the Commitment of such Lender or ending with the
Revolving Credit Maturity Date or the date on which the Revolving Credit
Commitment of such Lender shall expire or be terminated). All Commitment Fees
shall be computed on the basis of the actual number of days elapsed in a year of
360 days. The Commitment Fee due to each Lender shall commence to accrue on the
date of acceptance by the Borrower of the Commitment of such Lender and shall
cease to accrue on the date on which the Commitments of such Lender shall expire
or be terminated as provided herein. For purposes of calculating Commitment Fees
only, no portion of the Revolving Credit Commitments shall be deemed utilized
under Section 2.16 as a result of outstanding Swingline Loans. For the purpose
of calculating Commitment Fees in respect of Revolving Credit Commitments, any
portion of the Revolving Credit Commitments unavailable due to outstanding
Letters of Credit shall be deemed to be used amounts.
(b) The Borrower agrees to pay to the Administrative Agent,
for its own account, the administration fees set forth in the September Fee
Letter as payable to the Administrative Agent, at the time and in the amounts
specified therein (the "Administration Agent Fees").
(c) The Borrower agrees to pay to the Administrative Agent,
for payment to the other Lenders (to the extent applicable), on the Closing Date
the fees specified in the Fee Letter, and the Agent shall pay to each Lender on
the Closing Date that portion of such fees as shall be owing to such Lender.
(d) The Borrower agrees to pay (i) to each Revolving Credit
Lender, through the Administrative Agent, on the last day of March, June,
September and December of each year and on the date on which the Revolving
Credit Commitment of such Lender shall be terminated as provided herein, a fee
(an "L/C Participation Fee") calculated on such Lender's Pro Rata Percentage of
the average daily aggregate L/C Exposure (excluding the portion thereof
attributable to unreimbursed L/C Disbursements) during the preceding quarter (or
shorter period commencing with the Closing Date or ending with the Revolving
Credit Maturity Date or the date on which all Letters of Credit have been
canceled or have expired and the Revolving Credit Commitment of such Lender
shall have been terminated)
<PAGE> 40
at the Applicable Percentage for purposes of determining the interest rate on
Revolving Credit Borrowings comprised of Eurodollar Loans pursuant to Section
2.06, and (ii) to the Issuing Bank on the last day of March, June, September and
December of each year, a fronting fee of 0.125% per annum on the average daily
aggregate L/C Exposure (excluding the portion thereof attributable to
unreimbursed L/C Disbursements) during the preceding quarter (or shorter period
commencing with the Closing Date or ending with the Revolving Credit Maturity
Date or the date on which all Letters of Credit have been canceled or have
expired and the Revolving Credit Commitments of all Lenders shall have been
terminated) and, with respect to each Letter of Credit, any other fees agreed
upon by the Borrower and the Issuing Bank plus, in connection with the issuance,
amendment or transfer of any Letter of Credit or any L/C Disbursement, the
Issuing Bank's customary documentary and processing charges (collectively, the
"Issuing Bank Fees"). All L/C Participation Fees and Issuing Bank Fees shall be
computed on the basis of the actual number of days elapsed in a year of 360
days.
(e) All Fees shall be paid on the dates due, in immediately
available funds, to the Administrative Agent for distribution, if and as
appropriate, among the Lenders, except that the Issuing Bank Fees shall be paid
directly to the Issuing Bank. Once paid, none of the Fees shall be refundable
under any circumstances (other than corrections of error in payment).
SECTION 2.06. Interest on Loans. (a) Subject to the provisions
of Section 2.07, the Loans comprising each ABR Borrowing and the Swingline Loans
shall bear interest (computed on the basis of the actual number of days elapsed
over a year of 365 or 366 days, as the case may be, when the Alternate Base Rate
is determined by reference to the Prime Rate and over a year of 360 days at all
other times) at a rate per annum equal to the Alternate Base Rate plus the
Applicable Percentage in effect from time to time.
(b) Subject to the provisions of Section 2.07, the Loans
comprising each Eurodollar Borrowing shall bear interest (computed on the basis
of the actual number of days elapsed over a year of 360 days) at a rate per
annum equal to the Adjusted LIBO Rate for the Interest Period in effect for such
Borrowing plus the Applicable Percentage in effect from time to time.
(c) Interest on each Loan shall be payable on the Interest
Payment Dates applicable to such Loan except as otherwise provided in this
Agreement. The applicable Alternate Base Rate or Adjusted LIBO Rate for each
Interest Period or day within an Interest Period, as the case may be, shall be
determined by the Administrative Agent, and such determination shall be
conclusive absent manifest error.
SECTION 2.07. Default Interest. If the Borrower shall default
in the payment of the principal of or interest on any Loan or any other amount
becoming due hereunder, by acceleration or otherwise, or under any other Loan
Document, the Borrower
<PAGE> 41
shall on demand from time to time pay interest, to the extent permitted by law,
on such defaulted amount to but excluding the date of actual payment (after as
well as before judgment) (a) in the case of overdue principal, at the rate
otherwise applicable to such Loan pursuant to Section 2.06 plus 2.00% per annum
and (b) in all other cases, at a rate per annum (computed on the basis of the
actual number of days elapsed over a year of 365 or 366 days, as the case may
be, when determined by reference to the Prime Rate and over a year of 360 days
at all other times) equal to the sum of the Alternate Base Rate plus 2.00%.
SECTION 2.08. Alternate Rate of Interest. In the event, and on
each occasion, that on the day two Business Days prior to the commencement of
any Interest Period for a Eurodollar Borrowing the Administrative Agent shall
have determined that Dollar deposits in the principal amounts of the Loans
comprising such Borrowing are not generally available in the London interbank
market, or that the rates at which such Dollar deposits are being offered will
not adequately and fairly reflect the cost to Lenders that would hold more than
25% of the Loans comprising such Borrowing of making or maintaining such Loans,
or that reasonable means do not exist for ascertaining the Adjusted LIBO Rate,
the Administrative Agent shall, as soon as practicable thereafter, give written
notice of such determination to the Borrower and the Lenders. In the event of
any such determination, until the Administrative Agent shall have advised the
Borrower and the Lenders that the circumstances giving rise to such notice no
longer exist, any request by the Borrower for a Eurodollar Borrowing pursuant to
Section 2.03 or 2.10 shall be deemed to be a request for an ABR Borrowing. Each
determination by the Administrative Agent hereunder shall be conclusive absent
manifest error.
SECTION 2.09. Termination and Reduction of Commitments. (a)
The June 1998 Term Loan Commitments terminated upon the making of the June 1998
Term Loans. The September 1998 Term Loan Commitments shall automatically
terminate at 5:00 p.m., New York City time, on the Effective Date. The Revolving
Credit Commitments, the L/C Commitment and the Swingline Commitment shall
automatically terminate on the Revolving Credit Maturity Date.
(b) Upon at least three Business Days' prior irrevocable
written notice to the Administrative Agent, the Borrower may at any time in
whole permanently terminate, or from time to time in part permanently reduce,
the Commitments; provided, however, that (i) each partial reduction of the
Commitments shall be in an integral multiple of $1,000,000 and in a minimum
principal amount of $5,000,000 and (ii) the Total Revolving Credit Commitment
shall not be reduced to an amount that is less than the sum of the Aggregate
Revolving Credit Exposure at the time.
(c) Each reduction in the Commitments hereunder shall be made
ratably among the applicable Lenders in accordance with their respective
applicable Commitments. The Borrower shall pay to the Administrative Agent for
the account of the applicable Lenders, on the date of each termination or
reduction, the Commitment Fees on the amount of the Commitments so terminated or
reduced accrued to but excluding the date of such termination or reduction.
<PAGE> 42
SECTION 2.10. Conversion and Continuation of Borrowings. (a)
The Borrower shall have the right at any time (subject to Sections 2.08 and
2.20(d)) upon prior irrevocable notice to the Administrative Agent (i) not later
than 12:00 (noon), New York City time, one Business Day prior to conversion, to
convert any Eurodollar Borrowing into an ABR Borrowing, (ii) not later than
11:00 a.m., New York City time, three Business Days prior to conversion or
continuation, to convert any ABR Borrowing into a Eurodollar Borrowing or to
continue any Eurodollar Borrowing as a Eurodollar Borrowing for an additional
Interest Period, and (iii) not later than 11:00 a.m., New York City time, three
Business Days prior to conversion, to convert the Interest Period with respect
to any Eurodollar Borrowing to another permissible Interest Period, subject in
each case to the following:
(A) each conversion or continuation shall be made pro rata
among the Lenders in accordance with the respective principal amounts
of the Loans comprising the converted or continued Borrowing;
(B) if less than all the outstanding principal amount of any
Borrowing shall be converted or continued, then each resulting
Borrowing shall satisfy the limitations specified in Sections 2.02(a)
and 2.02(b) regarding the principal amount and maximum number of
Borrowings of the relevant Type;
(C) each conversion shall be effected by each Lender by
recording for the account of such Lender the new Loan of such Lender
resulting from such conversion and reducing the Loan (or portion
thereof) of such Lender being converted by an equivalent principal
amount; accrued interest on any Eurodollar Loan (or portion thereof)
being converted shall be paid by the Borrower at the time of
conversion;
(D) if any Eurodollar Borrowing is converted at a time other
than the end of the Interest Period applicable thereto, the Borrower
shall pay, upon demand, any amounts due to the Lenders pursuant to
Section 2.15;
(E) any portion of a Borrowing maturing or required to be
repaid in less than one month may not be converted into or continued as
a Eurodollar Borrowing;
(F) any portion of a Eurodollar Borrowing that cannot be
converted into or continued as a Eurodollar Borrowing by reason of the
immediately preceding clause shall be automatically converted at the
end of the Interest Period in effect for such Borrowing into an ABR
Borrowing; and
<PAGE> 43
(G) no Interest Period may be selected for any Eurodollar Term
Borrowing comprised of June 1998 Term Loans or September 1998 Term
Loans that would end later than any June 1998 Term Loan Repayment Date
or September 1998 Term Loan Repayment Date, as the case may be,
occurring on or after the first day of such Interest Period if, after
giving effect to such selection, the aggregate outstanding amount of
(I) the Eurodollar Term Borrowings comprised of June 1998 Term Loans or
September 1998 Term Loans, as the case may be, with Interest Periods
ending on or prior to such Term Loan Repayment Date and (II) ABR Term
Borrowings comprised of June 1998 Term Loans or September 1998 Term
Loans, as the case may be, would not be at least equal to the principal
amount of Term Borrowings to be paid on such Term Loan Repayment Date.
(b) Each notice pursuant to this Section 2.10 shall be
irrevocable and shall refer to this Agreement and specify (i) the identity and
amount of the Borrowing that the Borrower requests be converted or continued,
(ii) whether such Borrowing is to be converted to or continued as a Eurodollar
Borrowing or an ABR Borrowing, (iii) if such notice requests a conversion, the
date of such conversion (which shall be a Business Day) and (iv) if such
Borrowing is to be converted to or continued as a Eurodollar Borrowing, the
Interest Period with respect thereto. If no Interest Period is specified in any
such notice with respect to any conversion to or continuation as a Eurodollar
Borrowing, the Borrower shall be deemed to have selected an Interest Period of
one month's duration. The Administrative Agent shall promptly advise the other
Lenders of any notice given pursuant to this Section 2.10 and of each Lender's
portion of any converted or continued Borrowing. If the Borrower shall not have
given notice in accordance with this Section 2.10 to continue any Borrowing into
a subsequent Interest Period (and shall not otherwise have given notice in
accordance with this Section 2.10 to convert such Borrowing), such Borrowing
shall, at the end of the Interest Period applicable thereto (unless repaid
pursuant to the terms hereof), automatically be continued into a new Interest
Period as an ABR Borrowing.
SECTION 2.11. Repayment of Term Borrowings. (a) The June 1998
Term Borrowings shall be payable as to principal in semi-annual installments
payable on the dates (each a "June 1998 Term Loan Repayment Date") and in the
amounts set forth below, subject to adjustment pursuant to paragraph (c) below:
Repayment Date Amount
-------------- ------
December 31, 1998 $ 7,500,000
June 30, 1999 $ 7,500,000
December 31, 1999 $12,500,000
June 30, 2000 $12,500,000
December 31, 2000 $15,000,000
June 30, 2001 $15,000,000
December 31, 2001 $20,000,000
June 30, 2002 $20,000,000
December 31, 2002 $20,000,000
June 30, 2003 $20,000,000
June 1998 Term Loan Maturity Date $20,000,000
<PAGE> 44
(b) The September 1998 Term Borrowings shall be payable as to
principal in semi-annual installments payable on the dates (each a "September
1998 Term Loan Repayment Date") and in the amounts set forth below, subject to
adjustment pursuant to paragraph (c) below:
Repayment Date Amount
-------------- ------
June 30, 2000 $ 2,500,000
December 31, 2000 $ 2,500,000
June 30, 2001 $ 2,500,000
December 31, 2001 $ 2,500,000
June 30, 2002 $ 5,000,000
December 31, 2002 $ 5,000,000
June 30, 2003 $10,000,000
September 1998 Term Loan Maturity Date
$10,000,000
(c) Each prepayment of principal of the Term Borrowings
pursuant to Section 2.12 shall be applied to the June 1998 Term Borrowings and
the September 1998 Term Borrowings on a pro rata basis to reduce scheduled
repayments of principal due under Section 2.11(a) or (b), as applicable, as
follows: (i) 50% of any such prepayment applied to the June 1998 Term Borrowings
or the September 1998 Term Borrowings shall be applied to reduce the remaining
scheduled repayments of principal due under Section 2.11(a) or (b), as
applicable, in the order of maturity and (ii) 50% of any such prepayment applied
to the June 1998 Term Borrowings or the September 1998 Term Borrowings shall be
applied to reduce the remaining scheduled repayments of principal due under
Section 2.11(a) or (b), as applicable, on a pro rata basis.
(d) To the extent not previously paid, all June 1998 Term
Borrowings and all September 1998 Term Borrowings shall be due and payable on
the June 1998 Term Loan Maturity Date (as set forth in Section 2.11(a)) and the
September 1998 Term Loan Maturity Date (as set forth in Section 2.11(b)),
respectively.
(e) Each repayment of Term Borrowings pursuant to this Section
2.11 shall be subject to Section 2.15 but shall otherwise be without premium or
penalty.
<PAGE> 45
Each repayment of Term Borrowings pursuant to this Section 2.11 shall be
accompanied by accrued interest on the principal amount paid to but excluding
the date of payment.
SECTION 2.12. Prepayment. (a) The Borrower shall have the
right at any time and from time to time to prepay (i) any Eurodollar Borrowing,
in whole or in part, upon at least three Business Days' telephonic notice
(promptly confirmed in writing) to the Administrative Agent before 11:00 a.m.,
New York City time; provided, however, that each partial prepayment shall be in
an amount that is an integral multiple of $1,000,000 and not less than
$5,000,000; and (ii) any ABR Borrowing, in whole or in part, upon at least one
Business Day's telephonic notice (promptly confirmed in writing) to the
Administrative Agent before 11:00 a.m., New York City time; provided, however,
that each such partial prepayment shall be in an amount not less than $1,000,000
or an integral multiple thereof. Any voluntary prepayment of Term Borrowings
shall be applied to the June 1998 Term Borrowings and the September 1998 Term
Borrowings on a pro rata basis in accordance with Section 2.11(c). This
paragraph (a) shall not apply to prepayments of Swingline Loans.
(b) In the event of any termination of the Revolving Credit
Commitments, the Borrower shall repay or prepay all its outstanding Revolving
Credit Borrowings and all outstanding Swingline Loans on the date of such
termination. In the event of any partial reduction of the Revolving Credit
Commitments, then (i) at or prior to the effective date of such reduction, the
Administrative Agent shall notify the Borrower and the Revolving Credit Lenders
of the Aggregate Revolving Credit Exposure and (ii) if the Aggregate Revolving
Credit Exposure would exceed the Total Revolving Credit Commitment after giving
effect to such reduction, then the Borrower shall, on the date of such
reduction, repay or prepay Revolving Credit Borrowings or Swingline Loans (or a
combination thereof) in an amount sufficient to eliminate such excess.
(c) So long as any Term Borrowings remain outstanding, in the
event and on each occasion that a Prepayment Event (other than under clause (c)
of the definition thereof and other than to the extent that the proceeds of
Indebtedness incurred or created under Section 6.01(k) are applied in accordance
with Section 6.01(k)) occurs, the Borrower shall apply an amount equal to 100%
of the Net Cash Proceeds therefrom to prepay Term Loans outstanding under this
Agreement by, substantially simultaneously with (and in any event not later than
the Business Day next following) the occurrence of such Prepayment Event, paying
to the Administrative Agent an amount equal to 100% of the Net Cash Proceeds
from such Prepayment Event for application to the prepayment of outstanding Term
Borrowings in accordance with the following paragraphs of this Section 2.12. If
a Prepayment Event arises under clause (c) of the definition thereof, then the
Borrower shall apply an amount equal to 50% of the Net Cash Proceeds therefrom
to prepay Term Loans outstanding under this Agreement by paying to the
Administrative Agent an amount equal to 50% of the Net Cash Proceeds from such
Prepayment Event in the manner and for the purpose set forth in the preceding
sentence.
<PAGE> 46
(d) So long as any Term Borrowings remain outstanding, not
later than the earlier of (i) 110 days after the end of each fiscal year of the
Borrower, commencing with the fiscal year ending December 31, 1999, and (ii) the
date on which the financial statements with respect to such fiscal year are
delivered pursuant to Section 5.04 (such earlier date, the "Determination
Date"), the Borrower shall prepay Term Loans outstanding under this Agreement in
an aggregate principal amount equal to 50% of Excess Cash Flow for such fiscal
year if, as of the applicable Determination Date, the Leverage Ratio exceeds
3.25 to 1.00, by paying to the Administrative Agent such amount for application
to the prepayment of outstanding Term Borrowings in accordance with the
following paragraphs of this Section 2.12.
(e) Mandatory prepayments pursuant to paragraphs (c) and (d)
above shall be applied to the prepayment in full of all outstanding June 1998
Term Borrowings and September 1998 Term Borrowings on a pro rata basis.
(f) The Borrower will deliver to the Administrative Agent (i)
at the time of each prepayment required under paragraph (c) or (d) above, a
certificate signed by a Financial Officer of the Borrower setting forth in
reasonable detail the calculation of the amount of such prepayment and (ii) no
later than the later of (A) the date on which a Responsible Officer of the
Borrower becomes aware that such prepayment will be made and (B) the date that
is five Business Days prior to the date of such prepayment, a notice of such
prepayment. In the case of a prepayment pursuant to paragraph (c) above, such
certificate shall also describe in reasonable detail the facts and circumstances
giving rise to the applicable Prepayment Event and a reasonably detailed
calculation of the Net Cash Proceeds therefrom.
(g) Net Cash Proceeds and any other amounts to be applied
pursuant to paragraph (c) or (d) above to the prepayment of June 1998 Term
Borrowings or September 1998 Term Borrowings shall be applied first to reduce
outstanding ABR June 1998 Term Borrowings or September 1998 Term Borrowings, as
applicable, and any amounts remaining after such application shall, at the
option of the Borrower, be applied to prepay Eurodollar Term Borrowings
immediately or shall be deposited in the Prepayment Account. The Administrative
Agent will apply any cash deposited in the Prepayment Account (i) allocable to
Term Borrowings to prepay Eurodollar Term Borrowings and (ii) allocable to
Revolving Credit Borrowings to prepay Eurodollar Revolving Credit Borrowings, in
each case on the last day of their respective Interest Periods (or, at the
direction of the Borrower, on any earlier date) until all outstanding Term
Borrowings or Revolving Credit Borrowings, as the case may be, have been prepaid
or until all the allocable cash held in the Prepayment Account with respect to
such Borrowings has been exhausted. The term "Prepayment Account" shall mean an
account established by the Borrower with the Administrative Agent and over which
the Administrative Agent shall have exclusive dominion and control, including
the exclusive right of withdrawal for application in accordance with this
paragraph (g). The Administrative Agent will, at the written or
<PAGE> 47
telephonic request (which shall promptly be confirmed in writing) of the
Borrower, use its reasonable efforts to invest amounts on deposit in the
Prepayment Account in the Permitted Investments specified in such request;
provided, however, that (i) the Administrative Agent shall not be required to
make any investment that, in its sole judgment, would require or cause the
Administrative Agent to be in, or would result in any, violation of any law,
statute, rule or regulation, (ii) the Administrative Agent shall have no
obligation to invest amounts on deposit in the Prepayment Account if an Event of
Default shall have occurred and be continuing and (iii) no Permitted Investment
shall mature after the last day of the applicable Interest Periods of the
Eurodollar Term Borrowings or Eurodollar Revolving Credit Borrowings to be
prepaid, as the case may be. The Borrower shall indemnify the Administrative
Agent for any losses relating to the investments so that the amount available to
prepay Eurodollar Borrowings on the last day of the applicable Interest Period
is not less than the amount that would have been available had no investments
been made pursuant thereto. Until no Term Borrowings or Revolving Credit
Borrowings, as the case may be, are outstanding, interest or profits, if any, on
such investments shall be deposited in the Prepayment Account and reinvested as
specified above. Upon prepayment or payment in full of all Term Borrowings or
Revolving Credit Borrowings, as the case may be, any amount remaining on deposit
in the Prepayment Account with respect to such Borrowings shall be paid to the
Borrower. If the maturity of the Loans has been accelerated pursuant to Article
VII, the Administrative Agent may, in its sole discretion, apply all amounts on
deposit in the Prepayment Account to satisfy any of the Obligations. The
Borrower hereby grants to the Administrative Agent, for its benefit and the
benefit of the Issuing Bank, the other Agents and the Lenders, a security
interest in the Prepayment Account.
(h) Each notice of prepayment shall specify the prepayment
date and the principal amount of each Borrowing (or portion thereof) to be
prepaid, shall state the Type of each Borrowing to be repaid, shall state
whether Term Borrowings, Revolving Credit Borrowings or Swingline Loans are to
be repaid and respective principal amounts so to be repaid, shall be irrevocable
and shall commit the Borrower to prepay such Borrowing by the amount stated
therein on the date stated therein. All prepayments under this Section 2.12
shall be subject to Section 2.15 but otherwise without premium or penalty. All
prepayments under this Section 2.12 (other than pursuant to paragraph (c) or (d)
above) shall be accompanied by accrued interest on the principal amount being
prepaid to the date of payment. All prepayments under paragraph (d) above shall
be applied first to the payment of accrued interest and then to the payment of
principal.
SECTION 2.13. Reserve Requirements; Change in Circumstances.
(a) Notwithstanding any other provision of this Agreement, if after the Closing
Date any change in applicable law or regulation or in the interpretation or
administration thereof by any Governmental Authority charged with the
interpretation or administration thereof (whether or not having the force of
law) shall 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 such Lender or the Issuing Bank (except any such reserve
<PAGE> 48
requirement that is reflected in the Adjusted LIBO Rate or in the Alternate Base
Rate) or shall impose on such Lender or the Issuing Bank or the London interbank
market any other condition affecting this Agreement or Eurodollar 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 or the Issuing
Bank of making or maintaining any Eurodollar Loan or increase the cost to any
Lender of issuing or maintaining any Letter of Credit or purchasing or
maintaining a participation therein, or to reduce the amount of any sum received
or receivable by such Lender or the Issuing Bank hereunder (whether of
principal, interest or otherwise) by an amount deemed by such Lender or the
Issuing Bank to be material, then the Borrower will pay to such Lender or the
Issuing Bank, as the case may be, following receipt of a certificate of such
Lender to such effect in accordance with paragraph (c) below 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 the Issuing Bank shall have determined
that the adoption after the Closing Date of any law, rule, regulation, agreement
or guideline regarding capital adequacy, or any change after the Closing Date in
any such law, rule, regulation, agreement or guideline (whether such law, rule,
regulation, agreement or guideline has been adopted) or in the interpretation or
administration thereof by any Governmental Authority charged with the
interpretation or administration thereof, or compliance by any Lender (or any
lending office of such Lender) or the Issuing Bank or any Lender's or the
Issuing Bank's holding company with any request or directive regarding capital
adequacy issued under any law, rule, regulation or guideline (whether or not
having the force of law) of any Governmental Authority has or would have the
effect of reducing the rate of return on such Lender's or the Issuing Bank's
capital or on the capital of such Lender's or the Issuing Bank's holding
company, if any, as a consequence of this Agreement or the Loans made by such
Lender or participations in Letters of Credit purchased by such Lender pursuant
hereto or the Letters of Credit issued by the Issuing Bank pursuant hereto to a
level below that which such Lender or the Issuing Bank or such Lender's or the
Issuing Bank's holding company could have achieved but for such applicability,
adoption, change or compliance (taking into consideration such Lender's or the
Issuing Bank's policies and the policies of such Lender's or the Issuing Bank's
holding company with respect to capital adequacy) by an amount deemed by such
Lender or the Issuing Bank to be material, then from time to time the Borrower
will pay to such Lender or the Issuing Bank, as the case may be, following
receipt of a certificate of such Lender to such effect in accordance with
paragraph (c) below, such additional amount or amounts as shall compensate such
Lender or the Issuing Bank or such Lender's or the Issuing Bank's holding
company for any such reduction suffered.
(c) A certificate of any Lender or the Issuing Bank setting
forth such amount or amounts as shall be necessary to compensate such Lender or
the Issuing Bank or its holding company, as applicable, as specified in
paragraph (a) or (b) above, and setting forth in reasonable detail an
explanation of the basis of requesting such compensation in accordance with
paragraph (a) or (b) above, shall be delivered to the Borrower and shall be
<PAGE> 49
conclusive absent manifest error. The Borrower will pay such Lender or the
Issuing Bank the amount shown as due on any such certificate delivered by such
Lender or the Issuing Bank within 10 days after the Borrower's receipt of the
same unless the Borrower has notified such Lender or the Issuing Bank, as the
case may be, that it intends to exercise its rights under the next succeeding
sentence. The Borrower, at its expense, at any time within 180 days after the
delivery of such certificate, so long as no Event of Default shall have occurred
and be continuing, may require such Lender or the Issuing Bank, as the case may
be, to assign in accordance with the provisions of Section 9.04, at par plus
accrued interest, without recourse or warranty and pursuant to an Assignment and
Acceptance, its rights and obligations hereunder to a financial institution
specified by the Borrower that is willing to accept an assignment of such rights
and obligations on the terms hereof and that is reasonably acceptable to the
Administrative Agent; provided, however, that (i) such assignment shall not
conflict with or violate any law or regulation applicable to or binding on such
Lender or the Issuing Bank, as the case may be, (ii) the Borrower shall have
paid to the assigning Lender all amounts (other than interest) accrued and owing
hereunder to it (including amounts accrued and owing pursuant to this Section
2.13) and (iii) the assignee Lender shall have executed and delivered an
Assignment and Acceptance in accordance with Section 9.04. Notwithstanding
anything in this Section 2.13(c) to the contrary, the Borrower shall not be
entitled to require an assignment under this Section 2.13(c) with respect to any
Lender or the Issuing Bank if, prior to any such requirement, such Lender or the
Issuing Bank, as the case may be, shall have taken any action under Section
2.13(e) so as to eliminate the continued incurrence of the costs in respect of
which payment was demanded.
(d) Failure on the part of any Lender or the Issuing Bank to
demand compensation for any increased costs or reduction in amounts received or
receivable or reduction in return on capital with respect to any period shall
not constitute a waiver of such Lender's or the Issuing Bank's right to demand
such compensation with respect to such period or any other period, except that
none of any Lender or the Issuing Bank shall be entitled to compensation under
this Section 2.13 for any costs incurred or reduction suffered with respect to
any date unless such Lender or the Issuing Bank, as applicable, shall have
notified the Borrower that it will demand compensation for such costs or
reductions under paragraph (c) above, not more than six months after the later
of (i) such date and (ii) the earlier of the date on which such Lender or the
Issuing Bank, as applicable, shall have become aware or should have become aware
of such costs or reduction. The protection of this Section 2.13 shall be
available to each Lender and the Issuing Bank regardless of any possible
contention of the invalidity or inapplicability of the law, rule, regulation,
guideline or other change or condition that shall have occurred or been imposed.
(e) Each Lender will, at the request of the Borrower, either
designate a different lending office or transfer its Loans to an Affiliate of
such Lender if such designation or transfer, as the case may be, (i) would avoid
the need for, or minimize the amount of, any compensation to which such Lender
is entitled pursuant to this Section 2.13 and (ii) would not, in the sole
judgment of such Lender, be otherwise disadvantageous to such Lender in any
material respect.
<PAGE> 50
SECTION 2.14. Change in Legality. (a) Notwithstanding any
other provision of this Agreement, if, after the Closing Date, any change in any
law or regulation or in the interpretation thereof by any Governmental Authority
charged with the administration or interpretation thereof shall make it unlawful
for any Lender to make or maintain any Eurodollar Loan or to give effect to its
obligations as contemplated hereby with respect to any Eurodollar Loan, then, by
written notice to the Borrower and to the Administrative Agent such Lender may:
(i) declare that Eurodollar Loans 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),
whereupon any request for a Eurodollar Borrowing (or to convert an ABR
Borrowing to a Eurodollar Borrowing or to continue a Eurodollar
Borrowing for an additional Interest Period) shall, as to such Lender
only, be deemed a request for an ABR Loan (or request to continue an
ABR Loan as such for an additional Interest Period or to convert a
Eurodollar Loan into an ABR Loan, as the case may be), unless such
declaration shall be subsequently withdrawn); and
(ii) require that all outstanding Eurodollar Loans made by it
be converted to ABR Loans, in which event all such Eurodollar Loans
shall be automatically converted to ABR Loans as of the effective date
of such notice as provided in paragraph (b) below.
In the event any Lender shall exercise its rights under clause (i) or (ii)
above, all payments and prepayments of principal that would otherwise have been
applied to repay the Eurodollar Loans that would have been made by such Lender
or the converted Eurodollar 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 Eurodollar Loans.
(b) For purposes of this Section 2.14, a notice to the
Borrower by any Lender shall be effective as to each Eurodollar Loan, if lawful,
on the last day of the Interest Period currently applicable to such Eurodollar
Loan; in all other cases such notice shall be effective on the date of receipt
by the Borrower.
(c) The Borrower, at its expense, at any time within 180 days
after the delivery of such notice, so long as no Event of Default shall have
occurred and be continuing, may require such Lender to assign in accordance with
the provisions of Section 9.04, at par plus accrued interest, without recourse
or warranty and pursuant to an Assignment and Acceptance, its rights and
obligations hereunder to a financial institution specified by the Borrower that
is willing to accept an assignment of such rights and
<PAGE> 51
obligations on the terms hereof and that is reasonably acceptable to the
Administrative Agent; provided, however, that (i) such assignment shall not
conflict with or violate any law or regulation applicable to or binding on such
Lender, (ii) the Borrower shall have paid to the assigning Lender all amounts
(other than interest) accrued and owing hereunder to it and (iii) the assignee
Lender shall have executed and delivered an Assignment and Acceptance in
accordance with Section 9.04. Notwithstanding anything in this Section 2.14(c)
to the contrary, the Borrower shall not be entitled to require an assignment
under this Section 2.14(c) with respect to any Lender if, prior to any such
requirement, such Lender shall have taken any action under Section 2.14(d) so as
to terminate such unlawfulness.
(d) Each Lender will, at the request of the Borrower, either
designate a different lending office or transfer its Loans to an Affiliate of
such Lender if such designation or transfer, as the case may be, (i) would
permit such Lender or Affiliate to make and maintain Eurodollar Loans and (ii)
would not, in the sole judgment of such Lender, be otherwise disadvantageous to
such Lender in any material respect.
SECTION 2.15. Indemnity. The Borrower will indemnify each
Lender against any loss or expense that such Lender may sustain or incur as a
consequence of (a) any failure by the Borrower to fulfill on the date of any
proposed Borrowing the applicable conditions set forth in Article IV or, with
respect to Borrowings to be made upon effectiveness of the Amendment Agreement,
in the Amendment Agreement, (b) any failure by the Borrower to borrow or to
refinance, convert or continue any Eurodollar Loan hereunder after irrevocable
notice of such borrowing, refinancing, conversion or continuation has been given
pursuant to Section 2.03 or 2.10, (c) any payment, prepayment or conversion of a
Eurodollar Loan required by any other provision of this Agreement or otherwise
made or deemed made on a date other than the last day of the Interest Period
applicable thereto, including, in each such case, any loss or reasonable expense
sustained or incurred or to be sustained or incurred in liquidating or
redeploying deposits from third parties acquired to effect or maintain such Loan
or any part thereof as a Eurodollar Loan. Such loss or reasonable expense shall
be equal to the sum of (a) such Lender's actual costs and expenses incurred
(other than any lost profits) in connection with, or by reason of, any of the
foregoing events and (b) an amount equal to the excess, if any, as reasonably
determined by such Lender of (i) its cost of obtaining the funds for the Loan
being paid, prepaid, converted or not borrowed, converted or continued (assumed
to be the Adjusted LIBO Rate applicable thereto) for the period from and
including the date of such payment, prepayment, conversion or failure to borrow,
convert or continue to but excluding the last day of the Interest Period for
such Loan (or in the case of a failure to borrow, convert or continue, the
Interest Period for such Loan that would have commenced on the date of such
failure) over (ii) the amount of interest (as reasonably determined by such
Lender) that would be realized by such Lender in redeploying the funds so paid,
prepaid, converted or not borrowed, converted or continued for such period or
Interest Period, as the case may be. A certificate of any Lender setting forth
any amount or amounts that such Lender is entitled to receive pursuant to this
Section 2.15 shall be delivered to the Borrower and shall be conclusive absent
manifest error.
<PAGE> 52
Without prejudice to the survival of any other agreement contained herein, the
agreements and obligations contained in this Section 2.15 shall survive the
payment in full of the principal of and interest hereunder or any Loan Document.
SECTION 2.16. Pro Rata Treatment. Except as required under
Section 2.14, each Borrowing, each payment or prepayment of principal of any
Borrowing, each payment of interest on the Loans, each payment of the Commitment
Fees, each payment of the L/C Participation Fees, each reduction of the
Commitments and each refinancing of any Borrowing with, conversion of any
Borrowing to or continuation of any Borrowing as a Borrowing of any Type shall
be allocated pro rata among the Lenders in accordance with their respective
applicable Commitments (or, if such Commitments shall have expired or been
terminated, in accordance with the respective principal amounts of their
applicable outstanding Loans). For purposes of determining the available
Revolving Credit Commitments of the Lenders at any time, each outstanding
Swingline Loan shall be deemed to have utilized the Revolving Credit Commitments
of the Lenders pro rata in accordance with such respective Revolving Credit
Commitments. Each Lender agrees that in computing such Lender's portion of any
Borrowing to be made hereunder, the Administrative Agent may, in its discretion,
round each Lender's percentage of such Borrowing, computed in accordance with
Section 2.01, to the next higher or lower whole Dollar amount.
SECTION 2.17. Sharing of Setoffs. Each Lender agrees that if
it shall, through the exercise of a right of banker's lien, setoff or
counterclaim against the Borrower, or pursuant to a secured claim under Section
506 of Title 11 of the United States Code or other security or interest arising
from, or in lieu of, such secured claim, received by such Lender under any
applicable bankruptcy, insolvency or other similar law or otherwise, or by any
other means, obtain payment (voluntary or involuntary) in respect of any Loan or
Loans or L/C Disbursement as a result of which the unpaid principal portion of
its Loans and participations in L/C Disbursements shall be proportionately less
than the unpaid principal portion of the Loans and participations in L/C
Disbursements of any other Lender, it shall be deemed simultaneously to have
purchased from such other Lender at face value, and will promptly pay to such
other Lender the purchase price for, a participation in the Loans and L/C
Exposure of such other Lender, so that the aggregate unpaid principal amount of
the Loans and L/C Exposure and participations in Loans and L/C Exposure held by
each Lender shall be in the same proportion to the aggregate unpaid principal
amount of all Loans and L/C Exposure then outstanding as the principal amount of
such Lender's Loans and L/C Exposure prior to such exercise of banker's lien,
setoff or counterclaim or other event was to the principal amount of all Loans
and L/C Exposure outstanding prior to such exercise of banker's lien, setoff or
counterclaim or other event; provided, however, that, if any such purchase or
purchases or adjustments shall be made pursuant to this Section and the payment
giving rise thereto shall thereafter be recovered, such purchase or purchases or
adjustments shall be rescinded to the extent of such recovery and the purchase
price or prices or adjustment restored without interest. The Borrower expressly
consents to the foregoing arrangements and agrees that any Lender holding a
participation in a Loan or L/C
<PAGE> 53
Disbursement deemed to have been so purchased may exercise any and all rights of
banker's lien, setoff or counterclaim with respect to any and all moneys owing
by the Borrower to such Lender by reason thereof as fully as if such Lender had
made a Loan directly to the Borrower in the amount of such participation.
SECTION 2.18. Payments. (a) The Borrower shall make each
payment (including principal of or interest on any Borrowing or any L/C
Disbursement or any Fees or other amounts) hereunder and under any other Loan
Document not later than 12:00 (noon), New York City time, on the date when due
in immediately available funds without setoff, counterclaim, withholding or
deduction of any kind. Each such payment (other than (i) Issuing Bank Fees,
which shall be paid directly to the Issuing Bank, and (ii) principal of and
interest on Swingline Loans, which shall be paid directly to the Swingline
Lender except as otherwise provided in Section 2.20(e)) shall be made to the
Administrative Agent at its offices at 270 Park Avenue, New York, New York. Each
such payment shall be made in Dollars.
(b) Whenever any payment (including principal of or interest
on any Borrowing or any Fees or other amounts) hereunder or under any other Loan
Document shall become due, or otherwise would occur, on a day that is not a
Business Day, such payment may be made on the next succeeding Business Day, and
such extension of time shall in such case be included in the computation of
interest or Fees, if applicable.
SECTION 2.19. Taxes. (a) Any and all payments by the Borrower
hereunder shall be made, in accordance with Section 2.18, free and clear of and
without deduction for any and all current or future taxes, levies, imposts,
deductions, charges or withholdings, and all liabilities with respect thereto,
excluding (i) taxes imposed on the net income of any Agent, the Issuing Bank or
any Lender (or any transferee or assignee thereof, including a participation
holder (any such entity being called a "Transferee")) and (ii) franchise taxes
imposed on the net income of any Agent, the Issuing Bank or any Lender (or
Transferee) by (A) the United States or (B) any jurisdiction under the laws of
which the Agents, the Issuing Bank or any such Lender (or Transferee) is
organized or has its principal office or lending office (or political
subdivision or taxing authority thereof or therein) (all such nonexcluded taxes,
levies, imposts, deductions, charges, withholdings and liabilities being
hereinafter referred to as "Non-Excluded Taxes"). If any Non-Excluded Taxes are
required to be deducted from or in respect of any sum payable hereunder to any
Lender (or any Transferee), any Agent or the Issuing Bank, (i) the sum payable
shall be increased by the amount (an "additional amount") necessary so that
after making all required deductions (including deductions applicable to
additional sums payable under this Section 2.19) such Lender (or Transferee),
such Agent or the Issuing Bank (as the case may be) shall receive an amount
equal to the sum it would have been received had no such deductions been made,
(ii) the Borrower shall make such deductions and (iii) the Borrower shall pay
the full amount deducted to the relevant taxing authority or other Governmental
Authority in accordance with applicable law.
<PAGE> 54
(b) In addition, the Borrower agrees to pay any current or
future stamp, intangible or documentary taxes or any other excise or property
taxes, charges or similar levies (including mortgage recording taxes and similar
fees), together with interest, penalties and fees, that arise from any payment
made hereunder or from the execution, delivery or registration of, or otherwise
with respect to, this Agreement, any Assignment and Acceptance entered into at
the request of the Borrower or any other Loan Document (hereinafter referred to
as "Other Taxes").
(c) The Borrower will indemnify each Lender (or Transferee),
each Agent and the Issuing Bank for the full amount of Non-Excluded Taxes and
Other Taxes paid by such Lender (or Transferee) or Agent or the Issuing Bank, as
the case may be, and any liability (including penalties, interest and expenses)
arising therefrom or with respect thereto, whether or not such Non-Excluded
Taxes or Other Taxes were correctly or legally asserted by the relevant taxing
authority or other Governmental Authority. Such indemnification shall be made
within 30 days after the date any Lender (or Transferee) any Agent or the
Issuing Bank, as the case may be, makes written demand therefor. If a Lender (or
Transferee) or Agent or the Issuing Bank shall become aware that it is entitled
to receive a refund in respect of Non-Excluded Taxes or Other Taxes as to which
it has been indemnified by the Borrower pursuant to this Section 2.19, it shall
promptly notify the Borrower of the availability of such refund and shall,
within 30 days after receipt of a request by the Borrower, apply for such refund
at the Borrower's expense. If any Lender (or Transferee), any Agent or the
Issuing Bank receives a refund in respect of any Non-Excluded Taxes or Other
Taxes as to which it has been indemnified by the Borrower pursuant to this
Section 2.19, it shall promptly notify the Borrower of such refund and shall,
within 15 days of receipt, repay such refund to the Borrower, net of all
out-of-pocket expenses of such Lender, such Agent or the Issuing Bank and
without any interest (other than the interest, if any, included in such refund);
provided, however, that the Borrower, upon the request of such Lender (or
Transferee), any Agent or the Issuing Bank, agrees to return such refund (plus
penalties, interest or other charges) to such Lender (or Transferee), any Agent
or the Issuing Bank in the event such Lender (or Transferee) or Agent or the
Issuing Bank is required to repay such refund.
(d) Within 30 days after the date of any payment of
Non-Excluded Taxes or Other Taxes withheld by the Borrower in respect of any
payment to any Lender (or Transferee), any Agent or the Issuing Bank, the
Borrower will furnish to the Administrative Agent, at its address referred to in
Section 9.01, the original or a certified copy of a receipt evidencing payment
thereof or other evidence reasonably satisfactory to such Lender (or
Transferee), such Agent or the Issuing Bank, as the case may be.
(e) Without prejudice to the survival of any other agreement
contained herein, the agreements and obligations contained in this Section 2.19
shall survive the payment in full of the principal of and interest hereunder or
any Loan Document.
<PAGE> 55
(f) Any Agent, any Issuing Bank and any Lender (or Transferee)
that itself is not incorporated under the laws of the United States of America
or a state thereof or that is lending from a lending office not located within
the United States of America or a state thereof (a "Non-U.S. Lender") shall
deliver to the Borrower and the Agent two copies of either United States
Internal Revenue Service Form 1001 or Form 4224, or, in the case of a Non-U.S.
Lender claiming exemption from U.S. Federal withholding tax under Section 871(h)
or 881(c) of the Code with respect to payments of "portfolio interest", a Form
W-8, or any subsequent versions thereof or successors thereto (and, if such
Non-U.S. Lender delivers a Form W-8, a certificate representing that such
Non-U.S. Lender (i) is not a bank for purposes of Section 881(c) of the Code, is
not subject to regulatory or other legal requirements as a bank in any
jurisdiction, has not been treated as a bank for purposes of any tax, securities
law or other filing or submission made to any governmental authority, any
application made to a rating agency or qualification for any exemption from tax,
securities law or other legal requirements, (ii) is not a 10-percent shareholder
(within the meaning of Section 871(h)(3)(B) of the Code) of the Borrower, (iii)
is not a controlled foreign corporation related to the Borrower (within the
meaning of Section 864(d)(4) of the Code) and (iv) is not acting as a conduit
entity (within the meaning of proposed U.S. Treasury Regulation Section 1.881-3
and any successor thereto and any other regulations promulgated under the
authority of Section 7701(1) of the Code)), properly completed and duly executed
by such Non-U.S. Lender claiming complete exemption from, or reduced rate of,
United States Federal withholding tax on payments by the Borrower under this
Agreement and the other Loan Documents. Such forms shall be delivered by each
Non-U.S. Lender on or before the date it becomes a party to this Agreement (or,
in the case of a Transferee that is a participation holder, on or before the
date such participation holder becomes a Transferee hereunder) and on or before
the date, if any, such Non-U.S. Lender changes its applicable lending office by
designating a different lending office (a "New Lending Office"). In addition,
each Non-U.S. Lender shall deliver such forms promptly upon the obsolescence or
invalidity of any form previously delivered by such Non-U.S. Lender.
Notwithstanding any other provision of this Section 2.19(f), a Non-U.S. Lender
shall not be required to deliver any form pursuant to this Section 2.19(f) that
such Non-U.S. Lender is not legally able to deliver.
(g) The Borrower shall not be required to indemnify any
Non-U.S. Lender, or to pay any additional amounts to any Non-U.S. Lender, in
respect of United States Federal withholding tax pursuant to paragraph (a) or
(c) above to the extent that (i) the obligation to withhold amounts with respect
to United States Federal withholding tax existed on the date such Non-U.S.
Lender became a party to this Agreement (or, in the case of a Transferee that is
a participation holder, on the date such participation holder became a
Transferee hereunder) or, with respect to payments to a New Lending Office, the
date such Non-U.S. Lender designated such New Lending Office with respect to a
Loan; provided, however, that this clause (i) shall not apply to any Transferee
or New Lending Office that becomes a Transferee or new Lending Office as a
result of an assignment, participation, transfer or designation made at the
request of the Borrower; and provided further, however,
<PAGE> 56
that this clause (i) shall not apply to the extent that the indemnity payment or
additional amounts any Transferee, or Lender (or Transferee) through a New
Lending Office, would be entitled to receive (without regard to this clause (i))
do not exceed the indemnity payment or additional amounts that the person making
the assignment, participation or transfer to such Transferee, or Lender (or
Transferee) making the designation of such New Lending Office, would have been
entitled to receive in the absence of such assignment, participation, transfer
or designation or (ii) the obligation to pay such additional amounts would not
have arisen but for a failure by such Non-U.S. Lender to comply with the
provisions of paragraph (f) above.
(h) Any Agent, Issuing Bank or Lender (or Transferee) claiming
any additional amounts payable pursuant to this Section 2.19 will use reasonable
efforts (consistent with legal and regulatory restrictions) (including
reasonable efforts to change the jurisdiction of its applicable lending office
or to transfer its Loans to an Affiliate of such Lender) to avoid the need for
or reduce the amount of any such additional amounts that may thereafter accrue;
provided, however, that such efforts would not, in the sole determination of
such Lender (or Transferee), Agent or Issuing Bank as the case may be, be
otherwise disadvantageous to such Lender (or Transferee), Agent or Issuing Bank
in any material respect. In addition, the Borrower, at its expense, at any time
within 180 days after receipt of notice that additional amounts are payable
under this Section 2.19, so long as no Event of Default shall have occurred and
be continuing, may require the Issuing Bank or such Lender, as the case may be,
to assign in accordance with the provisions of Section 9.04, at par plus accrued
interest, without recourse or warranty and pursuant to an Assignment and
Acceptance, its rights and obligations hereunder to a financial institution
specified by the Borrower that is willing to accept an assignment of such rights
and obligations on the terms hereof and is reasonably acceptable to the Agent;
provided, however, that (i) such assignment shall not conflict with or violate
any law or regulation applicable to or binding on such Agent, Issuing Bank or
Lender, as applicable, (ii) the Borrower shall have paid to the assigning Lender
all amounts (other than interest) accrued and owing hereunder to it (including
amounts accrued and owing pursuant to this paragraph (h)) and (iii) the assignee
Lender shall have executed and delivered an Assignment and Acceptance in
accordance with Section 9.04. Notwithstanding anything in this paragraph (h) to
the contrary, the Borrower shall not be entitled to require an assignment under
this paragraph (h) with respect to the Issuing Bank or any Lender if, prior to
any such requirement, the Issuing Bank or such Lender, as applicable, shall have
taken any action under the first sentence of this paragraph (h) so as to
eliminate the continued need for payment of additional amounts under this
Section 2.19.
(i) Nothing contained in this Section 2.19 shall require any
Lender (or Transferee), any Agent or the Issuing Bank to make available any of
its tax returns (or any other information relating to its taxes that it deems to
be confidential).
<PAGE> 57
SECTION 2.20. Swingline Loans. (a) Swingline Commitment. On
the terms and subject to the conditions and relying upon the representations and
warranties herein set forth, the Swingline Lender agrees to continue Existing
Swingline Loans and to make loans to the Borrower at any time and from time to
time on and after the Effective Date and until the earlier of the Revolving
Credit Maturity Date and the termination of the Revolving Credit Commitments in
accordance with the terms hereof, in an aggregate principal amount at any time
outstanding that will not result in (i) the aggregate principal amount of all
Swingline Loans exceeding $5,000,000 in the aggregate or (ii) the Aggregate
Revolving Credit Exposure, after giving effect to any Swingline Loan, exceeding
the Total Revolving Credit Commitment. Each Swingline Loan shall be in a
principal amount that is an integral multiple of $250,000. The Swingline
Commitment may be terminated or reduced from time to time as provided herein.
Within the foregoing limits, the Borrower may borrow, pay or prepay and reborrow
Swingline Loans hereunder, on and after the Effective Date and prior to the
Revolving Credit Maturity Date, subject to the terms, conditions and limitations
set forth herein.
(b) Swingline Loans. The Borrower shall notify the
Administrative Agent by telephone (promptly confirmed in writing), not later
than 12:00 (noon), New York City time, on the day of a proposed Swingline Loan.
Such notice shall be delivered on a Business Day, shall be irrevocable and shall
refer to this Agreement and shall specify the requested date (which shall be a
Business Day) and amount of such Swingline Loan. The Administrative Agent will
promptly advise the Swingline Lender of any notice received from the Borrower
pursuant to this paragraph (b). The Swingline Lender will make each Swingline
Loan available to the Borrower by means of a credit to the general deposit
account of the Borrower with the Swingline Lender by 3:00 p.m. on the date such
Swingline Loan is so requested.
(c) Prepayment. The Borrower shall have the right at any time
and from time to time to prepay any Swingline Loan, in whole or in part, upon
giving telephonic notice (promptly confirmed in writing) to the Swingline Lender
and to the Administrative Agent before 12:00 (noon), New York City time on the
date of prepayment at the Swingline Lender's address for notices specified on
Schedule 2.01. Any prepayment in part of a Swingline Loan shall be in an amount
that is an integral multiple of $250,000. All principal payments of Swingline
Loans shall be accompanied by accrued interest on the principal amount being
repaid to but excluding the date of payment.
(d) Interest. Each Swingline Loan shall be an ABR Loan and,
subject to the provisions of Section 2.07, shall bear interest as provided in
Section 2.06(a).
(e) Participations. The Swingline Lender may by written notice
given to the Administrative Agent not later than 12:00 (noon), New York City
time, on any Business Day require the Revolving Credit Lenders to acquire
participations in all or a portion of the Swingline Loans outstanding. Such
notice shall specify the aggregate amount of Swingline Loans in which Revolving
Credit Lenders shall participate. The Administrative Agent will, promptly upon
receipt of such notice, give notice to each Revolving Credit
<PAGE> 58
Lender, specifying in such notice such Lender's Pro Rata Percentage of such
Swingline Loan or Loans. In consideration and in furtherance of the foregoing,
each Revolving Credit Lender hereby absolutely and unconditionally agrees, upon
receipt of notice as provided above, to pay to the Administrative Agent, for the
account of the Swingline Lender, such Revolving Credit Lender's Pro Rata
Percentage of such Swingline Loan or Loans. Each Lender acknowledges and agrees
that its obligation to acquire participations in Swingline Loans pursuant to
this paragraph (e) is absolute and unconditional and shall not be affected by
any circumstance whatsoever, including the occurrence and continuance of a
Default or an Event of Default, and that each such payment shall be made without
any offset, abatement, withholding or reduction whatsoever. Each Lender shall
comply with its obligation under this paragraph by wire transfer of immediately
available funds, in the same manner as provided in Section 2.02(c) with respect
to Loans made by such Lender (and Section 2.02(c) shall apply, mutatis mutandis,
to the payment obligations of the Lenders) and the Administrative Agent shall
promptly pay to the Swingline Lender amounts so received by it from the Lenders.
The Administrative Agent shall notify the Borrower 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 Swingline Lender. Any amounts received by the Swingline Lender from the
Borrower (or other party on behalf of the Borrower) in respect of a Swingline
Loan after receipt by the 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 Lenders that shall have made their payments
pursuant to this paragraph and to the Swingline Lender, as their interests may
appear. The purchase of participations in a Swingline Loan pursuant to this
paragraph (e) shall not relieve the Borrower (or other party liable for
obligations of the Borrower) of its default in respect of the payment thereof.
SECTION 2.21. Letters of Credit. (a) General. Subject to the
terms and conditions and relying upon the representations and warranties herein
set forth, (i) each of the Existing Letters of Credit shall, upon the initial
funding of Loans on the Closing Date and without any further action on the part
of the Issuing Bank or any other Person, be deemed for all purposes to have been
issued by the Issuing Bank on the Closing Date as a Letter of Credit hereunder
and (ii) the Issuing Bank agrees to continue the Letters of Credit outstanding
on the Effective Date. The Borrower may request the issuance of a Letter of
Credit, in a form reasonably acceptable to the Administrative Agent and the
Issuing Bank, appropriately completed, for the account of the Borrower, at any
time and from time to time on and after the Effective Date while the Revolving
Credit Commitments remain in effect and, subject to the terms and conditions
hereof and relying upon the representations and warranties herein set forth, the
Issuing Bank hereby agrees to issue Letters of Credit as requested at any time
and from time to time on or after the Effective Date and until the earlier of
(i) the termination of the Revolving Credit Commitments of all Lenders in
accordance with the terms hereof and (ii) the fifth day prior to the Revolving
Credit Maturity Date. This Section 2.21 shall not be construed to impose an
obligation upon the Issuing Bank to issue any Letter of Credit that is
inconsistent with the terms and conditions of this Agreement.
<PAGE> 59
(b) Notice of Issuance, Amendment, Renewal, Extension; Certain
Conditions. In order to request the issuance of a Letter of Credit (or to amend,
renew or extend an existing Letter of Credit), the Borrower shall hand deliver
or telecopy to the Issuing Bank 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) below), the amount and currency of such
Letter of Credit, the name and address of the beneficiary thereof and such other
information as shall be necessary to prepare such Letter of Credit. Following
receipt of such notice and prior to the issuance of the requested Letter of
Credit or the applicable amendment, renewal or extension, the Administrative
Agent shall notify the Borrower and the Issuing Bank of the amount of the
Aggregate Revolving Credit Exposure after giving effect to (i) the issuance,
amendment, renewal or extension of such Letter of Credit, (ii) the issuance or
expiration of any other Letter of Credit that is to be issued or will expire
prior to the requested date of issuance of such Letter of Credit and (iii) the
borrowing or repayment of any Revolving Credit Loans or Swingline Loans that
(based upon notices delivered to the Administrative Agent by the Borrower) are
to be borrowed or repaid prior to the requested date of issuance of such 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 Borrower shall be deemed to represent and warrant that, after giving effect
to such issuance, amendment, renewal or extension (i) the L/C Exposure shall not
exceed $50,000,000, (ii) the Aggregate Revolving Credit Exposure shall not
exceed the Total Revolving Credit Commitment and (iii) the Alternate Currency
L/C Exposure shall not exceed $25,000,000. Compliance with clause (ii) of the
preceding sentence shall be determined based upon the assumption that (A) each
Letter of Credit remains outstanding and undrawn in accordance with its terms
until its expiration date (taking into account any rights of renewal or
extension that do not require written notice by or consent of the Issuing Bank,
in its sole discretion, in order to effect such renewal or extension) and (B)
the Revolving Credit Commitments shall not be reduced voluntarily pursuant to
Section 2.09(b).
(c) Expiration Date. The Borrower may elect that Letters of
Credit which represent up to $25,000,000 in the aggregate of the L/C Exposure
shall expire on the date that is five Business Days prior to the Revolving
Credit Maturity Date, unless such Letters of Credit expire by their terms on an
earlier date. Each of the remaining Letters of Credit shall expire at the close
of business on the earlier of the first anniversary of issuance and the date
that is five Business Days prior to the Revolving Credit Maturity Date, unless
such Letter of Credit expires by its terms on an earlier date, provided that any
Letter of Credit with a one-year term may provide for the renewal thereof for
additional one-year periods (which shall in no event extend beyond the date that
is five Business Days prior to the Revolving Credit Maturity Date).
<PAGE> 60
(d) Participations. By the issuance (or in the case of the
Existing Letters of Credit, deemed issuance) of a Letter of Credit and without
any further action on the part of the Issuing Bank or the Lenders, the Issuing
Bank hereby grants to each Lender, and each such Lender hereby acquires from the
applicable Issuing Bank, a participation in such Letter of Credit equal to such
Lender's Pro Rata Percentage of the aggregate amount available to be drawn under
such Letter of Credit, effective upon the issuance of such Letter of Credit. In
consideration and in furtherance of the foregoing, each Lender hereby absolutely
and unconditionally agrees to pay to the Administrative Agent, for the account
of the Issuing Bank, such Lender's Pro Rata Percentage of each L/C Disbursement
(or, the case of an L/C Disbursement denominated in an Alternative Currency,
such Lender's Pro Rata Percentage of the Assigned Dollar Value of such L/C
Disbursement) made by the Issuing Bank and not reimbursed by the Borrower (or,
if applicable, another party pursuant to its obligations under any other Loan
Document) forthwith on the date due as provided in Section 2.02(f). Each Lender
acknowledges and agrees that its obligation to acquire participations pursuant
to this paragraph (d) in respect of Letters of Credit is absolute and
unconditional and shall not be affected by any circumstance whatsoever,
including the occurrence and continuance of a Default or an Event of Default,
and that each such payment shall be made without any offset, abatement,
withholding or reduction whatsoever; provided, however, that no Lender shall be
required to make any such payment with respect to any wrongful payment or
disbursement made under any Letter of Credit as a result of the gross negligence
or wilful misconduct of the Issuing Bank.
(e) Reimbursement. If the Issuing Bank shall make any L/C
Disbursement in respect of a Letter of Credit, the Borrower shall pay to the
Administrative Agent, not later than three hours after the Borrower shall have
received notice from the Issuing Bank that payment of such draft will be made,
or, if the Borrower shall have received such notice later than 2:00 p.m., New
York City time, on any Business Day, not later than 10:00 a.m., New York City
time, on the immediately following Business Day an amount equal to such L/C
Disbursement (or, in the case of an L/C Disbursement denominated in an
Alternative Currency, the Assigned Dollar Value of such L/C Disbursement).
(f) Obligations Absolute. The Borrower's obligations to
reimburse L/C Disbursements as provided in paragraph (e) above 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;
(ii) any amendment or waiver of or any consent to departure
from all or any of the provisions of any Letter of Credit made with the
consent of the Borrower;
<PAGE> 61
(iii) the existence of any claim, setoff, defense or other
right that the Borrower, any other party guaranteeing, or otherwise
obligated with, the Borrower, any Subsidiary or other Affiliate thereof
or any other Person may at any time have against the beneficiary under
any Letter of Credit, the Issuing Bank, the Administrative Agent or any
Lender or any other Person, whether in connection with this Agreement,
any other Loan Document or any other related or unrelated agreement or
transaction;
(iv) any draft or other document presented under a Letter of
Credit proving to be forged, fraudulent, invalid or insufficient in any
respect or any statement therein being untrue or inaccurate in any
respect; provided, however, that payment by the Issuing Bank under such
Letter of Credit against presentation of such draft or document shall
not have constituted gross negligence or wilful misconduct of the
Issuing Bank;
(v) payment by the 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; provided, however, that
payment by the Issuing Bank under such Letter of Credit against
presentation of such draft or document shall not have constituted gross
negligence or wilful misconduct of the Issuing Bank; and
(vi) any other act or omission to act or delay of any kind of
the Issuing Bank, the Lenders, the Administrative Agent or any other
Person or 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 the
Borrower's obligations hereunder; provided, however, that such other
act, omission or delay shall not constitute gross negligence or wilful
misconduct of the Issuing Bank.
It is understood that in making any payment under any Letter
of Credit (i) the Issuing Bank's exclusive reliance on the documents presented
to it under such Letter of Credit as to any and all matters set forth therein,
including reliance on the amount of any draft presented under such Letter of
Credit, whether or not the amount due to the beneficiary thereunder equals the
amount of such draft and whether or not any document presented pursuant to such
Letter of Credit proves to be insufficient in any respect, if such document on
its face appears to be in order, and whether or not any other statement or any
other document presented pursuant to such Letter of Credit proves to be forged
or invalid or any statement therein proves to be inaccurate or untrue in any
respect whatsoever and (ii) any noncompliance in any immaterial respect of the
documents presented under such Letter of Credit with the terms thereof shall, in
each case, be deemed not to constitute wilful misconduct or gross negligence of
the Issuing Bank.
<PAGE> 62
(g) Disbursement Procedures. The Issuing Bank shall, promptly
following its receipt thereof, examine all documents purporting to represent a
demand for payment under a Letter of Credit. The Issuing Bank shall as promptly
as possible give telephonic notification, confirmed by telecopy, to the
Administrative Agent and the Borrower of such demand for payment and whether the
Issuing Bank has made or will make an L/C Disbursement thereunder; provided,
however, that any failure to give or delay in giving such notice shall not
relieve the Borrower of its obligation to reimburse the Issuing Bank and the
Lenders with respect to any such L/C Disbursement. The Administrative Agent
shall promptly give each Lender notice thereof.
(h) Interim Interest. If the Issuing Bank shall make any L/C
Disbursement in respect of a Letter of Credit, then, unless the Borrower shall
reimburse such L/C Disbursement in full on such date, the unpaid amount thereof
shall bear interest for the account of the Issuing Bank, for each day from and
including the date of such L/C Disbursement, to but excluding the earlier of the
date of payment or the date on which interest shall commence to accrue thereon
as provided in paragraph (e) above, at the rate per annum that would apply to
such amount if such amount were an ABR Loan.
(i) Resignation or Removal of the Issuing Bank. The Issuing
Bank may resign at any time by giving 180 days' prior written notice to the
Administrative Agent, the Lenders and the Borrower, and may be removed at any
time by the Borrower by notice to the Issuing Bank, the Administrative Agent and
the Lenders. Subject to this paragraph (i), upon the acceptance of any
appointment as the Issuing Bank hereunder by a successor Issuing Bank, such
successor shall succeed to and become vested with all the interests, rights and
obligations of the retiring Issuing Bank and the retiring Issuing Bank shall be
discharged from its obligations to issue additional Letters of Credit hereunder.
At the time such removal or resignation shall become effective, the Borrower
shall pay all accrued and unpaid fees pursuant to Section 2.05(d)(ii). The
acceptance of any appointment as the Issuing Bank hereunder by a successor
Lender shall be evidenced by an agreement entered into by such successor, in a
form satisfactory to the Borrower and the Administrative Agent, and, from and
after the effective date of such agreement, (i) such successor Lender shall have
all the rights and obligations of the previous Issuing Bank under this Agreement
and the other Loan Documents and (ii) references herein and in the other Loan
Documents 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 resignation or removal of the
Issuing Bank hereunder, the retiring Issuing Bank shall remain a party hereto
and shall continue to have all the rights and obligations of an Issuing Bank
under this Agreement and the other Loan Documents with respect to Letters of
Credit issued by it prior to such resignation or removal, but shall not be
required to issue additional Letters of Credit.
(j) Cash Collateralization. If any Event of Default shall
occur and be continuing, the Borrower shall, on the Business Day it receives
notice from the Administrative Agent or the Required Lenders (or, if the
maturity of the Loans has been accelerated, Revolving Credit Lenders holding
participations in outstanding Letters of Credit
<PAGE> 63
representing greater than 50% of the aggregate undrawn amount (or Assigned
Dollar Value as of the date of such acceleration) of all outstanding Letters of
Credit) of (i) such Event of Default and (ii) the amount to be deposited,
deposit in an account with the Collateral Agent, for the benefit of the
Revolving Credit Lenders, an amount in cash equal to the L/C Exposure as of such
date. Such deposit shall be held by the Collateral Agent as collateral for the
payment and performance of the Obligations. The Collateral 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 in Permitted Investments, which investments shall be made at the option
and sole discretion of the Collateral Agent, such deposits shall not bear
interest. Interest or profits, if any, on such investments shall accumulate in
such account. Moneys in such account shall (i) automatically be applied by the
Collateral Agent to reimburse the Issuing Bank for L/C Disbursements for which
it has not been reimbursed, (ii) be held for the satisfaction of the
reimbursement obligations of the Borrower for the L/C Exposure at such time and
(iii) if the maturity of the Loans has been accelerated (but subject to the
consent of Revolving Credit Lenders holding participations in outstanding
Letters of Credit representing greater than 50% of the aggregate undrawn amount
(or Assigned Dollar Value as of the date of such acceleration) of all
outstanding Letters of Credit), be applied to satisfy the Obligations. If the
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 the Borrower within three Business
Days after the earlier of (i) the date on which all Events of Default have been
cured or waived and (ii) the expiration and return to the Issuing Bank of all
outstanding Letters of Credit.
(k) Calculation Date Valuations. On each Calculation Date on
which there are outstanding any Letters of Credit denominated in an Alternative
Currency, the Administrative Agent shall determine, and shall promptly notify
the Borrower and the Revolving Credit Lenders of, the aggregate Assigned Dollar
Value of such Letters of Credit (which determination shall be conclusive in the
absence of manifest error). If, on any Calculation Date, the aggregate
Alternative Currency L/C Exposure exceeds $25,000,000, then the Borrower shall
deposit in an account with the Collateral Agent, for the benefit of the
Revolving Credit Lenders, an amount in cash in Dollars equal to such excess
(such amounts to be held and applied by the Collateral Agent in accordance with
the second through sixth sentences of Section 2.21(j) and to be released to the
Borrower to the extent of any reduction in such excess).
SECTION 2.22. Unavailability of ECU. If the Administrative
Agent at any time prior to the commencement of the third stage of EMU determines
(after consultation with the Lenders) that:
(a) the ECU has ceased to be utilized as the basic
accounting unit of the European Community;
<PAGE> 64
(b) for reasons affecting the market in ECU generally, the ECU
is not freely traded between banks internationally; or
(c) it is illegal, impossible or impracticable for payments to
be made hereunder in ECU,
then the Administrative Agent may, in its discretion but after consultation with
the Borrower and the Lenders, declare (such declaration to be binding on all the
parties hereto) that any payment made or to be made thereafter which, but for
this provision, would have been payable in ECU shall be made in a component
currency of the ECU or Dollars (as selected by the Administrative Agent after
consultation with the Borrower and the Lenders) (the "Selected Currency"). The
calculation of any amount to be paid in a Selected Currency shall be made by the
Administrative Agent on the date that such payment is due (or, if such day is
not a Business Day in the relevant Selected Currency, the next succeeding
Business Day). The amount of the Selected Currency shall be the equivalent on
the date that is the third Business Day prior to date of payment (the
"Measurement Date") of the components of the ECU when it was most recently used
in the European Monetary System, provided that if the ECU is being used by
public institutions of or within the European Community on the Measurement Date,
the Administrative Agent shall calculate the equivalent of such payment in the
Selected Currency by using the currency amounts that are components of the ECU
which are used by such public institutions on the Measurement Date.
ARTICLE III. REPRESENTATIONS AND WARRANTIES
The Borrower represents and warrants to each of the Lenders
that:
SECTION 3.01. Organization; Powers. The Borrower and each of
the Subsidiaries (a) is a corporation duly organized, validly existing and in
good standing under the laws of the jurisdiction of its organization, (b) has
all requisite power and authority to own its property and assets and to carry on
its business as now conducted and as proposed to be conducted, (c) is qualified
to do business and is in good standing in every jurisdiction where such
qualification is required, except where the failure so to qualify or be in good
standing would not result in a Material Adverse Effect, and (d) has the
corporate power and authority to execute, deliver and perform its obligations
under each of the Loan Documents and each other agreement or instrument
contemplated thereby to which it is or will be a party and, in the case of the
Borrower, to borrow hereunder. The ESOP (a) has been duly authorized, organized
and established by all necessary corporate action on the part of the Borrower
and (b) is a legal and valid employee stock ownership plan within the meaning of
Section 4975(e)(7) of the Code and Treasury Regulation Section 54.4975-11 and is
duly qualified under Section 401(a) of the Code.
<PAGE> 65
SECTION 3.02. Authorization. The execution, delivery and
performance by each Loan Party of each of the Loan Documents to which it is a
party and the borrowings hereunder, the creation of the security interests
contemplated thereby and the other transactions contemplated hereby and thereby
(a) have been duly authorized by all requisite corporate and, if required,
stockholder action and (b) will not (i) violate (A) any provision of law,
statute, rule or regulation, other than any law, statute, rule or regulation,
the violation of which will not result in a Material Adverse Effect, or of the
certificate or articles of incorporation or other constitutive documents or
by-laws of the Borrower or any Subsidiary, (B) any order of any Governmental
Authority or (C) any material provision of any material indenture, agreement or
other instrument to which the Borrower or any Subsidiary is a party or by which
any of them or any of their property (including the Mortgaged Properties) or
assets is or may be bound, (ii) be in conflict with, result in a breach of,
constitute (alone or with notice or lapse of time or both) a default under or
give rise to any right to accelerate any material obligation on the part of the
Borrower or any Subsidiary under any such indenture, agreement or other
instrument or (iii) result in the creation or imposition of any Lien (other than
any Lien created under the Security Documents) upon or with respect to any
property or assets now owned or hereafter acquired by the Borrower or any
Subsidiary.
SECTION 3.03. Enforceability. This Agreement has been duly
executed and delivered by the Borrower and constitutes, and each other Loan
Document when executed and delivered by the Borrower and each other Loan Party a
party thereto will constitute, a legal, valid and binding obligation of the
Borrower and such Loan Party enforceable against the Borrower and such Loan
Party in accordance with its terms, subject to bankruptcy, insolvency,
reorganization, fraudulent transfer, moratorium or other similar laws affecting
creditors' rights generally and to general principles of equity (regardless of
whether such enforceability is considered in a proceeding at law or in equity).
SECTION 3.04. Approvals. (a) No action, consent or approval
of, registration or filing with or any other action by any Governmental
Authority is or will be required in connection with the Transactions, except for
(i) the filing of Uniform Commercial Code financing statements and filings with
the United States Patent and Trademark Office and the United States Copyright
Office, (ii) recordation of the Mortgages and (iii) such as have been made or
obtained and are in full force and effect.
(b) No consent or authorization of any Person (other than any
Governmental Authority) is required in connection with the Transactions except
(i) such as have been obtained and are in full force and effect or (ii) such the
failure of which to obtain could not reasonably be expected to have a Material
Adverse Effect.
SECTION 3.05. Financial Statements. (a) The Borrower has
heretofore furnished to the Lenders its consolidated balance sheets and
statements of income and changes in financial condition as of and for the fiscal
years ended December 31, 1997, December 31, 1996, December 31, 1995, and
December 31, 1994, audited by and
<PAGE> 66
accompanied by the opinion of Arthur Andersen & Co., independent public
accountants. Such financial statements present fairly the financial condition
and results of operations of the Borrower and its consolidated subsidiaries as
of such dates and for such periods and were prepared in accordance with GAAP
applied on a consistent basis. Such balance sheets and the notes thereto
disclose all material liabilities, direct or contingent, of the Borrower and its
consolidated subsidiaries as of the dates thereof.
(b) The Borrower has heretofore furnished to the Lenders an
unaudited pro forma consolidated balance sheet as of December 31, 1998, which
was prepared giving effect to the Rockwell Acquisition as if it had occurred on
September 30, 1998. Such pro forma balance sheet has been prepared based on the
assumptions used to prepare the pro forma financial information contained in the
September Confidential Information Memorandum, is based on the best information
available to the Borrower as of the date of delivery thereof, accurately
reflects all adjustments required to be made to give effect to the Rockwell
Acquisition and presents fairly on a pro forma basis the estimated consolidated
financial position of the Borrower and its subsidiaries as of December 31, 1998,
assuming that the Rockwell Acquisition had actually occurred at September 30,
1998.
(c) The Borrower has heretofore furnished to the Lenders an
unaudited pro forma consolidated statement of income for the 12 month period
ended December 31, 1998, which was prepared giving effect to the Rockwell
Acquisition as if it had occurred on September 30, 1998. Such statement of
income is based on the best information available to the Borrower as of the date
of delivery thereof, accurately reflects all adjustments required to be made to
give effect to the Rockwell Acquisition and presents fairly on a pro forma basis
the estimated results of operations of the Borrower and its consolidated
subsidiaries for the 12 month period ended December 31, 1998, assuming that the
Rockwell Acquisition had actually occurred on September 30, 1998.
SECTION 3.06. No Material Adverse Change. There has been no
material adverse change in the business, assets, operations, properties,
financial condition, contingent liabilities or material agreements of the
Borrower and the Subsidiaries, taken as a whole, since December 31, 1997.
SECTION 3.07. Title to Properties; Possession Under Leases.
(a) Each of the Borrower and the Subsidiaries has good and marketable title to,
or valid leasehold interests in, all its material properties and assets
(including all Mortgaged Property). All such material properties and assets are
free and clear of Liens, other than Liens expressly permitted by Section 6.02.
No material portion of any Mortgaged Property shall be subject to any lease,
license, sublease or other agreement granting to any person any right to use,
occupy or enjoy the same.
<PAGE> 67
(b) Each of the Borrower and the Subsidiaries has complied
with all obligations under all material leases to which it is a party and all
such leases are in full force and effect. Each of the Borrower and the
Subsidiaries enjoys peaceful and undisturbed possession under all such material
leases under which it is a tenant.
(c) Except as set forth on Schedule 3.07(c), the Borrower has
not received any notice of, nor has any knowledge of, any pending or
contemplated condemnation proceeding affecting the Mortgaged Properties or any
sale or disposition thereof in lieu of condemnation.
(d) Except as set forth on Schedule 3.07(d), the Borrower is
not obligated under any right of first refusal, option or other contractual
right to sell, assign or otherwise dispose of any Mortgaged Property or any
interest therein.
SECTION 3.08. Subsidiaries. (a) Schedule 3.08 sets forth as of
the Effective Date a list of all Subsidiaries and the percentage ownership
interest of the Borrower therein.
(b) Cobra Canada Inc. does not have any material assets,
properties or business operations.
SECTION 3.09. Litigation; Compliance with Laws. (a) Except as
set forth on Schedule 3.09, there are no actions, suits or proceedings at law or
in equity or by or before any Governmental Authority now pending or, to the
knowledge of the Borrower, threatened against or affecting the Borrower or any
Subsidiary or any business, property, assets or rights of any such Person (i)
that involve any Loan Document or the Transactions or (ii) as to which there is
a reasonable possibility of an adverse determination and that, if adversely
determined, could, individually or in the aggregate, reasonably be expected to
result in a Material Adverse Effect.
(b) None of the Borrower or any of the Subsidiaries or any of
their respective material properties or assets is in violation of, nor will the
continued operation of their material properties and assets as currently
conducted violate, any law, rule, regulation or statute (including any zoning,
building, Environmental Law, ordinance, code or approval or any building
permits) or any restrictions of record or agreements affecting the Mortgaged
Property, or is in default with respect to any judgment, writ, injunction,
decree or order of any Governmental Authority, where such violation or default
could reasonably be expected to result in a Material Adverse Effect.
(c) To the extent required by applicable law in the
jurisdiction in which each Mortgaged Property is located, certificates of
occupancy and permits are in effect for such Mortgaged Property as currently
constructed. True and complete copies of all certificates of occupancy and
permits with respect to each Mortgaged Property have been delivered to the
Collateral Agent as mortgagee.
<PAGE> 68
SECTION 3.10. Agreements. (a) Neither the Borrower nor any of
the Subsidiaries is a party to any agreement or instrument or subject to any
corporate restriction that has resulted or could reasonably be expected to
result in a Material Adverse Effect.
(b) Neither the Borrower nor any of the Subsidiaries is in
default in any manner under any provision of any indenture or other agreement or
instrument evidencing Indebtedness, or any other material agreement or
instrument to which it is a party or by which it or any of its properties or
assets are or may be bound, where such default could reasonably be expected to
result in a Material Adverse Effect.
SECTION 3.11. Federal Reserve Regulations. (a) Neither the
Borrower nor any of the Subsidiaries is engaged principally, or as one of its
important activities, in the business of extending credit for the purpose of
purchasing or carrying Margin Stock.
(b) No part of the proceeds of any Loan or any Letter of
Credit has been or will be used by the Borrower or any Subsidiary, whether
directly or indirectly, and whether immediately, incidentally or ultimately, (i)
to purchase or carry Margin Stock or to extend credit to others for the purpose
of purchasing or carrying Margin Stock or to refund indebtedness originally
incurred for such purpose, or (ii) for any purpose that entails a violation of,
or that is inconsistent with, the provisions of the Regulations of the Board,
including Regulation G, U and X.
SECTION 3.12. Investment Company Act; Public Utility Holding
Company Act. Neither the Borrower nor any Subsidiary (a) is an "investment
company" as defined in, or subject to regulation under, the Investment Company
Act of 1940 or (b) is a "holding company" as defined in, or subject to
regulation under, the Public Utility Holding Company Act of 1935.
SECTION 3.13. Use of Proceeds. The Borrower will use the
proceeds of the Loans and will request the issuance of Letters of Credit only
for the purposes specified in the preamble to this Agreement.
SECTION 3.14. Tax Returns. The Borrower and each Subsidiary
have filed or caused to be filed all Federal tax returns and material state and
local tax returns required to have been filed by it or with respect to it and
has paid or accrued or caused to be paid or accrued all taxes shown to be due
and payable on such returns or on any assessments received by it or with respect
to it, except taxes that are being contested in good faith by appropriate
proceedings and for which it shall have set aside on its books adequate reserves
in accordance with GAAP. The Borrower and each Subsidiary has filed or made
adequate provision in accordance with GAAP on its books for any material taxes
payable by it in connection with the recapitalization transactions of the
Borrower and the Subsidiaries consummated on or about January 31, 1995
(including any such taxes payable in respect of indemnities).
<PAGE> 69
SECTION 3.15. No Material Misstatements. No written
information, report, financial statement, exhibit or schedule furnished by or on
behalf of the Borrower to the Administrative Agent or any Lender in connection
with the negotiation of any Loan Document or included therein or delivered
pursuant thereto contained, when taken as a whole, as of the date such
information, report, financial statement, exhibit or schedule was furnished,
contains or will contain any material misstatement of fact or omitted, omits or
will omit to state any material fact necessary to make the statements therein,
in the light of the circumstances under which they were, are or will be made,
not misleading; provided, however, that, to the extent any such information was
based upon or constituted a forecast or projection, the Borrower represents that
it acted in good faith and utilized assumptions believed by it to be reasonable.
SECTION 3.16. Employee Benefit Plans. The Borrower, each
Subsidiary and each ERISA Affiliate is in compliance with the applicable
provisions of ERISA and the Code and the regulations and published
interpretations thereunder, except where failure to comply therewith could not
reasonably be expected to have a Material Adverse Effect. No Reportable Event
has occurred within the five-year period prior to the date upon which this
representation is made or deemed made or exists in respect of any Plan. The
present value of all benefit liabilities under each Plan (based on those
assumptions that would be used in a termination of such Plan) did not, as of the
last annual valuation date applicable thereto, exceed by more than $5,000,000
the value of the assets of such Plan, on a termination basis. None of the
Borrower, any Subsidiary or any ERISA Affiliate has incurred any Withdrawal
Liability in an amount that could reasonably be expected to result in a Material
Adverse Effect. None of the Borrower, any Subsidiary or any ERISA Affiliate has
received any notification that any Multiemployer Plan is in reorganization or
has been terminated within the meaning of Title IV of ERISA, and no
Multiemployer Plan is reasonably expected to be in reorganization or to be
terminated where such reorganization or termination has resulted or could
reasonably be expected to result, through increases in the contributions
required to be made to such Plan or otherwise, in a Material Adverse Effect.
SECTION 3.17. Environmental Matters. (a) The properties now or
formerly owned or operated by the Borrower and the Subsidiaries (the
"Properties") do not contain any Hazardous Materials in amounts or
concentrations which (i) constitute, or constituted a violation of, or (ii)
could give rise to liability under, Environmental Laws resulting from any
Release of Hazardous Materials during the Borrower's or the Subsidiaries'
ownership or operation of the Properties or, to the knowledge of the Borrower,
at any other time, which violations and liabilities, in the aggregate, could
reasonably be expected to result in a Material Adverse Effect.
(b) The Properties and all operations of the Borrower and the
Subsidiaries are in compliance, and, to the extent the Borrower or the
Subsidiaries owned or operated such Properties in the past three years, in the
last three years (i) have been in compliance, with all Environmental Laws and
all Environmental Permits and (ii) all necessary Environmental Permits have been
obtained and are in effect, except to the extent that such non-compliance or
failure to obtain any necessary permits, in the aggregate, could not reasonably
be expected to result in a Material Adverse Effect.
<PAGE> 70
(c) During the time of the Borrower's or the Subsidiaries'
ownership or operation of the Properties and, to the knowledge of the Borrower,
at any other time, there have been no Releases at, from, under or proximate to
the Properties or otherwise in connection with the operations of the Borrower or
the Subsidiaries, which Releases, in the aggregate, could reasonably be expected
to result in a Material Adverse Effect, and none of the Properties currently
owned or operated by the Borrower and the Subsidiaries are listed on the Federal
National Priorities List (under CERCLA and as defined pursuant to Environmental
Law).
(d) Neither the Borrower nor any of the Subsidiaries has
received any Environmental Claim in connection with the Properties or the
operations of the Borrower or the Subsidiaries or with regard to any Person
whose liabilities for environmental matters the Borrower or the Subsidiaries has
retained or assumed, in whole or in part, contractually, by operation of law or
otherwise, which, in the aggregate, could reasonably be expected to result in a
Material Adverse Effect, nor do the Borrower or the Subsidiaries have reason to
believe that any such notice will be received or is being threatened.
(e) Hazardous Materials have not been transported from the
Properties by the Borrower or the Subsidiaries or, to the knowledge of Borrower,
any other party, nor have Hazardous Materials been generated, treated, stored or
disposed of at, on or under any of the Properties in a manner that could
reasonably be expected to give rise to liability under any Environmental Law
that would constitute a Material Adverse Effect, nor have the Borrower or the
Subsidiaries retained or assumed any liability, contractually, by operation of
law or otherwise, with respect to the generation, treatment, storage or disposal
of Hazardous Materials, which transportation, generation, treatment, storage or
disposal, or retained or assumed liabilities, in the aggregate, could reasonably
be expected to result in a Material Adverse Effect.
SECTION 3.18. Insurance. Schedule 3.18 sets forth a true,
complete and correct description of all material insurance maintained by the
Borrower or by the Borrower for its Subsidiaries as of the Effective Date. As of
each such date, such insurance is in full force and effect and all premiums have
been duly paid. The Borrower and its Subsidiaries have insurance in such amounts
and covering such risks and liabilities as are in accordance with normal
industry practice.
SECTION 3.19. Solvency. Immediately after the consummation of
the Transactions and immediately following the making of each Loan made on the
Closing Date and on the Effective Date and after giving effect to the
application of the proceeds of such Loans, (a) the fair salable value of the
assets of the Borrower on a consolidated basis will exceed the amount that will
be required to be paid on or in respect of the existing debts and other
liabilities (including contingent liabilities) of the Borrower on a consolidated
basis as
<PAGE> 71
they mature, (b) the assets of the Borrower on a consolidated basis will not
constitute unreasonably small capital to carry out its businesses as conducted
or as proposed to be conducted, including the capital needs of the Borrower on a
consolidated basis (taking into account, in each case, the particular capital
requirements of the businesses conducted by the Borrower and the projected
capital requirements and capital availability of such businesses), and (c) the
Borrower does not intend to, nor does it believe that it or any Subsidiary will,
incur debts beyond its ability to pay such debts as they mature (taking into
account the timing and amounts of cash to be received by it and the amounts to
be payable on or in respect of its obligations).
SECTION 3.20. Labor Matters. Except as set forth on Schedule
3.20, as of the Effective Date, there are no strikes pending or threatened
against the Borrower or any Subsidiary. The hours worked and payment made to
employees and the Subsidiaries have not been in violation in any material
respect of the Fair Labor Standards Act or any other applicable law dealing with
such matters. All payments due from the Borrower or any Subsidiary, or for which
any claim may be made against the Borrower or any Subsidiary, on account of
wages and employee health and welfare insurance and other benefits, have been
paid or, to the extent required under GAAP, accrued as a liability on the books
of the Borrower or such Subsidiary, except to the extent that failure to make
such payment or accrual could not reasonably be expected, individually or in the
aggregate, to result in a Material Adverse Effect.
SECTION 3.21. Security Documents. (a) The Pledge Agreement is
effective to create in favor of the Collateral Agent, for the ratable benefit of
the Secured Parties, a legal, valid and enforceable security interest in the
Collateral (as defined in the Pledge Agreement) and proceeds thereof and, when
the Collateral is delivered to the Collateral Agent, the Pledge Agreement shall
constitute a fully perfected first priority Lien on, and security interest in,
all right, title and interest of the pledgors thereunder in such Collateral and
the proceeds thereof, in each case prior and superior in right to any other
Person.
(b) The Security Agreement is effective to create in favor of
the Collateral Agent, for the ratable benefit of the Secured Parties, a legal,
valid and enforceable security interest in the Collateral (as defined in the
Security Agreement) and proceeds thereof and, when financing statements in
appropriate form are filed in the offices specified on Schedule 3.21, the
Security Agreement shall constitute a fully perfected Lien on, and security
interest in, all right, title and interest of the grantors thereunder in such
Collateral and the proceeds thereof, in each case prior and superior in right to
any other Person, other than with respect to the rights of Persons pursuant to
Liens expressly permitted by Section 6.02.
(c) The Mortgages are effective to create in favor of the
Collateral Agent, for the ratable benefit of the Secured Parties, a legal, valid
and enforceable Lien on all of the Loan Parties' right, title and interest in
and to the Mortgaged Properties thereunder and the
<PAGE> 72
proceeds thereof, and when the Mortgages are filed in the offices specified on
Schedule 3.21, the Mortgages shall constitute fully perfected Liens on, and
security interests in, all right, title and interest of the Loan Parties in such
Mortgaged Property and the proceeds thereof, in each case prior and superior in
right to any other Person, other than with respect to the rights of Persons
pursuant to Liens expressly permitted by Section 6.02.
(d) The Intellectual Property Security Agreement is effective
to create in favor of the Collateral Agent, for the ratable benefit of the
Secured Parties, a legal, valid and enforceable security interest in the
Collateral (as defined in the Intellectual Property Security Agreement) and the
proceeds thereof, and when the Intellectual Property Security Agreement is (or
appropriate assignments are) filed in the United States Patent and Trademark
Office and the United States Copyright Office, the Intellectual Property
Security Agreement shall constitute a fully perfected Lien on, and security
interest in, all right, title and interest of the Loan Parties in such
Collateral and the proceeds thereof, in each case prior and superior in right to
any other Person, other than with respect to the rights of Persons pursuant to
Liens expressly permitted by Section 6.02.
SECTION 3.22. Location of Real Property and Leased Premises.
(a) Schedule 3.22(a) lists completely and correctly as of the Effective Date all
real property owned by the Borrower and the Subsidiaries and the addresses
thereof. The Borrower and the Subsidiaries own in fee all the real property set
forth on Schedule 3.22(a).
(b) Schedule 3.22(b) lists completely and correctly as of the
Effective Date all real property leased by the Borrower and the Subsidiaries and
the addresses thereof. The Borrower and the Subsidiaries have valid leases in
all the real property set forth on Schedule 3.22(b).
SECTION 3.23. Year 2000 Compliance. Any reprogramming required
to permit the proper functioning, in and following the year 2000, of (a) the
computer systems of the Borrower and each of the Subsidiaries and (b) equipment
containing embedded microchips (including systems and equipment supplied by
others or with which the systems of the Borrower or any Subsidiary interface),
and the testing of all such systems and equipment, as so reprogrammed, will be
completed in all material respects by June 30, 1999. The cost to the Borrower
and the Subsidiaries of such reprogramming and testing and of the reasonably
foreseeable consequences of year 2000 to the Borrower and the Subsidiaries
(including the cost of (i) reprogramming errors and (ii) the failure of others'
systems or equipment) will not result in a Default or a Material Adverse Effect.
<PAGE> 73
ARTICLE IV. CONDITIONS OF LENDING
SECTION 4.01. All Credit Events. On the date of each Borrowing
(other than any Revolving Credit Loan deemed made pursuant to Section 2.02(f)),
including each Borrowing of a Swingline Loan, and on the date of each issuance
of a Letter of Credit (each such event, a "Credit Event"):
(a) The Administrative Agent shall have received a notice of
such Borrowing as required by Section 2.03 (or such notice shall have
been deemed given in accordance with Section 2.03) or, in the case of
the issuance of a Letter of Credit, the Issuing Bank and the
Administrative Agent shall have received a notice requesting the
issuance of such Letter of Credit as required by Section 2.21(b) or, in
the case of the Borrowing of a Swingline Loan, the Swingline Lender and
the Administrative Agent shall have received a notice requesting such
Swingline Loan as required by Section 2.20(b).
(b) Each representation and warranty set forth in Article III
shall be true and correct in all material respects on and as of the
date of such Credit Event with the same effect as though made on and as
of such date, except to the extent such representation and warranty
expressly relate to an earlier date.
(c) At the time of and immediately after such Credit Event, no
Event of Default or Default shall have occurred and be continuing.
Each Credit Event, including the transactions occurring on the Effective Date,
shall be deemed to constitute a representation and warranty by the Borrower on
the date of such Credit Event, as to the matters specified in paragraphs (b) and
(c) above. Continuations and conversions of outstanding Borrowings pursuant to
Section 2.10 shall not be deemed to be Borrowings for the purpose of this
Section 4.01.
SECTION 4.02. First Credit Event. The obligations of the
Lenders to make Loans (other than September 1998 Term Loans) and of the Issuing
Bank to issue Letters of Credit hereunder shall not become effective until each
of the following conditions is satisfied (or waived in accordance with Section
9.08) (it being understood that, notwithstanding the foregoing, the Lenders
shall not be obligated to make September 1998 Term Loans until the Effective
Date):
(a) The Administrative Agent shall have received, on behalf of
itself, the Lenders and the Issuing Bank, a favorable written opinion
of (i) Reed Smith Shaw & McClay LLP, counsel for the Borrower,
substantially to the effect set forth in Exhibit I (A) dated the
Closing Date, (B) addressed to the Issuing Bank, the Administrative
Agent and the Lenders, and (C) covering such other matters relating to
the Loan Documents and the Transactions as the Administrative Agent
shall reasonably request, and the Borrower hereby instructs such
counsel to deliver such opinions.
<PAGE> 74
(b) All legal matters incident to this Agreement, the
borrowings and extensions of credit hereunder and the Loan Documents
shall be satisfactory to the Lenders, to the Issuing Bank and to
Cravath, Swaine & Moore, counsel for the Administrative Agent.
(c) The Administrative Agent shall have received (i) a copy of
the certificate or articles of incorporation, including all amendments
thereto, of each Loan Party, certified as of a recent date by the
Secretary of State of the state of its organization, and a certificate
as to the good standing of each Loan Party as of a recent date, from
such Secretary of State; (ii) a certificate of the Secretary or
Assistant Secretary of each Loan Party dated the Closing Date and
certifying (A) that attached thereto is a true and complete copy of the
by-laws of such Loan Party as in effect on the Closing Date and at all
times since a date prior to the date of the resolutions described in
clause (B) below, (B) that attached thereto is a true and complete copy
of resolutions duly adopted by the Board of Directors of such Loan
Party authorizing the execution, delivery and performance of the Loan
Documents to which such Person is a party and, in the case of the
Borrower, the Borrowings hereunder, and that such resolutions have not
been modified, rescinded or amended and are in full force and effect,
(C) that the certificate or articles of incorporation of such Loan
Party have not been amended since the date of the last amendment
thereto shown on the certificate of good standing furnished pursuant to
clause (i) above, and (D) as to the incumbency and signature of each
officer executing any Loan Document or any other document delivered in
connection herewith on behalf of such Loan Party; (iii) a certificate
of another officer as to the incumbency and specimen signature of the
Secretary or Assistant Secretary executing the certificate pursuant to
(ii) above; and (iv) such other documents as the Lenders, the Issuing
Bank or Cravath, Swaine & Moore, counsel for the Administrative Agent,
may reasonably request.
(d) The Administrative Agent shall have received a
certificate, dated the Closing Date and signed by a Financial Officer
of the Borrower, confirming compliance with the conditions precedent
set forth in Sections 4.01(b) and 4.01(c).
(e) The Administrative Agent shall have received all Fees and
other amounts due and payable on or prior to the Closing Date,
including, to the extent invoiced, reimbursement or payment of all
out-of-pocket expenses required to be reimbursed or paid by the
Borrower hereunder or under any other Loan Document.
<PAGE> 75
(f) The Pledge Agreement shall have been duly executed by the
parties thereto and delivered to the Collateral Agent and shall be in
full force and effect. All the outstanding capital stock of each
Domestic Subsidiary, 65% of the outstanding capital stock of each
Foreign Subsidiary (other than Cobra Europe S.A., Greysham Railway
Friction Products and Vapor UK Limited) that is owned directly by the
Borrower or any Domestic Subsidiary and the entire interest of the
Borrower in the Pledged Debt Securities (as such term is defined in the
Pledge Agreement) shall have been duly and validly pledged thereunder
to the Collateral Agent for the ratable benefit of the Secured Parties
and certificates (other than the certificates for the Domestic
Subsidiaries and Foreign Subsidiaries referred to in Section 5.13(a))
representing such shares, accompanied by stock powers endorsed in
blank, shall be in the actual possession of the Collateral Agent.
(g) The Security Agreement and the Intellectual Property
Security Agreement shall have been duly executed by the Loan Parties
party thereto and shall have been delivered to the Collateral Agent and
shall be in full force and effect on such date and each document
(including each Uniform Commercial Code financing statement) required
by law or reasonably requested by the Administrative Agent to be filed,
registered or recorded in order to create in favor of the Collateral
Agent for the benefit of the Secured Parties a valid, legal and
perfected first-priority security interest in and lien on the
Collateral (subject to any Lien expressly permitted by Section 6.02)
described in such agreement shall have been delivered to the Collateral
Agent.
(h) The Collateral Agent shall have received evidence
reasonably satisfactory to it of the termination of the Original Credit
Agreement and the discharge of all the obligations of the Borrower
thereunder. The Collateral Agent shall have received the results of a
search of the Uniform Commercial Code filings (or equivalent filings)
made with respect to the Loan Parties in the States (or other
jurisdictions) in which are located the chief executive offices of such
Persons or any offices of such Persons in which records have been kept
relating to Accounts (as defined in the Security Agreement) and the
other jurisdictions in which Uniform Commercial Code filings (or
equivalent filings) are to be made pursuant to the preceding paragraph
(except for results with respect to such Loan Parties in such
jurisdictions as are referred to in Schedule 4(c) to the Perfection
Certificate, which results shall be delivered pursuant to Section
5.13(b)), together with copies of the financing statements (or similar
documents) disclosed by such search, and accompanied by evidence
satisfactory to the Administrative Agent that the Liens indicated in
any such financing statement (or similar document) would be permitted
under Section 6.02 or have been released.
(i) The Collateral Agent shall have received a Perfection
Certificate with respect to the Loan Parties dated the Closing Date and
duly executed by a Responsible Officer of the Borrower.
<PAGE> 76
(j) (i) Each of the Security Documents, in form and substance
satisfactory to the Lenders, relating to each of the Mortgaged
Properties shall have been duly executed by the parties thereto and
delivered to the Collateral Agent and shall be in full force and
effect, (ii) each of such Mortgaged Properties shall not be subject to
any Lien other than those permitted under Section 6.02, (iii) each of
such Security Documents shall have been filed and recorded in the
recording office as specified on Schedule 3.22 (or a lender's title
insurance commitment, in form and substance reasonably acceptable to
the Collateral Agent, insuring the lien of such Security Document as a
first lien on such Mortgaged Property (subject to any Lien listed on
Schedule B of any related lender's title insurance policy delivered to
the Collateral Agent prior to the Closing Date) shall have been
received by the Collateral Agent) and, in connection therewith, the
Collateral Agent shall have received evidence reasonably satisfactory
to it of each such filing and recordation and (iv) the Collateral Agent
shall have received such other documents, including a policy or
policies of title insurance issued by a nationally recognized title
insurance company, together with such endorsements, coinsurance and
reinsurance as may be reasonably requested by the Administrative Agent
and the Lenders, insuring the Mortgages as valid first liens on the
Mortgaged Properties, free of Liens other than those listed on Schedule
B of any related lender's title insurance policy delivered to the
Collateral Agent prior to the Closing Date, together with such
abstracts, appraisals, confirmations (including with respect to zoning)
and legal opinions as may be reasonably requested by the Administrative
Agent or the Lenders.
(k) The Guarantee Agreement and the Indemnity, Subrogation and
Contribution Agreement shall have been duly executed by each Guarantor
and the Collateral Agent, and shall be in full force and effect.
(l) The Administrative Agent shall have received a copy of, or
a certificate as to coverage under, the insurance policies required by
Section 5.02 and the applicable provisions of the Security Documents.
(m) After giving effect to the Transactions, the Borrower and
the Subsidiaries shall have no outstanding Indebtedness other than (i)
the Loans, and (ii) the Indebtedness referred to in Section 6.01(a).
(n) The Lenders shall be reasonably satisfied as to the amount
and nature of any environmental and employee health and safety
exposures to which the Borrower and the Subsidiaries may be subject and
the plans of the Borrower with respect thereto.
(o) The Lenders shall be reasonably satisfied with the
financial statements referred to in Section 3.05(a). The consolidated
financial results of the Borrower for all periods ending prior to the
Closing Date shall be consistent in all material respects with the
information contained in the Confidential Information Memorandum.
<PAGE> 77
(p) There shall be no litigation or administrative proceedings
or other legal or regulatory developments, actual or overtly
threatened, that, in the reasonable judgment of the Lenders, involve a
reasonable possibility of a material adverse effect on the business,
assets, operations, properties, financial condition, contingent
liabilities, prospects or material agreements of the Borrower and the
Subsidiaries taken as a whole or the ability of any Loan Party to
perform its obligations under the Loan Documents, or the ability of the
parties to consummate the Transactions or the validity or
enforceability of any of the Loan Documents or the rights, remedies and
benefits available to the Lenders, the Issuing Bank and the Agents
under the Loan Documents.
(q) There shall have been no material adverse change in the
business, assets, operations, properties, financial condition,
contingent liabilities, prospects or material agreements of the
Borrower and the Subsidiaries since December 31, 1997.
ARTICLE V. AFFIRMATIVE COVENANTS
The Borrower covenants and agrees with each Lender that so
long as this Agreement shall remain in effect and until the Commitments have
been terminated and the principal of and interest on each Loan, all Fees and all
other expenses or amounts payable under any Loan Document shall have been paid
in full and all Letters of Credit have been canceled or have expired and all
amounts drawn thereunder have been reimbursed in full, unless the Required
Lenders shall otherwise consent in writing, the Borrower will, and will cause
each of the Subsidiaries to:
SECTION 5.01. Existence; Businesses and Properties. (a) Do or
cause to be done all things necessary to preserve, renew and keep in full force
and effect its legal existence, except as otherwise expressly permitted under
Section 6.05.
(b) Do or cause to be done all things necessary to obtain,
preserve, renew, extend and keep in full force and effect the rights, licenses,
permits, franchises, authorizations, patents, copyrights, trademarks and trade
names material to the conduct of its business; maintain and operate such
business in substantially the manner in which it is currently conducted and
operated; comply in all material respects with all material applicable laws,
rules, regulations and statutes (including any zoning, building, Environmental
Law, ordinance, code or approval or any building permits or any restrictions of
record or agreements affecting the Mortgaged Properties) and decrees and orders
of any Governmental Authority, whether now in effect or hereafter enacted; and
at all times maintain and preserve all property material to the conduct of such
business and keep such property in good repair,
<PAGE> 78
working order and condition and from time to time make, or cause to be made, all
needful and proper repairs, renewals, additions, improvements and replacements
thereto necessary in order that the business carried on in connection therewith
may be properly conducted at all times.
(c) Maintain all financial records in accordance with GAAP.
SECTION 5.02. Insurance. (a) Keep its insurable properties
adequately insured at all times by financially sound and reputable insurers;
maintain such other insurance, to such extent and against such risks, including
fire and other risks insured against by extended coverage, as is customary with
companies of established repute in the same general area engaged in the same or
similar businesses, including public liability insurance against claims for
personal injury or death or property damage occurring upon, in, about or in
connection with the use of any properties owned, occupied or controlled by it or
the use of any products sold by it; and maintain such other insurance as may be
required by law.
(b) Cause all such policies to be endorsed or otherwise
amended to include a "standard" or "New York" lender's loss payable endorsement,
in form and substance satisfactory to the Administrative Agent and the
Collateral Agent, which endorsement shall provide that, from and after the
Closing Date, (i) the insurance carrier shall give the Administrative Agent or
the Collateral Agent at least 30 days' prior notice of termination of such
policies and (ii) 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, the insurance carrier shall pay all proceeds otherwise payable
to the Borrower or the Loan Parties under such policies directly to the
Collateral Agent.
(c) If at any time the area in which the Premises (as defined
in the Mortgages) are located is designated a "flood hazard area" in any Flood
Insurance Rate Map published by the Federal Emergency Management Agency, obtain
flood insurance in such total amount as the Collateral Agent may from time to
time reasonably require, and otherwise comply with the National Flood Insurance
Program as set forth in said Flood Disaster Protection Act of 1973, as it may be
amended from time to time.
SECTION 5.03. Obligations and Taxes. Pay its Indebtedness and
other material obligations promptly and in accordance with their terms and pay
and discharge promptly when due all taxes, assessments and governmental charges
or levies imposed upon it or upon its income or profits or in respect of its
property, before the same shall become delinquent or in default, as well as all
lawful claims for labor, materials and supplies or otherwise that, if unpaid,
might give rise to a Lien upon such properties or any part thereof; provided,
however, that such payment and discharge shall not be required with respect to
any such tax, assessment, charge, levy or claim so long as the validity or
amount thereof shall be contested in good faith by appropriate proceedings and
the Borrower shall have set aside on its books adequate reserves with respect
thereto in accordance with GAAP and such contest operates to suspend collection
of the contested obligation, tax, assessment or charge and enforcement of a Lien
and, in the case of a Mortgaged Property, there is no risk of forfeiture of such
property.
<PAGE> 79
SECTION 5.04. Financial Statements, Reports, etc. In the case
of the Borrower, furnish to the Administrative Agent and each Lender:
(a) within 90 days after the end of each fiscal year, its
consolidated balance sheets and related statements of operations,
stockholders' equity and cash flows showing the financial condition of
the Borrower and its consolidated subsidiaries as of the close of such
fiscal year and the results of its operations and the operations of
such subsidiaries during such year, all audited by Arthur Andersen &
Co. or other independent public accountants of recognized national
standing reasonably acceptable to the Required Lenders and accompanied
by an opinion of such accountants (which shall not be qualified in any
material respect) to the effect that such consolidated financial
statements fairly present the financial condition and results of
operations of the Borrower on a consolidated basis in accordance with
GAAP consistently applied;
(b) within 45 days after the end of each of the first three
fiscal quarters of each fiscal year, its unaudited consolidated balance
sheets and related statements of operations, stockholders' equity and
cash flows showing the financial condition of the Borrower and its
consolidated subsidiaries as of the close of such fiscal quarter and
the results of its operations and the operations of such subsidiaries
during such fiscal quarter and the then elapsed portion of the fiscal
year, all certified by one of its Financial Officers as fairly
presenting the financial condition and results of operations of the
Borrower on a consolidated basis in accordance with GAAP, subject to
normal year-end audit adjustments and the absence of notes;
(c) concurrently with any delivery of any such financial
statements, a certificate of a Financial Officer (and, in the case of
any financial statements being delivered under clause (a) above, a
certificate of the opining accounting firm, which certificate may be
limited to accounting matters and disclaim responsibility for legal
interpretations), (i) certifying that no Event of Default or Default
has occurred or, if such an Event of Default or Default has occurred,
specifying the nature and extent thereof and any corrective action
taken or proposed to be taken with respect thereto and (ii) setting
forth computations in reasonable detail satisfactory to the
Administrative Agent demonstrating (A) compliance with the covenants
contained in Sections 6.13 and 6.14 and (B) the Applicable Percentage
based upon the Leverage Ratio;
<PAGE> 80
(d) promptly after the same become publicly available, copies
of all periodic and other reports, proxy statements and other materials
filed by the Borrower or any Subsidiary with the Securities and
Exchange Commission, or any Governmental Authority succeeding to any of
or all the functions of said Commission, or with any national
securities exchange, or distributed to its shareholders, as the case
may be;
(e) as soon as available, and in any event no later than 95
days after the end of each fiscal year thereafter, historical summary
data for the immediately preceding year and forecasted financial
projections and summary data through the end of the then-current fiscal
year, in substantially the same form and format as set forth in the
Confidential Information Memorandum (including a specification of the
underlying assumptions and management's discussion of historical
results), all certified by a Financial Officer of the Borrower to be a
fair summary of such entity's results and such entity's good faith
estimate of the forecasted financial projections and results of
operations for the period through the then-current fiscal year;
(f) upon the earlier of (i) 95 days after the end of each
fiscal year of the Borrower and (ii) the date on which the financial
statements with respect to such period are delivered pursuant to clause
(a) above, a certificate of a Financial Officer of the Borrower setting
forth, in detail satisfactory to the Administrative Agent, the
calculation and amount of Excess Cash Flow, if any, for such period;
and
(g) promptly, from time to time, such other information
regarding the operations, business affairs and financial condition of
the Borrower, or compliance with the terms of any Loan Document, as any
Lender may reasonably request.
SECTION 5.05. Litigation and Other Notices. Furnish to the
Administrative Agent and each Lender prompt written notice of the occurrence of
the following:
(a) any Event of Default or Default, specifying the nature and
extent thereof and the corrective action (if any) proposed to be taken
with respect thereto;
(b) the filing or commencement of, or any written threat or
written notice of intention of any Person to file or commence, any
action, suit or proceeding, whether at law or in equity or by or before
any Governmental Authority, against the Borrower or any Affiliate
thereof that, if adversely determined, could reasonably be expected to
result in a Material Adverse Effect; and
(c) any development that has resulted in, or could reasonably
be expected to result in, a Material Adverse Effect.
SECTION 5.06. ERISA. (a) Comply with the applicable provisions
of ERISA and the Code and the regulations and published interpretations
thereunder, except where the failure to comply therewith could not reasonably be
expected to have a Material
<PAGE> 81
Adverse Effect, and (b) furnish to the Administrative Agent (i) as soon as
possible, and in any event within 30 days after any Responsible Officer of the
Borrower either knows or has a reasonable basis to believe that any Reportable
Event has occurred, that alone or together with any other Reportable Event could
reasonably be expected to result in liability, of the Borrower, any Subsidiary
or any ERISA Affiliate to the PBGC, a statement of a Financial Officer of the
Borrower setting forth details as to such Reportable Event and the action
proposed to be taken with respect thereto, together with a copy of the notice,
if any, of such Reportable Event given to the PBGC, (ii) promptly after receipt
thereof, a copy of any notice the Borrower, any Subsidiary or any ERISA
Affiliate receives from the PBGC relating to the intention of the PBGC to
terminate any Plan or Plans or to appoint a trustee to administer any Plan or
Plans, (iii) within 20 Business Days after the due date for filing with the PBGC
pursuant to Section 412(n) of the Code a notice of failure to make a required
installment or other payment with respect to a Plan, a statement of a Financial
Officer of the Borrower setting forth details as to such failure and the action
proposed to be taken with respect thereto, together with a copy of such notice
given to the PBGC and (iv) promptly and in any event within 30 days after
receipt thereof by the Borrower, any Subsidiary or any ERISA Affiliate from the
sponsor of a Multiemployer Plan, a copy of each notice received by the Borrower,
any Subsidiary or any ERISA Affiliate concerning (A) the imposition of
Withdrawal Liability or (B) a determination that a Multiemployer Plan is, or is
expected to be, terminated or in reorganization, in each case within the meaning
of Title IV of ERISA; provided, however, that no such notice will be required
hereunder unless the event, when aggregated with all other events occurring at
the same time, could be reasonably expected to result in liability in an amount
that would exceed $10,000,000.
SECTION 5.07. Maintaining Records; Access to Properties and
Inspections. Maintain all financial records in accordance with GAAP and permit
any representatives designated by any Lender to visit and inspect the financial
records and the properties of the Borrower or any Subsidiary at reasonable times
and upon reasonable notice and as often as reasonably requested and to make
extracts from and copies of such financial records, and permit any
representatives designated by any Lender to discuss the affairs, finances,
properties and condition of the Borrower or any Subsidiary with the officers
thereof and independent accountants therefor.
SECTION 5.08. Use of Proceeds. Use the proceeds of the Loans
and request the issuance of Letters of Credit only for the purposes set forth in
the preamble to this Agreement. The proceeds of all Term Loans shall be applied
immediately following receipt thereof by the Borrower in the manner required by
this Section 5.08.
SECTION 5.09. Compliance with Environmental Laws. Except as
could not reasonably be expected to result in a Material Adverse Effect, comply,
and use its reasonable best efforts to cause all lessees and other Persons
occupying its Properties to comply, in all material respects with all
Environmental Laws and Environmental Permits applicable to its operations and
Properties; obtain and renew all material Environmental Permits necessary
<PAGE> 82
for its operations and Properties; and conduct any Remedial Action required by
any Governmental Authority in accordance with Environmental Laws; provided,
however, that neither the Borrower nor any of the Subsidiaries shall be required
to undertake any Remedial Action to the extent that its obligation to do so is
being contested in good faith and by proper proceedings and appropriate reserves
are being maintained with respect to such circumstances.
SECTION 5.10. Preparation of Environmental Reports. If a
Default caused by reason of a breach of Section 3.17 or 5.09 shall have occurred
and be continuing, at the request of the Required Lenders through the
Administrative Agent, provide to the Lenders within 45 days after such request,
at the expense of the Borrower, an environmental site assessment report for the
Properties (which are the subject of such default) prepared by an environmental
consulting firm reasonably acceptable to the Administrative Agent, indicating
the presence or absence of Hazardous Materials and the estimated cost of any
compliance or Remedial Action in connection with such Properties.
SECTION 5.11. Further Assurances. Execute any and all further
documents, financing statements, agreements and instruments, and take all
further action (including filing Uniform Commercial Code and other financing
statements, mortgages and deeds of trust) that may be required under applicable
law, or which the Required Lenders, the Administrative Agent or the Collateral
Agent may reasonably request, in order to effectuate the transactions
contemplated by the Loan Documents and in order to grant, preserve, protect and
perfect the validity and first priority of the security interests created or
intended to be created by the Security Documents. In addition, if any additional
Subsidiary is formed or acquired after the Closing Date, the Borrower will
notify the Administrative Agent thereof and (a) the Borrower will cause any such
Domestic Subsidiary to become a party to the Guarantee Agreement, the Indemnity,
Subrogation and Contribution Agreement and each applicable Security Document in
the manner provided therein within twenty 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 as the Administrative Agent
or the Required Lenders shall reasonably request and (b) if any shares of
capital stock or Indebtedness of any additional Subsidiary formed or acquired
after the Closing Date are owned by or on behalf of any Loan Party, the Borrower
will cause such shares and promissory notes evidencing such Indebtedness to be
pledged pursuant to the Pledge Agreement within five Business Days after such
Subsidiary is formed or acquired (except that, if such Subsidiary is a Foreign
Subsidiary, shares of common stock of such Subsidiary to be pledged pursuant to
the Pledge Agreement may be limited to 65% of the outstanding shares of common
stock of such Subsidiary). In addition, from time to time, the Borrower will, at
its cost and expense, promptly secure the Obligations by pledging or creating,
or causing to be pledged or created, perfected security interests with respect
to such of its assets and properties as the Administrative Agent or the Required
Lenders shall designate (it being understood that it is the intent of the
parties that the Obligations shall be secured by, among other things, (a)
substantially all the assets of the Borrower and its
<PAGE> 83
Subsidiaries (including real and other properties acquired subsequent to the
Closing Date), other than the common stock of Foreign Subsidiaries, and (b) by
65% of the common stock of each Foreign Subsidiary (other than Cobra Europe
S.A., Greysham Railway Friction Products and Vapor UK Limited) that is owned
directly by the Borrower or any Domestic Subsidiary). Such security interests
and Liens will be created under the Security Documents and other security
agreements, mortgages, deeds of trust and other instruments and documents in
form and substance satisfactory to the Collateral Agent, and the Borrower will
deliver or cause to be delivered to the Lenders all such instruments and
documents (including legal opinions, title insurance policies, surveys and lien
searches) as the Collateral Agent shall reasonably request to evidence
compliance with this Section 5.11. The Borrower agrees to provide such evidence
as the Collateral Agent shall reasonably request as to the perfection and
priority status of each such security interest and Lien.
SECTION 5.12. Material Contracts. (a) Maintain in full force
and effect (including exercising any available renewal option), and without
amendment or modification, all its material contracts unless the failure so to
maintain such contracts or to exercise any renewal option (or the amendments or
modifications thereto), individually or in the aggregate, could not reasonably
be expected to have a Material Adverse Effect.
(b) Give the Administrative Agent reasonable prior written
notice of any amendment or modification of the Senior Unsecured Notes or the
related indenture, the Long-Term Pulse Seller Note or the Pulse Subordination
Agreement, or the Rockwell Senior Unsecured Credit Agreement or the Exchange
Notes or the related indenture.
SECTION 5.13. Post-Closing Matters. (a) Deliver to the
Collateral Agent, (i) within 30 days after the Closing Date, stock certificates
representing all the outstanding capital stock of each of TFL, Inc., RFI
Properties, Inc. and Stone Safety Service Corporation, accompanied by undated
stock powers endorsed in blank (to the extent not previously delivered), (ii)
within 60 days after the Closing Date, stock certificates representing 65% of
the outstanding capital stock of each of Westinghouse International Corp., H.P.
Srl., RFS(E), Ltd(UK) and Evand Pty. Ltd., accompanied by undated stock powers
endorsed in blank (to the extent not previously delivered), together with a
revised Schedule 1 to the Pledge Agreement (revised in order to insert therein
correct references to the certificate numbers for the stock certificates being
delivered pursuant to clause (i) and this clause (ii)), and (iii) within 30 days
after the Closing Date, undated instruments of transfer endorsed in blank
relating to the Pledged Debt Securities (as such term is defined in the Pledge
Agreement).
(b) Deliver to the Collateral Agent, within 15 days after the
Closing Date, the results of a search of the Uniform Commercial Code filings (or
equivalent filings) made with respect to the Loan Parties and in the
jurisdictions specified on Schedule 4(c) to the Perfection Certificate, together
with copies of the financing statements (or similar documents) disclosed by such
search, and accompanied by evidence satisfactory to the Administrative Agent
that the Liens indicated in any such financing statement (or similar document)
would be permitted under Section 6.02 or have been released.
<PAGE> 84
ARTICLE VI. NEGATIVE COVENANTS
The Borrower covenants and agrees with each Lender that, so
long as this Agreement shall remain in effect and until the Commitments have
been terminated and the principal of and interest on each Loan, all Fees and all
other expenses or amounts payable under any Loan Document have been paid in full
and all Letters of Credit have been canceled or have expired and all amounts
drawn thereunder have been reimbursed in full, unless the Required Lenders shall
otherwise consent in writing, the Borrower will not, and will not cause or
permit any of the Subsidiaries to:
SECTION 6.01. Indebtedness. Incur, create, assume or permit to
exist any Indebtedness, except:
(a) Indebtedness existing on the Closing Date and set forth on
Schedule 6.01 (and any extensions, renewals or replacements of such
Indebtedness so long as the principal amount of such Indebtedness is
not increased);
(b) Indebtedness created under any Loan Document or under any
Rockwell Senior Unsecured Credit Facility Loan Document;
(c) in the case of the Borrower, Indebtedness consisting of
purchase money Indebtedness incurred in the ordinary course of business
after the Closing Date to finance Capital Expenditures permitted under
Section 6.11; provided, however, that (i) the sum of (A) the aggregate
principal amount of any Indebtedness incurred by the Borrower pursuant
to this clause (c), (B) the aggregate annual rental payments in respect
of all Capital Lease Obligations incurred by the Borrower or any
Subsidiary in accordance with Section 6.12 and (C) the aggregate annual
payments in respect of a Sale and Leaseback Transaction incurred by the
Borrower or any Subsidiary in accordance with Section 6.03 shall not
exceed $5,000,000 for any fiscal year and (ii) such Indebtedness is
incurred within 90 days after the making of the Capital Expenditures
financed thereby;
(d) in the case of the Borrower, Indebtedness in respect of a
Sale and Leaseback Transaction permitted under Section 6.03;
(e) in the case of the Borrower, Indebtedness in respect of
Capital Lease Obligations permitted under Section 6.11;
(f) in the case of the Borrower, Indebtedness in respect of
Rate Protection Agreements;
<PAGE> 85
(g) in the case of the Borrower, other unsecured Indebtedness
in a principal amount at any time outstanding not in excess of
$15,000,000;
(h) Indebtedness of the Borrower to any Subsidiary and of any
Subsidiary to the Borrower or any other Subsidiary; provided, however,
that no Indebtedness under this clause (h) may be incurred by or issued
to any Subsidiary of the Borrower that is not a Guarantor;
(i) Indebtedness of any Subsidiary that is not a Guarantor in
an aggregate principal amount with respect to all such Subsidiaries at
any time outstanding not in excess of $10,000,000;
(j) Indebtedness of any Subsidiary that is a Guarantor in an
aggregate principal amount with respect to all such Subsidiaries at any
time outstanding not in excess of $10,000,000; and
(k) other unsecured Indebtedness in a principal amount at any
time outstanding not in excess of $100,000,000 for which the Borrower
or any Subsidiary receives cash only; provided that the Borrower and
the Subsidiaries shall be in compliance, on a pro forma basis after
giving effect to each incurrence or creation of Indebtedness hereunder,
with the covenants contained in Sections 6.13 and 6.14 recomputed as of
the last day of the most recently ended fiscal quarter of the Borrower
as if such Indebtedness had been incurred or created on the first day
of each relevant period for testing such compliance; and provided,
further, that the Borrower shall apply an amount equal to 100% of the
net cash proceeds of all Indebtedness incurred or created hereunder to
repay or prepay in accordance with Section 2.12, first, Rockwell Senior
Unsecured Credit Facility Loans or Exchange Notes or other amounts then
due and payable under the Rockwell Senior Unsecured Credit Facility
Loan Documents and, second, Revolving Credit Borrowings by
substantially simultaneously with (and in any event not later than the
Business Day next following) the incurrence or creation of such
Indebtedness, paying to the Administrative Agent an amount equal to
100% of the net cash proceeds therefrom. For the purposes of this
Section 6.01(k), the term "net cash proceeds" shall mean (i) the gross
proceeds in the form of cash received by the Borrower or any Subsidiary
in respect of an incurrence or creation of Indebtedness hereunder, less
(ii) the sum of (A) the amount, if any, of all taxes (other than income
taxes) payable by the Borrower or any Subsidiary in connection with
such Indebtedness and the Borrower's good-faith best estimate of the
amount of all income taxes payable in connection with such Indebtedness
and (B) reasonable and customary fees, commissions and expenses and
other costs paid by the Borrower or any Subsidiary in connection with
such Indebtedness, in each case only to the extent not already deducted
in arriving at the amount referred to in clause (i) of this sentence.
<PAGE> 86
SECTION 6.02. Liens. Create, incur, assume or permit to exist
any Lien on any property or assets (including stock or other securities of any
Person, including any Subsidiary) now owned or hereafter acquired by it or on
any income or revenues or rights in respect of any thereof, except:
(a) Liens on property or assets of the Borrower and its
Subsidiaries existing on the Closing Date and set forth on Schedule
6.02 or on Schedule B to any lender's title insurance policy delivered
to the Collateral Agent in accordance with Section 4.02(j) prior to the
Closing Date (and any extension, renewal or replacement of such Liens);
provided, however, that such Liens shall secure only those obligations
that they secure on the Closing Date;
(b) any Lien created under the Loan Documents;
(c) any Lien existing on any property or asset prior to the
acquisition thereof by the Borrower or any Subsidiary; provided,
however, that (i) such Lien is not created in contemplation of or in
connection with such acquisition, and (ii) such Lien does not apply to
any other property or assets of the Borrower or any Subsidiary;
(d) Liens for taxes, assessments or governmental charges not
yet due and payable or that are being contested in compliance with
Section 5.03;
(e) carriers', warehousemen's, mechanics', materialmen's,
repairmen's, landlord's or other like Liens arising in the ordinary
course of business and securing obligations that are not due and
payable or, if a portion thereof is due and payable, that are being
contested in compliance with Section 5.03;
(f) pledges and deposits made in the ordinary course of
business in compliance with workmen's compensation, unemployment
insurance and other social security laws or regulations;
(g) pledges and deposits to secure the performance of bids,
trade contracts (other than for Indebtedness), leases (other than
Capital Lease Obligations), statutory obligations, surety and appeal
bonds, performance bonds and other obligations of a like nature
incurred in the ordinary course of business;
(h) purchase money security interests in real property,
improvements thereto or equipment hereafter acquired (or, in the case
of improvements, constructed) by the Borrower or any Subsidiary;
provided, however, that (i) such security interests secure Indebtedness
permitted by Section 6.01, (ii) such security interests are incurred,
and the Indebtedness secured thereby is created, within 90 days
<PAGE> 87
after such acquisition (or construction), (iii) the Indebtedness
secured thereby does not exceed 85% of the lesser of the cost or the
fair market value of such real property, improvements or equipment at
the time of such acquisition (or construction) and (iv) such security
interests do not apply to any other property or assets of the Borrower
or any Subsidiary;
(i) Liens incurred in connection with Capital Lease
Obligations permitted under Section 6.11;
(j) Liens incurred in connection with any Sale and Leaseback
Transaction permitted under Section 6.03;
(k) zoning restrictions, easements, rights-of-way,
restrictions on use of real property and other similar encumbrances
that do not materially impair the current use or the value of the
property subject thereto; and
(l) Liens securing Indebtedness permitted by Sections 6.01(i)
or 6.01(j); provided however that such Liens apply only to property or
assets of the Subsidiary that has incurred such Indebtedness and do not
apply to the property or assets of the Borrower or any other
Subsidiary.
SECTION 6.03. Sale and Leaseback Transactions. 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 that it intends to use for substantially the same purpose or
purposes as the property being sold or transferred (a "Sale and Leaseback
Transaction"), except Sale and Leaseback Transactions entered into by the
Borrower to finance the acquisition of equipment and other property so long as
(a) the sum of (i) the Attributable Debt in respect of all such Sale and
Leaseback Transactions, (ii) the aggregate principal amount of any purchase
money Indebtedness incurred by the Borrower pursuant to Section 6.01(c) and
(iii) the aggregate amount of all Capital Lease Obligations incurred by the
Borrower and the Subsidiaries in accordance with Section 6.11 shall not exceed
$10,000,000 at any time outstanding and (b) such Sale and Leaseback Transaction
occurs within 180 days after the acquisition of such equipment or other
property.
SECTION 6.04. Investments, Loans and Advances. Purchase, hold
or acquire any capital stock, evidences of Indebtedness or other securities of,
make or permit to exist any loans or advances to, or make or permit to exist any
investment or any other interest in, or give any Guarantee of Indebtedness of,
any other Person, except:
(a) investments by the Borrower existing on the Effective Date
in the capital stock of the Subsidiaries;
<PAGE> 88
(b) in the case of the Borrower, Permitted Investments;
(c) in the case of the Borrower, the ESOP Loan and the ESOP
Note;
(d) in the case of the Borrower, pledges and deposits
permitted under Section 6.02(g);
(e) loans and advances to employees of the Borrower or any of
its subsidiaries for travel, entertainment and relocation expenses in
the ordinary course of business in an aggregate principal amount
outstanding at any one time not to exceed $5,000,000;
(f) loans and advances by the Borrower to any Subsidiary that
is a Guarantor;
(g) investments, loans and advances by the Borrower to any
Subsidiary that is not a Guarantor in an aggregate amount not exceeding
$4,000,000 with respect to all such Subsidiaries;
(h) purchases, leases and other Acquisitions permitted under
Section 6.05(i); and
(i) Guarantees created under any Loan Document.
SECTION 6.05. Mergers, Consolidations, Sales of Assets and
Acquisitions. Merge into or consolidate with any other Person, or permit any
other Person to merge into or consolidate with it, or sell, transfer, assign,
lease, sublease or otherwise dispose of (in one transaction or in a series of
transactions) all or any substantial part of its assets (whether now owned or
hereafter acquired) or any capital stock of any Subsidiary, or purchase, lease
or otherwise acquire (in one transaction or a series of transactions) all or any
substantial part of the assets of any other Person; provided, however, that the
foregoing shall not prohibit:
(a) sales of Permitted Investments for cash;
(b) sales, transfers and other dispositions of used or surplus
equipment, vehicles and other assets in the ordinary course of business
(to the extent that the Borrower shall have complied with the
provisions of Section 2.12);
(c) Sale and Leaseback Transactions permitted by Section 6.03;
(d) sales of inventory in the ordinary course of business;
<PAGE> 89
(e) sales, transfers and other dispositions by a Subsidiary to
the Borrower or to any other Subsidiary that is a party to the
Guarantee Agreement and all applicable Security Documents (which, it is
understood, does not include TSM);
(f) the capital contributions described in Section 6.04(g);
(g) the sale or discount without recourse of accounts
receivable arising in the ordinary course of business in connection
with the compromise or collection thereof in the ordinary course of
business;
(h) the merger of any Subsidiary with the Borrower or any
other Subsidiary; provided, however, that (i) at the time of and
immediately after giving effect to any such merger no Default or Event
of Default shall have occurred, (ii) the Borrower shall be the
surviving corporation of any merger involving the Borrower, (iii) no
Foreign Subsidiary may merge with a Domestic Subsidiary unless the
Domestic Subsidiary shall be the surviving corporation in such merger
and (iv) no Subsidiary may merge with another Subsidiary unless the
surviving corporation in such merger is a Guarantor; and
(i) other purchases, leases and other acquisitions of all or
substantially all the assets of, or all the shares or other equity
interests in, a Person or division or line of business ("Acquisitions")
for which the aggregate consideration paid or payable by the Borrower
and the Subsidiaries since the Closing Date does not exceed
$150,000,000 (including for this purpose the aggregate principal amount
of Indebtedness that is assumed or acquired in connection with
Acquisitions); provided, however, that (i) at the time of and
immediately after giving effect to each such Acquisition, no Default or
Event of Default shall have occurred and be continuing, (ii) such
Acquisition is not the result of an unsolicited tender offer by the
Borrower or the Subsidiaries, (iii) after giving effect to such
Acquisition, there shall exist at least $10,000,000 in unused Revolving
Credit Commitments, (iv) after giving effect to such Acquisition, the
Borrower and the Subsidiaries shall be in compliance, on a pro forma
basis after giving effect to such Acquisition with the covenants
contained in Sections 6.13 and 6.14 recomputed as at the last day of
the most recently ended fiscal quarter of the Borrower as if such
Acquisition had occurred on the first day of each relevant period for
testing such compliance, and (v) prior to the consummation of any such
Acquisition for aggregate consideration of at least $15,000,000, the
Borrower shall have delivered a certificate of a Responsible Officer of
the Borrower to the Administrative Agent certifying as to the truth of
the matters set forth in clauses (i), (ii), (iii) and (iv) above and
setting forth reasonably detailed calculations with respect to the
matters being certified to pursuant to clause (iv) above; provided
further, that any single Acquisition or series of related Acquisitions
made for consideration in excess of $50,000,000 will require the
approval of the Required Lenders.
<PAGE> 90
SECTION 6.06. Dividends and Distributions. Declare or pay,
directly or indirectly, any dividend or make any other distribution (by
reduction of capital or otherwise), whether in cash, property, securities or a
combination thereof, with respect to any shares of its capital stock or directly
or indirectly redeem, purchase, retire or otherwise acquire for value (or permit
any Subsidiary to purchase or acquire) any shares of any class of its capital
stock or set aside any amount for any such purpose; provided, however, that (a)
any Subsidiary may declare and pay dividends or make other distributions to the
Borrower or to a Guarantor; (b) the Borrower may repurchase or redeem Common
Stock required to be repurchased or redeemed pursuant to the terms of the ESOP
(and the applicable provisions of ERISA and the Code); (c) unless an Event of
Default or any Default under paragraph (c) of Article VII shall have occurred
and be continuing, the Borrower may repurchase its Common Stock; and (d) unless
an Event of Default or any Default under paragraph (c) of Article VII shall have
occurred and be continuing, the Borrower may declare and pay cash dividends in
respect of its Common Stock (including Common Stock held by the ESOP); provided,
further, that the aggregate amount of repurchases, redemptions and dividends
(net of dividends on unallocated shares of Common Stock of the Borrower that are
returned to the Borrower) made pursuant to clauses (c) and (d) of this Section
6.06 in any fiscal year shall not exceed the excess of (i) $15,000,000 over (ii)
the aggregate amount of prepayments of the Long-Term Pulse Seller Note, the
Rockwell Senior Unsecured Credit Facility Loans and the Exchange Notes during
such fiscal year made pursuant to Section 6.09(c).
SECTION 6.07. Transactions with Affiliates. Sell or transfer
any property or assets to, or purchase or acquire any property or assets from,
or otherwise engage in any other transactions with, any of its Affiliates,
except that as long as no Default or Event of Default shall have occurred and be
continuing, the Borrower or any Subsidiary may engage in any of the foregoing
transactions in the ordinary course of business at prices and on terms and
conditions not less favorable to the Borrower or such Subsidiary than could be
obtained on an arm's-length basis from unrelated third parties; provided,
however, that this Section 6.07 shall not restrict (i) any transaction expressly
permitted by Section 6.04 or 6.06 or (ii) any extension of the current financial
advisory services agreement between the Borrower and Vestar Capital (provided
that the annual fee payable pursuant thereto is not increased).
SECTION 6.08. Business of Borrower and Subsidiaries. Engage at
any time in any business or business activity other than the business conducted
by it as of the Closing Date (or, with respect to TSM, the Effective Date) and
business activities reasonably incidental thereto.
SECTION 6.09. Limitations on Certain Debt Payments and
Interest Payments. Optionally prepay, repurchase or redeem or otherwise defease
or segregate funds with respect to any Indebtedness for borrowed money of the
Borrower or any Subsidiary (including the Long-Term Pulse Seller Note, the
Senior Unsecured Notes, the Rockwell Senior Unsecured Credit Facility Loans and
the Exchange Notes), other than
<PAGE> 91
(a) Indebtedness under this Agreement, (b) Rockwell Senior Unsecured Credit
Facility Loans and Exchange Notes with the proceeds of Indebtedness incurred or
created pursuant to Section 6.01(k) and (c) prepayments of the Long-Term Pulse
Seller Note or the Rockwell Senior Unsecured Credit Facility Loans or the
Exchange Notes (other than as contemplated by clause (b) above) in any fiscal
year in an aggregate amount that does not exceed the excess of (i) $15,000,000
over (ii) the aggregate amount of repurchases, redemptions and dividends (net of
dividends on unallocated shares of Common Stock of the Borrower that are
returned to the Borrower) made pursuant to clauses (c) and (d) of Section 6.06
during such fiscal year.
SECTION 6.10. Amendment of Certain Documents; Certain
Agreements. (a) Permit any termination of, or any amendment or modification
that, in the reasonable judgment of the Lenders, is adverse in any material
respect to the Lenders to, (i) the Certificate of Incorporation of the Borrower,
(ii) the By-laws of the Borrower, (iii) any Recapitalization Document (other
than, subject to Section 9.04, a Loan Document) or (iv) any Rate Protection
Agreement.
(b) Permit any amendment or modification to the terms of the
Senior Unsecured Notes or the related indenture, the Long-Term Pulse Seller Note
or the Pulse Subordination Agreement, or the Rockwell Senior Unsecured Credit
Agreement, or the Exchange Notes or the related indenture that is adverse to the
Lenders.
(c) Permit any Subsidiary to enter into any indenture,
agreement or other instrument that restricts the ability of such Subsidiary to
pay dividends or make distributions on its capital stock.
SECTION 6.11. Limitation on Capital Lease Obligations. Create
or suffer to exist any Capital Lease Obligation, except Capital Lease
Obligations incurred by the Borrower to finance the acquisition of equipment and
other property, so long as (a) the sum of (i) the amount of all such Capital
Lease Obligations, (ii) the aggregate principal amount of any purchase money
Indebtedness incurred by the Borrower in accordance with Section 6.01(c) and
(iii) the aggregate Attributable Debt in respect of all Sale and Leaseback
Transactions entered into by the Borrower or any of its Subsidiaries in
accordance with Section 6.03 shall not exceed $10,000,000 at any time
outstanding, (b) each Capital Lease Obligation at the time of its incurrence
shall have an average life to maturity greater than the average life to maturity
of the Term Loans outstanding at such time and (c) none of the related leases
shall contain financial covenants.
<PAGE> 92
SECTION 6.12. Capital Expenditures. Make or permit to be made
any Capital Expenditures, except that the Borrower may make Capital Expenditures
(a) during the period from June 30, 1998, through December 31, 1998, not in
excess of $20,000,000 and (b) during each fiscal year thereafter of up to the
amount set forth in the table below opposite such fiscal year:
Year: Amount:
----- -------
1999 $30,000,000
2000 $35,000,000
2001 $35,000,000
2002 $40,000,000
2003 $40,000,000
The amount of Capital Expenditures permitted pursuant to this
Section 6.12 (i) in any fiscal year other than 1999, shall be increased by the
total amount of unused permitted Capital Expenditures for the immediately
preceding fiscal year (less an amount equal to any unused Capital Expenditures
carried forward to such preceding year) and (ii) in fiscal year 1999 shall be
increased by the total amount of unused permitted Capital Expenditures for the
period from June 30, 1998, through December 31, 1998.
<PAGE> 93
SECTION 6.13. Interest Expense Coverage Ratio. Permit the
Interest Expense Coverage Ratio for any period of four consecutive fiscal
quarters ending on the last day of the fiscal quarter indicated below (or, if
shorter, the period from and including the Closing Date, to such last day) to be
less than the ratio set forth opposite such date:
Fiscal Quarter Ending: Ratio:
---------------------- ------
June 30, 1998 3.00 to 1.00
September 30, 1998 3.00 to 1.00
December 31, 1998 3.00 to 1.00
March 31, 1999 3.00 to 1.00
June 30, 1999 3.00 to 1.00
September 30, 1999 3.00 to 1.00
December 31, 1999 3.00 to 1.00
March 31, 2000 3.00 to 1.00
June 30, 2000 3.00 to 1.00
September 30, 2000 3.00 to 1.00
December 31, 2000 3.00 to 1.00
March 31, 2001 3.00 to 1.00
June 30, 2001 3.00 to 1.00
September 30, 2001 3.00 to 1.00
December 31, 2001 3.00 to 1.00
Thereafter 3.50 to 1.00
SECTION 6.14. Leverage Ratio. Permit the Leverage Ratio on the
last day of the fiscal quarter indicated below to be in excess of the ratio set
forth opposite such date:
Fiscal Quarter Ending: Ratio:
---------------------- ------
June 30, 1998 4.00 to 1.00
September 30, 1998 4.25 to 1.00
December 31, 1998 4.25 to 1.00
March 31, 1999 4.00 to 1.00
June 30, 1999 4.00 to 1.00
September 30, 1999 4.00 to 1.00
December 31, 1999 4.00 to 1.00
March 31, 2000 3.75 to 1.00
June 30, 2000 3.75 to 1.00
September 30, 2000 3.75 to 1.00
December 31, 2000 3.75 to 1.00
March 31, 2001 3.50 to 1.00
June 30, 2001 3.50 to 1.00
September 30, 2001 3.50 to 1.00
December 31, 2001 3.50 to 1.00
March 31, 2002 3.00 to 1.00
June 30, 2002 3.00 to 1.00
September 30, 2002 3.00 to 1.00
December 31, 2002 3.00 to 1.00
Thereafter 2.50 to 1.00
<PAGE> 94
SECTION 6.15. Asset Value of Guarantors. Notwithstanding
anything to the contrary contained in this Agreement, the Borrower shall not (a)
purchase or acquire any capital stock, evidences of Indebtedness or other
securities of, (b) make any loans or advances to, (c) make any investment or
acquire any other interest in, (d) sell, transfer, assign, lease, sublease or
otherwise dispose of any of its assets (whether now owned or hereafter acquired)
or the capital stock of any Subsidiary to, (e) permit the merger into or
consolidation with any other Person by, (f) permit any other Person to merge
into or consolidate with, or (g) permit the purchase, lease or other acquisition
of any assets of any other Person, other than in the ordinary course of
business, by, any Subsidiary, unless, at the time of and after giving effect to
each such transaction referred to in clauses (a) through (g) above, the book
value of all assets owned or held by Guarantors, on a consolidated basis, would
not exceed $250,000,000.
ARTICLE VII. EVENTS OF DEFAULT
In case of the happening of any of the following events
("Events of Default"):
(a) any representation or warranty made or deemed made in any
Loan Document, or any representation, warranty, statement or
information contained in any report, certificate, financial statement
or other instrument furnished pursuant to any Loan Document, shall
prove to have been false or misleading in any material respect when so
made, deemed made or furnished;
(b) default shall be made in the payment of any principal of
any Loan or reimbursement with respect to any L/C Disbursement when and
as the same shall become due and payable, whether at the due date
thereof or at a date fixed for payment thereof or by acceleration
thereof or otherwise;
(c) default shall be made in the payment of any interest on
any Loan or L/C Disbursement or any Fee or any other amount (other than
an amount referred to in (b) above) due under any Loan Document, when
and as the same shall become due and payable, and such default shall
continue unremedied for a period of five Business Days;
<PAGE> 95
(d) default shall be made in the due observance or performance
by the Borrower or any Subsidiary of any covenant, condition or
agreement contained in Section 2.12(b), 2.12(c), 2.12(d), 5.01(a),
5.05, 5.08, 5.12 or in Article VI;
(e) default shall be made in the due observance or performance
by the Borrower or any Subsidiary of any covenant, condition or
agreement contained in any Loan Document (other than those specified in
clause (b), (c) or (d) above) and such default shall continue
unremedied for a period of 15 days after notice thereof from the
Administrative Agent or any Lender to the Borrower;
(f) the Borrower or any Subsidiary shall (i) fail to pay any
principal or interest, regardless of amount, due in respect of any
Indebtedness in a principal amount in excess of $5,000,000, when and as
the same shall become due and payable (after giving effect to any
applicable grace period), or (ii) fail to observe or perform any other
term, covenant, condition or agreement contained in any agreement or
instrument evidencing or governing any such Indebtedness if the effect
of any failure referred to in this clause (ii) is to cause, or to
permit the holder or holders of such Indebtedness or a trustee on its
or their behalf (with or without the giving of notice, the lapse of
time or both) to cause, such Indebtedness to become due prior to its
stated maturity;
(g) an involuntary proceeding shall be commenced or an
involuntary petition shall be filed seeking (i) relief in respect of
the Borrower or any Subsidiary, or of a substantial part of the
property or assets of the Borrower or a Subsidiary, under Title 11 of
the United States Code, as now constituted or hereafter amended, or any
other Federal or state bankruptcy, insolvency, receivership or similar
law, (ii) the appointment of a receiver, trustee, custodian,
sequestrator, conservator or similar official for the Borrower or any
Subsidiary or for a substantial part of the property or assets of the
Borrower or a Subsidiary or (iii) the winding-up or liquidation of the
Borrower or any Subsidiary; and 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;
(h) the Borrower or any Subsidiary shall (i) voluntarily
commence any proceeding or file any petition seeking relief under Title
11 of the United States Code, as now constituted or hereafter amended,
or any other Federal or state bankruptcy, insolvency, receivership or
similar law, (ii) consent to the institution of, or fail to contest in
a timely and appropriate manner (but within 60 days in any event), any
proceeding or the filing of any petition described in (g) above, (iii)
apply for or consent to the appointment of a receiver, trustee,
custodian, sequestrator, conservator or similar official for the
Borrower or any Subsidiary or for a substantial part of the property or
assets of the Borrower or any Subsidiary, (iv) file an answer admitting
the material allegations of a petition filed against it in any such
proceeding,
<PAGE> 96
(v) make a general assignment for the benefit of creditors, (vi) become
unable, admit in writing its inability or fail generally to pay its
debts as they become due or (vii) take any action for the purpose of
effecting any of the foregoing;
(i) one or more judgments for the payment of money in an
aggregate amount in excess of $5,000,000 (to the extent not covered by
insurance) shall be rendered against the Borrower, any Subsidiary or
any combination thereof and the same shall remain undischarged for a
period of 45 consecutive days during which execution shall not be
effectively stayed, or any action shall be legally taken by a judgment
creditor to levy upon assets or properties of the Borrower or any
Subsidiary to enforce any such judgment;
(j) a Reportable Event or Reportable Events, or a failure to
make a required installment or other payment (within the meaning of
Section 412(n)(l) of the Code), shall have occurred with respect to any
Plan or Plans that could reasonably be expected to result in liability
of the Borrower to the PBGC or to a Plan and, within 30 days after the
reporting of any such Reportable Event to the Administrative Agent or
after the receipt by the Administrative Agent of the statement required
pursuant to Section 5.06(b)(iii), the Administrative Agent shall have
notified the Borrower in writing that (i) the Required Lenders have
reasonably determined that, on the basis of such Reportable Event or
Reportable Events or the failure to make a required payment, there are
reasonable grounds (A) for the termination of such Plan or Plans by the
PBGC, (B) for the appointment by the appropriate United States district
court of a trustee to administer such Plan or Plans or (C) for the
imposition of a lien in favor of a Plan and (ii) as a result thereof an
Event of Default exists hereunder; or a trustee shall be appointed by a
United States district court to administer any such Plan or Plans; or
the PBGC shall institute proceedings to terminate any Plan or Plans or
give notice of its intention to do so; and, in connection with any of
the events set forth in this clause (j), the liability that the
Borrower, its Subsidiaries and its ERISA Affiliates could be reasonably
expected to incur would have a Material Adverse Effect;
(k) (i) the Borrower, any Subsidiary or any ERISA Affiliate
shall have been notified by the sponsor of a Multiemployer Plan (or
otherwise shall know or have a reasonable basis to believe) that it has
incurred Withdrawal Liability to such Multiemployer Plan, (ii) the
Borrower, such Subsidiary or such ERISA Affiliate shall not have
reasonable grounds for contesting such Withdrawal Liability or shall
not in fact contest such Withdrawal Liability in a timely and
appropriate manner and (iii) the amount of the Withdrawal Liability
specified in such notice, when aggregated with all other amounts
required to be paid to Multiemployer Plans in connection with
unsatisfied Withdrawal Liabilities (determined as of the date or dates
of such notification), could be reasonably expected to have a Material
Adverse Effect;
<PAGE> 97
(l) the Borrower, any Subsidiary or any ERISA Affiliate shall
have been notified by the sponsor of a Multiemployer Plan (or otherwise
shall know or have a reasonable basis to believe) that such
Multiemployer Plan is in reorganization or is being terminated, within
the meaning of Title IV of the ERISA, if solely as a result of such
reorganization or termination the aggregate annual contributions of the
Borrower, the Subsidiaries and the ERISA Affiliates to all
Multiemployer Plans that are then in reorganization or have been or are
being terminated have been or will be increased over the amounts
required to be contributed to such Multiemployer Plans for their most
recently completed plan years by an amount that could be reasonably
expected to have a Material Adverse Effect;
(m) there shall have occurred a Change in Control;
(n) any security interest purported to be created by any
Security Document shall cease to be, or shall be asserted by the
Borrower not to be, a valid, perfected, first priority (except as
otherwise expressly provided in the Credit Agreement or such Security
Document) security interest in the securities, assets or properties
covered thereby (other than a security interest in securities, assets
or properties having, in the aggregate, a fair market value not in
excess of $100,000), except to the extent that any such loss of
perfection or priority results from the failure of the Collateral Agent
to maintain possession of certificates representing securities pledged
under the Pledge Agreement or to file UCC continuation statements
unless the Borrower has been requested by the Collateral Agent in
writing to file such statements in a timely fashion and fails to do so;
(o) any Loan Document shall not be for any reason, or shall be
asserted by the Borrower not to be, in full force and effect and
enforceable in all material respects in accordance with its terms;
(p) the Obligations and the guarantees thereof pursuant to the
Guarantee Agreement shall cease to constitute, or shall be asserted by
the Borrower or any Guarantor not to constitute, senior indebtedness
under the subordination provisions of any subordinated Indebtedness of
the Borrower or such subordination provisions shall be invalidated or
otherwise cease to be a legal, valid and binding obligation of the
parties thereto, enforceable in accordance with its terms; or
(q) any material provision of any Guarantee Agreement shall
cease to be in full force and effect and enforceable in accordance with
its terms for any reason whatsoever or any Guarantor shall contest or
deny in writing the validity or enforceability of any of its
obligations under the Guarantee Agreement, as applicable, or the
Obligations shall cease to be entitled to the material benefits of any
other Loan Document for any reason whatsoever;
<PAGE> 98
then, and in every such event (other than an event with respect to the Borrower
described in paragraph (g) or (h) above), 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 Borrower, take either or both of
the following actions, at the same or different times: (i) terminate forthwith
the Commitments and (ii) declare the Loans then outstanding to be forthwith due
and payable in whole or in part, whereupon the principal of the Loans so
declared to be due and payable, together with accrued interest thereon and any
unpaid accrued Fees and all other liabilities of the Borrower accrued hereunder
and under any other Loan Document, shall become forthwith due and payable,
without presentment, demand, protest or any other notice of any kind, all of
which are hereby expressly waived by the Borrower, anything contained herein or
in any other Loan Document to the contrary notwithstanding; and in any event
with respect to the Borrower described in paragraph (g) or (h) above, the
Commitments shall automatically terminate and the principal of the Loans then
outstanding, together with accrued interest thereon and any unpaid accrued Fees
and all other liabilities of the Borrower accrued hereunder and under any other
Loan Document, shall automatically become due and payable, without presentment,
demand, protest or any other notice of any kind, all of which are hereby
expressly waived by the Borrower, anything contained herein or in any other Loan
Document to the contrary notwithstanding.
ARTICLE VIII. THE AGENTS
In order to expedite the transactions contemplated by this
Agreement, The Chase Manhattan Bank is hereby appointed to act as Administrative
Agent and Collateral Agent on behalf of the Lenders and the Issuing Bank and BNY
is hereby appointed as Documentation Agent on behalf of the Lenders (the
Administrative Agent, the Collateral Agent and the Documentation Agent are
referred to collectively as the "Agents"). Each of the Lenders and each assignee
of any such Lender, hereby irrevocably authorizes the Agents to take such
actions on behalf of such Lender or assignee or the Issuing Bank and to exercise
such powers as are specifically delegated to the Agents by the terms and
provisions hereof and of the other Loan Documents, together with such actions
and powers as are reasonably incidental thereto. The Administrative Agent is
hereby expressly authorized by the Lenders and the Issuing Bank, without hereby
limiting any implied authority, (a) to receive on behalf of the Lenders and the
Issuing Bank all payments of principal of and interest on the Loans, all
payments in respect of L/C Disbursements and all other amounts due to the
Lenders hereunder, and to distribute to each Lender or the Issuing Bank on the
due date therefor its proper share of each payment so received; (b) to give
notice on behalf of each of the Lenders to the Borrower of any Event of Default
specified in this Agreement of which the Administrative Agent has actual
knowledge acquired in connection with its agency hereunder; and (c) to
distribute promptly to each Lender copies of all notices, financial statements
and other materials delivered by the Borrower pursuant to this Agreement as
received by the Administrative Agent. Without limiting the generality of the
foregoing, the
<PAGE> 99
Agents are hereby expressly authorized to execute any and all documents
(including releases) with respect to the Collateral and the rights of the
Secured Parties with respect thereto, as contemplated by and in accordance with
the provisions of this Agreement and the Security Documents.
Neither the Agents nor any of their respective directors,
officers, employees or agents shall be liable as such for any action taken or
omitted by any of them except for its or his own gross negligence or wilful
misconduct, or be responsible for any statement, warranty or representation
herein or the contents of any document delivered in connection herewith, or be
required to ascertain or to make any inquiry concerning the performance or
observance by the Borrower or any other Loan Party of any of the terms,
conditions, covenants or agreements contained in any Loan Document. The Agents
shall not be responsible to the Lenders for the due execution, genuineness,
validity, enforceability or effectiveness of this Agreement or any other Loan
Documents or other instruments or agreements. The Agents shall in all cases be
fully protected in acting, or refraining from acting, in accordance with written
instructions signed by the Required Lenders (or, in the case of any matter
requiring the approval of all the Lenders, in accordance with written
instructions signed by all the Lenders) and, except as otherwise specifically
provided herein, such instructions and any action or inaction pursuant thereto
shall be binding on all the Lenders. Each Agent shall, in the absence of
knowledge to the contrary, be entitled to rely on any instrument or document
believed by it in good faith to be genuine and correct and to have been signed
or sent by the proper Person or Persons. Neither the Agents nor any of their
respective directors, officers, employees or agents shall have any
responsibility to the Borrower or any other Loan Party on account of the failure
of or delay in performance or breach by any Lender or the Issuing Bank of any of
its obligations hereunder or to any Lender or the Issuing Bank on account of the
failure of or delay in performance or breach by any other Lender or the Issuing
Bank or the Borrower or any other Loan Party of any of their respective
obligations hereunder or under any other Loan Document or in connection herewith
or therewith. Each of the Agents may execute any and all duties hereunder by or
through agents or employees and shall be entitled to rely upon the advice of
legal counsel selected by it with reasonable care with respect to all matters
arising hereunder and shall not be liable for any action taken or suffered in
good faith by it in accordance with the advice of such counsel.
The Lenders hereby acknowledge that no Agent shall be under
any duty to take any discretionary action permitted to be taken by it pursuant
to the provisions of this Agreement unless it shall be requested in writing to
do so by the Required Lenders.
Subject to the appointment and acceptance of a successor Agent
as provided below, any Agent may resign at any time by notifying the Lenders and
the Borrower. Upon any such resignation, the Required Lenders shall have the
right to appoint a successor, which successor shall be reasonably acceptable to
the Borrower. If no successor shall have been so appointed by the Required
Lenders and shall have accepted such appointment within
<PAGE> 100
30 days after the retiring Agent gives notice of its resignation, then the
retiring Agent may, on behalf of the Lenders, appoint a successor Agent which
shall be a bank with an office in New York, New York, having a combined capital
and surplus of at least $500,000,000 or an Affiliate of any such bank and be
reasonably acceptable to the Borrower. Upon the acceptance of any appointment as
Agent hereunder by a successor bank, 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. After the Agent's resignation hereunder, the provisions of this
Article and Section 9.05 shall continue in effect for its benefit in respect of
any actions taken or omitted to be taken by it while it was acting as Agent.
With respect to the Loans made by it hereunder, each Agent in
its individual capacity and not as Agent shall have the same rights and powers
as any other Lender and may exercise the same as though it were not an Agent,
and the Agents and their Affiliates may accept deposits from, lend money to and
generally engage in any kind of business with the Borrower or any Subsidiary or
other Affiliate thereof as if it were not an Agent.
Each Lender agrees (i) to reimburse the Agents, on demand, in
the amount of its pro rata share (based on its Commitments hereunder) of any
expenses incurred for the benefit of the Lenders by the Agents, including
reasonable counsel fees and compensation of agents paid for services rendered on
behalf of the Lenders, that shall not have been reimbursed by the Borrower and
(ii) to indemnify and hold harmless each Agent and any of its directors,
officers, employees or agents, on demand, in the amount of such pro rata share,
from and against any and all liabilities, taxes (other than income taxes),
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements of any kind or nature whatsoever that may be imposed
on, incurred by or asserted against it in its capacity as Agent or any of them
in any way relating to or arising out of this Agreement or any other Loan
Document or any action taken or omitted by it or any of them under this
Agreement or any other Loan Document, to the extent the same shall not have been
reimbursed by the Borrower; provided, however, that no Lender shall be liable to
an Agent for any portion of such liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements resulting
from the gross negligence or wilful misconduct of such Agent or any of its
directors, officers, employees or agents.
Each Lender acknowledges that it has, independently and
without reliance upon the Agents 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 the Agents 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 Agreement or any other Loan Document, any related
agreement or any document furnished hereunder or thereunder.
<PAGE> 101
ARTICLE IX. MISCELLANEOUS
SECTION 9.01. Notices. 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 Borrower, to it at 1001 Station Street,
Wilmerding, PA 15148, Attention: Mr. W. Clayton Davis (Telecopy No.
(412) 825-1333), with a copy to Robert J. Brooks at the same address
(Telecopy No. (412) 825-1156);
(b) if to the Administrative Agent, to Chase Manhattan Bank
Loan and Agency Services Group, One Chase Manhattan Plaza, 8th Floor,
New York, New York 10081, Attention of Doris Mesa (Telecopy No. (212)
552-5650), with a copy to The Chase Manhattan Bank, at 270 Park Avenue,
New York 10017, Attention of Julie Long (Telecopy No. (212) 972-9854);
(c) if to the Issuing Bank, to it at Letter of Credit
Department, 1201 Market Street, 8th Floor, Wilmington, Delaware 19801,
Attention of Michael Handango (Telecopy No. (302) 428-3390 or (302)
984-4904); and
(d) if to a Lender, to it at its address (or telecopy number)
set forth on Schedule 2.01 or in the Assignment and Acceptance pursuant
to which such Lender shall have become a party 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 if delivered by hand or overnight courier service or sent by
telecopy or on the date five Business Days after dispatch, if mailed by
certified or registered mail, in each case delivered, sent or mailed (properly
addressed) to such party as provided in this Section 9.01 or in accordance with
the latest unrevoked direction from such party given in accordance with this
Section 9.01.
SECTION 9.02. Survival of Agreement. All covenants,
agreements, representations and warranties made by the Borrower herein and in
the certificates or other instruments prepared or delivered in connection with
or pursuant to this Agreement or any other Loan Document shall be considered to
have been relied upon by the Lenders and the Issuing Bank and shall survive the
making by the Lenders of the Loans and the issuance of Letters of Credit by the
Issuing Bank, regardless of any investigation made by the Lenders or the Issuing
Bank or on their behalf, and shall continue in full force and effect as long as
the principal of or any accrued interest on any Loan or any Fee or any other
amount payable under this Agreement or any other Loan Document is outstanding
and unpaid or any Letter of Credit is outstanding and so long as the Commitments
have not been terminated.
<PAGE> 102
SECTION 9.03. Binding Effect. This Agreement shall become
effective when it shall have been executed by the Borrower and the
Administrative Agent and when the Administrative Agent shall have received
counterparts hereof that, 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 permitted successors and
assigns.
SECTION 9.04. Successors and Assigns. (a) Whenever in this
Agreement any of the parties hereto is referred to, such reference shall be
deemed to include the permitted successors and assigns of such party; and all
covenants, promises and agreements by or on behalf of the Borrower, the
Administrative Agent, the Issuing Bank or the Lenders that are contained in this
Agreement shall bind and inure to the benefit of their respective successors and
assigns.
(b) Each Lender may assign to one or more assignees all or a
portion of its interests, rights and obligations under this Agreement (including
all or a portion of its Commitments, the Loans and its L/C Exposure at the time
owing to it); provided, however, that (i) except in the case of an assignment to
a Lender or an Affiliate of a Lender, the Borrower (other than during the
continuance of an Event of Default under Article VII (g) or (h)) and the
Administrative Agent (and, in the case of any assignment of a Revolving Credit
Commitment, the Issuing Bank and the Swingline Lender) must give their prior
written consent to such assignment (which consent shall not be unreasonably
withheld or delayed), (ii) except in the case of an assignment to a Lender or an
Affiliate of a Lender, the amount of the Commitments 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 (or, if less, the entire Commitment of
the assigning Lender), (iii) the parties to each such assignment shall execute
and deliver to the Administrative Agent an Assignment and Acceptance, together
with a processing and recordation fee of $3,500 (provided, however, that if such
assignment is being effected pursuant to Section 2.13(c), 2.14(c) or 2.19(g) or
paragraph (j) below, such recordation fee shall be paid to the Administrative
Agent by the Borrower or the Issuing Bank, as applicable), and (iv) the
assignee, if it shall not be a Lender, shall deliver to the Administrative Agent
an Administrative Questionnaire. Assignments of Commitments need not be pro
rata. Upon acceptance and recording pursuant to paragraph (e) below, from and
after the effective date specified in each Assignment and Acceptance, which
effective date shall be at least five Business Days after the execution thereof,
(A) the assignee thereunder shall be a party hereto and, to the extent of the
interest assigned by such Assignment and Acceptance, have the rights and
obligations of a Lender under this Agreement and (B) 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 or the remaining portion of an
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 2.13, 2.15, 2.19 and 9.05, as well as to any interest and
Fees accrued for its account and not yet paid).
<PAGE> 103
(c) By executing and delivering an Assignment and Acceptance,
the assigning Lender thereunder and the assignee thereunder shall be deemed to
confirm to and agree with each other and the other parties hereto as follows:
(i) such assigning Lender warrants that it is the legal and beneficial owner of
the interest being assigned thereby free and clear of any adverse claim and that
its Term Loan Commitment and Revolving Credit Commitment, the outstanding
balances of its Term Loans and Revolving Loans and its outstanding L/C Exposure,
in each case without giving effect to assignments thereof which have not become
effective, are as set forth in such Assignment and Acceptance, (ii) except as
set forth in (i) above, such assigning Lender makes no representation or
warranty and assumes no responsibility with respect to any statements,
warranties or representations made in or in connection with this Agreement, or
the execution, legality, validity, enforceability, genuineness, sufficiency or
value of this Agreement, any other Loan Document or any other instrument or
document furnished pursuant hereto, or the financial condition of any Loan Party
or the performance or observance by any Loan Party of any of its obligations
under this Agreement, any other Loan Document or any other instrument or
document furnished pursuant hereto; (iii) such assignee represents and warrants
that it is legally authorized to enter into such Assignment and Acceptance; (iv)
such assignee confirms that it has received a copy of this Agreement, together
with copies of the most recent financial statements, if any, delivered pursuant
to Section 5.04 and such other documents and information as it has deemed
appropriate to make its own credit analysis and decision to enter into such
Assignment and Acceptance; (v) such assignee will independently and without
reliance upon the Administrative Agent, the Collateral Agent, such assigning
Lender or any other Lender and based on such documents and information as it
shall deem appropriate at the time, continue to make its own credit decisions in
taking or not taking action under this Agreement; (vi) such assignee appoints
and authorizes the Administrative Agent and the Collateral Agent to take such
action as agent on its behalf and to exercise such powers under this Agreement
as are delegated to the Administrative Agent and the Collateral Agent,
respectively, by the terms hereof, together with such powers as are reasonably
incidental thereto; and (vii) such assignee agrees that it will perform in
accordance with their terms all the obligations which by the terms of this
Agreement are required to be performed by it as a Lender.
(d) The Administrative Agent, acting for this purpose as an
agent of the Borrower, 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, principal amount of the Loans owing to and L/C Exposure of, each Lender
pursuant to the terms hereof from time to time (the "Register"). The entries in
the Register shall be conclusive and the Borrower, the Administrative Agent, the
Issuing Bank, the Collateral Agent 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 Borrower, the
Issuing Bank, the Collateral Agent and any Lender, at any reasonable time and
from time to time upon reasonable prior notice.
<PAGE> 104
(e) Upon its receipt of a duly completed Assignment and
Acceptance executed by an assigning Lender and an assignee, an Administrative
Questionnaire completed in respect of the assignee (unless the assignee shall
already be a Lender hereunder), the processing and recordation fee referred to
in paragraph (b) above and, if required, the written consent of the Borrower,
the Swingline Lender, the Issuing Bank and the Administrative Agent to such
assignment, the Administrative Agent shall (i) accept such Assignment and
Acceptance, (ii) record the information contained therein in the Register and
(iii) give prompt notice thereof to the Lenders, the Issuing Bank and the
Swingline Lender. No assignment shall be effective unless it has been recorded
in the Register as provided in this paragraph (e).
(f) Each Lender may without the consent of the Borrower, the
Swingline Lender, the Issuing Bank or the Administrative Agent sell
participations to one or more banks or other entities in all or a portion of its
rights and obligations under this Agreement (including all or a portion of its
Commitment, the Loans owing to it and its L/C Exposure); provided, however, 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 obligations, (iii) the participating banks or other entities
shall be entitled to the benefit of the cost protection provisions contained in
Sections 2.13, 2.15 and 2.19 to the same extent as if they were Lenders and (iv)
the Borrower, the Administrative Agent, the Issuing Bank and the Lenders shall
continue to deal solely and directly with such Lender in connection with such
Lender's rights and obligations under this Agreement, and such Lender shall
retain the sole right to enforce the obligations of the Borrower relating to the
Loans or L/C Disbursements and to approve any amendment, modification or waiver
of any provision of this Agreement (other than amendments, modifications or
waivers decreasing any fees payable hereunder or the amount of principal of or
the rate at which interest is payable on the Loans, extending any scheduled
principal payment date or date fixed for the payment of interest on the Loans
and the actual release of all or substantially all the Collateral under the
Security Documents).
(g) Any Lender or participant may, in connection with any
assignment or participation or proposed assignment or participation pursuant to
this Section 9.04, disclose to the assignee or participant or proposed assignee
or participant any information relating to the Borrower furnished to such Lender
by or on behalf of the Borrower; provided, however, that, prior to any such
disclosure of information designated by the Borrower as confidential, each such
assignee or participant or proposed assignee or participant shall execute an
agreement whereby such assignee or participant shall agree (subject to customary
exceptions) to preserve the confidentiality of such confidential information on
terms no less restrictive than those applicable to the Lenders pursuant to
Section 9.17.
<PAGE> 105
(h) Any Lender may at any time assign all or any portion of
its rights under this Agreement to a Federal Reserve Bank to secure extensions
of credit by such Federal Reserve Bank to such Lender; provided, however, that
no such assignment shall release a Lender from any of its obligations hereunder
or substitute any such Bank for such Lender as a party hereto. In order to
facilitate such an assignment to a Federal Reserve Bank, the Borrower shall, at
the request of the assigning Lender, duly execute and deliver to the assigning
Lender a promissory note or notes evidencing the Loans made to the Borrower by
the assigning Lender hereunder.
(i) The Borrower shall not assign or delegate any of its
rights or duties hereunder without the prior written consent of the
Administrative Agent, the Issuing Bank and each Lender, and any attempted
assignment without such consent shall be null and void.
(j) In the event that Standard & Poor's, Moody's and
Thompson's BankWatch (or InsuranceWatch Ratings Service, in the case of Lenders
that are insurance companies (or Best's Insurance Reports, if such insurance
company is not rated by Insurance Watch Ratings Service)) shall, after the date
that any Lender becomes a Lender, downgrade the long-term certificate of deposit
ratings (or long-term senior debt ratings in the case of a Lender that is not a
bank) of such Lender, and the resulting ratings shall be below BBB-, Baa3 and C
(or BB, in the case of a Lender that is an insurance company (or B, in the case
of an insurance company not rated by InsuranceWatch Ratings Service)),
respectively, then the Issuing Bank shall have the right, but not the
obligation, at its own expense, upon notice to such Lender and the
Administrative Agent, to replace (or to request the Borrower to use its
reasonable efforts to replace) such Lender with an assignee (in accordance with
and subject to the restrictions contained in paragraph (b) above), and such
Lender hereby agrees to transfer and assign without recourse (in accordance with
and subject to the restrictions contained in paragraph (b) above) all its
interests, rights and obligations in respect of its Revolving Credit Commitment
to such assignee; provided, however, that (i) such assignee shall be reasonably
acceptable to the Administrative Agent and the Borrower, (ii) no such assignment
shall conflict with any law, rule and regulation or order of any Governmental
Authority and (iii) the Issuing Bank or such assignee, as the case may be, shall
pay to such Lender in immediately available funds on the date of such assignment
the principal of and interest accrued to the date of payment on the Loans made
by such Lender hereunder and all other amounts accrued for such Lender's account
or owed to it hereunder.
SECTION 9.05. Expenses; Indemnity. (a) The Borrower agrees to
pay all reasonable out-of-pocket expenses incurred by the Agents, the Issuing
Bank and the Swingline Lender in connection with the preparation and
administration of this Agreement and the other Loan Documents or in connection
with any amendments, modifications or waivers of the provisions hereof or
thereof (whether or not the transactions hereby contemplated shall be
consummated) or incurred by any Agent or Lender or the Issuing Bank in
connection with the enforcement or protection of their rights in connection with
<PAGE> 106
this Agreement and the other Loan Documents or in connection with the Loans made
or Letters of Credit issued hereunder, including the fees, charges and
disbursements of Cravath, Swaine & Moore, counsel for the Administrative Agent,
the Collateral Agent and the Issuing Bank, and one local counsel in each
applicable jurisdiction, and, in connection with any such enforcement or
protection, the fees, charges and disbursements of any other counsel for any
Agent or Lender or the Issuing Bank.
(b) The Borrower agrees to indemnify each Agent, each Lender
and the Issuing Bank, each Affiliate of any of the foregoing Persons and each of
their respective directors, officers, employees and agents (each such Person
being called an "Indemnitee") against, and to hold each Indemnitee harmless
from, any and all losses, claims, damages, liabilities and related expenses,
including reasonable counsel fees, charges and disbursements, incurred by or
asserted against any Indemnitee arising out of, in any way connected with, or as
a result of any claim, litigation, investigation or proceeding, whether or not
any Indemnitee is a party thereto, relating to (i) the execution or delivery of
this Agreement or any other Loan Document or any agreement or instrument
contemplated thereby, the performance by the parties thereto of their respective
obligations thereunder or the consummation of the Transactions and the other
transactions contemplated thereby, (ii) the use of the proceeds of the Loans or
issuance of Letters of Credit, or (iii) any actual or alleged presence or
Release of Hazardous Materials on any property owned or operated by the Borrower
or any of the Subsidiaries, or any Environmental Claim related in any way to the
Borrower or the Subsidiaries; provided, however, that such indemnity shall not,
as to any Indemnitee, be available to the extent that such losses, claims,
damages, liabilities or related expenses have resulted from the gross negligence
or wilful misconduct of such Indemnitee.
(c) The provisions of this Section 9.05 shall remain operative
and in full force and effect regardless of the expiration of the term of this
Agreement, the consummation of the transactions contemplated hereby, the
repayment of any of the Loans, the expiration of the Commitments, the expiration
of any Letter of Credit, the invalidity or unenforceability of any term or
provision of this Agreement or any other Loan Document, or any investigation
made by or on behalf of the Administrative Agent, the Collateral Agent, any
Lender or the Issuing Bank. All amounts due under this Section 9.05 shall be
payable on written demand therefor.
SECTION 9.06. Right of Setoff. If an Event of Default shall
have occurred and be continuing, each Lender 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 indebtedness at any time owing by such Lender
to or for the credit or the account of the Borrower against any of and all the
obligations of the Borrower now or hereafter existing under this Agreement and
other Loan Documents held by such Lender, irrespective of whether or not such
Lender shall have made any demand under this Agreement or such other Loan
Document and although such obligations may be unmatured, and irrespective of
whether such Lender is otherwise fully secured. The rights of each Lender under
this Section are in addition to other rights and remedies (including other
rights of setoff) that such Lender may have.
<PAGE> 107
SECTION 9.07. APPLICABLE LAW. THIS AGREEMENT AND THE OTHER
LOAN DOCUMENTS (OTHER THAN LETTERS OF CREDIT AND AS EXPRESSLY SET FORTH IN OTHER
LOAN DOCUMENTS) SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS
OF THE STATE OF NEW YORK. EACH LETTER OF CREDIT SHALL BE GOVERNED BY, AND SHALL
BE CONSTRUED IN ACCORDANCE WITH, THE LAWS OR RULES DESIGNATED IN SUCH LETTER OF
CREDIT, OR IF NO SUCH LAWS OR RULES ARE DESIGNATED, THE UNIFORM CUSTOMS AND
PRACTICE FOR DOCUMENTARY CREDITS (1993 REVISION), INTERNATIONAL CHAMBER OF
COMMERCE, PUBLICATION NO. 500 (THE "UNIFORM CUSTOMS") AND, AS TO MATTERS NOT
GOVERNED BY THE UNIFORM CUSTOMS, THE LAWS OF THE STATE OF NEW YORK.
SECTION 9.08. Waivers; Amendment. (a) No failure or delay of
any Agent, any Lender or the Issuing Bank in exercising any power or right
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 Bank 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 this Agreement or any other Loan Document or consent to any
departure by the Borrower therefrom shall in any event be effective unless the
same shall be permitted by paragraph (b) below, and then such waiver or consent
shall be effective only in the specific instance and for the purpose for which
given. No notice or demand on the Borrower in any case shall entitle the
Borrower to any other or further notice or demand in similar or other
circumstances.
(b) Neither this Agreement nor any provision hereof may be
waived, amended or modified except pursuant to an agreement or agreements in
writing entered into by the Borrower and the Required Lenders; provided,
however, that no such agreement (i) shall (A) decrease the principal amount of,
or extend the maturity of or any scheduled principal payment date of, or date
for the payment of any interest on, any Loan, or any date for reimbursement of
an L/C Disbursement, or waive or excuse any such payment or any part thereof, or
decrease the rate of interest on any Loan or L/C Disbursement, without the prior
written consent of each Lender affected thereby, (B) increase or extend the
Commitments or decrease the Commitment Fees of any Lender without the prior
written consent of such Lender, or (C) amend or modify the provisions of Section
2.16, the provisions of this Section 9.08, the definition of "Required Lenders",
release all or any substantial part of the Collateral or release from its
obligations under the Guarantee Agreement any Guarantor that owns a substantial
part of the assets of the Borrower on a consolidated basis, in each case without
the prior written consent of each Lender affected thereby, (ii) shall amend,
modify
<PAGE> 108
or otherwise affect the rights or duties of any Agent, the Issuing Bank or the
Swingline Lender hereunder or under any other Loan Document without the prior
written consent of such Agent, the Issuing Bank or the Swingline Lender, as
applicable, (iii) shall change the allocation between June 1998 Term Loans and
September 1998 Term Loans of any prepayment pursuant to Section 2.12 without the
prior written consent of (A) Lenders holding June 1998 Term Loans representing
more than 50% of the aggregate outstanding principal amount of the June 1998
Term Loans and (B) Lenders holding September 1998 Term Loans representing more
than 50% of the aggregate outstanding principal amount of the September 1998
Term Loans or (iv) shall operate as a waiver of a Default or Event of Default,
amendment or modification for the purposes of Section 4.01 without the prior
written consent of Lenders holding more than 50% of the Revolving Credit
Commitments.
SECTION 9.09. Interest Rate Limitation. Notwithstanding
anything herein to the contrary, if at any time the interest rate applicable to
any Loan or participation in any L/C Disbursement, together with all fees,
charges and other amounts that are treated as interest on such Loan or
participation in such L/C Disbursement under applicable law (collectively the
"Charges"), shall exceed the maximum lawful rate (the "Maximum Rate") that may
be contracted for, charged, taken, received or reserved by the Lender holding
such Loan or participation in accordance with applicable law, the rate of
interest payable in respect of such Loan or participation 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 or participation 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 participations 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 9.10. Entire Agreement. This Agreement and the other
Loan Documents constitute the entire contract between the parties relative to
the subject matter hereof. Any previous agreement among the parties with respect
to the subject matter hereof is superseded by this Agreement and the other Loan
Documents. Nothing in this Agreement or in the other Loan Documents, expressed
or implied, is intended to confer upon any party other than the parties hereto
and thereto any rights, remedies, obligations or liabilities under or by reason
of this Agreement or the other Loan Documents.
SECTION 9.11. 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 RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING
OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY OF THE OTHER LOAN
DOCUMENTS. EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR
ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH
OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE
<PAGE> 109
FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE
BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS, AS
APPLICABLE, BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN
THIS SECTION 9.11.
SECTION 9.12. Severability. In the event any one or more of
the provisions contained in this Agreement or in any other Loan Document should
be held invalid, illegal or unenforceable in any respect, the validity, legality
and enforceability of the remaining provisions contained herein and therein
shall not in any way be affected or impaired thereby. The parties shall endeavor
in good-faith negotiations to replace the invalid, illegal or unenforceable
provisions with valid provisions the economic effect of which comes as close as
possible to that of the invalid, illegal or unenforceable provisions.
SECTION 9.13. Counterparts. 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, and shall become effective as provided in Section
9.03. Delivery of an executed signature page to this Agreement by facsimile
transmission shall be as effective as delivery of a manually signed counterpart
of this Agreement.
SECTION 9.14. 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 are not to affect the construction of, or to be taken
into consideration in interpreting, this Agreement.
SECTION 9.15. Jurisdiction; Consent to Service of Process. (a)
The Borrower hereby irrevocably and unconditionally submits, for itself and its
property, to the nonexclusive jurisdiction of any New York State court or
Federal court of the United States of America sitting in New York City, and any
appellate court from any thereof, in any action or proceeding arising out of or
relating to this Agreement or the other Loan Documents, or for recognition or
enforcement of any judgment, and each of the parties hereto hereby irrevocably
and unconditionally agrees that all claims in respect of any such action or
proceeding may be heard and determined in such New York State or, to the extent
permitted by law, in such Federal court. Each of the parties hereto agrees that
a final judgment in any such action or proceeding 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 shall affect any right that any
Lender may otherwise have to bring any action or proceeding relating to this
Agreement or the other Loan Documents against the Borrower or its properties in
the courts of any jurisdiction.
(b) The 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 the other
Loan Documents in any New York State or Federal court. Each of the parties
hereto hereby irrevocably waives, to the fullest extent permitted by law, the
defense of an inconvenient forum to the maintenance of such action or proceeding
in any such court.
<PAGE> 110
(c) Each party to this Agreement irrevocably consents to
service of process in the manner provided for notices in Section 9.01. Nothing
in this Agreement will affect the right of any party to this Agreement to serve
process in any other manner permitted by law.
SECTION 9.16. Mortgaged Property Casualty and Condemnation.
(a) Notwithstanding any other provision of this Agreement or the Security
Documents, the Collateral Agent is authorized, at its option (for the benefit of
the Secured Parties), to collect and receive, to the extent payable to the
Borrower or any other Loan Party, all insurance proceeds, damages, claims and
rights of action under any insurance policies with respect to any casualty or
other insured damage ("Casualty") to any portion of any Mortgaged Property
(collectively, "Insurance Proceeds"), unless the amount of the related Insurance
Proceeds is less than $10,000,000 and an Event of Default shall not have
occurred and be continuing. The Borrower agrees to notify the Collateral Agent
and the Administrative Agent, in writing, promptly after the Borrower obtains
notice or knowledge of any Casualty to a Mortgaged Property, which notice shall
set forth a description of such Casualty and the Borrower's good faith estimate
of the amount of related damages. The Borrower agrees, subject to the foregoing
limitations, to endorse and transfer or cause to be endorsed or transferred any
Insurance Proceeds received by it or any other Loan Party to the Collateral
Agent.
(b) The Borrower will notify the Collateral Agent and the
Administrative Agent immediately upon obtaining knowledge of the institution of
any action or proceeding for the taking of any Mortgaged Property, or any part
thereof or interest therein, for public or quasi-public use under the power of
eminent domain, by reason of any public improvement or condemnation proceeding,
or in any other manner (a "Condemnation"). No settlement or compromise of any
claim in connection with any such action or proceeding shall be made without the
consent of the Collateral Agent, which consent shall not be unreasonably
withheld. The Collateral Agent is authorized, at its option (for the benefit of
the Secured Parties), to collect and receive all proceeds of any such
Condemnation (in each case, the "Condemnation Proceeds"). The Borrower agrees to
execute or cause to be executed such further assignments of any Condemnation
Proceeds as the Collateral Agent may reasonably require.
(c) In the event of a Condemnation of all or substantially all
of any Mortgaged Property (which determination shall be made by the Collateral
Agent in its reasonable discretion), unless the Borrower shall have notified the
Collateral Agent in writing promptly after such Condemnation that it intends to
replace the related Mortgaged Property (and no Default or Event of Default shall
have occurred and be continuing at the time of such election), the Collateral
Agent may deem such event to be a Prepayment Event, and shall apply the
Condemnation Proceeds received as a result of such Condemnation (less the
reasonable costs, if any, incurred by the Collateral Agent or the Borrower in
the recovery
<PAGE> 111
of such Condemnation Proceeds, including reasonable attorneys' fees, other
charges and disbursements (the Collateral Agent having agreed to reimburse the
Borrower from such Condemnation Proceeds such costs incurred by the Borrower))
to prepay obligations outstanding under this Agreement to the extent required
under Section 2.12, with any remaining Condemnation Proceeds being returned to
the Borrower. If the Borrower shall elect to replace a Mortgaged Property as
contemplated above, (i) the replacement property shall be of utility comparable
to that of the replaced Mortgaged Property and (ii) the insufficiency of any
Condemnation Proceeds to defray the entire expense of the related location,
acquisition and replacement of such replacement property shall in no way relieve
the Borrower of its obligation to complete the construction or acquisition of
any replacement property if the Borrower shall have made such election and shall
have acquired the related real property. Any condemnation of substantially all
of a Mortgaged Property is referred to herein as a "`substantially all'
Condemnation".
(d) In the event of any Condemnation of the Mortgaged
Property, or any part thereof (other than a Condemnation described in paragraph
(c) above and subject to the provisions of paragraph (f) below), the Collateral
Agent shall apply the Condemnation Proceeds (to the extent it receives such
proceeds), first, in the case of a partial Condemnation, to the repair or
restoration of any integrated structure subject to such Condemnation and,
second, shall apply the remainder of such Condemnation Proceeds (less the
reasonable costs, if any, incurred by the Collateral Agent and the Borrower in
the recovery of such Condemnation Proceeds, including reasonable attorneys' fees
(the Collateral Agent having agreed to reimburse the Borrower from such
Condemnation Proceeds such costs incurred by the Borrower)) to prepay
obligations outstanding under this Agreement to the extent required under
Section 2.12, with any remaining Condemnation Proceeds being returned to the
Borrower.
(e) In the event of any Casualty of the improvements of any
Mortgaged Property and so long as no Default or Event of Default has occurred
and is continuing, the Borrower shall have the option to either:
(i) restore the Mortgaged Property to a condition
substantially similar to its condition immediately prior to such
Casualty and to invest the balance, if any, of any Insurance Proceeds,
in equipment, vehicles or other assets used in the Borrower's principal
lines of business within 180 days after the receipt thereof, provided,
however, that the Borrower, pending such reinvestment, promptly
deposits such excess Insurance Proceeds in a cash collateral account
established with the Collateral Agent for the benefit of the Secured
Parties, or
(ii) direct the Collateral Agent to apply the related
Insurance Proceeds to prepay obligations outstanding under this
Agreement to the extent required under Section 2.12, with any remaining
Insurance Proceeds being returned to the Borrower.
<PAGE> 112
It is understood that any excess Insurance Proceeds that are not reinvested in
the Borrower's principal lines of business as contemplated above will be applied
to prepay obligations outstanding under this Agreement to the extent required
under Section 2.12.
If required to do so, the Borrower shall make the election
contemplated by the immediately preceding paragraph by notifying the Collateral
Agent promptly after the later to occur of (A) 30 days after the Borrower and
its insurance carrier reach a final determination of the amount of any Insurance
Proceeds and (B) 60 days after the occurrence of the Casualty. If the Borrower
shall be required or shall elect to restore the Mortgaged Property, the
insufficiency of any Insurance Proceeds or Condemnation Proceeds to defray the
entire expense of such restoration shall in no way relieve the Borrower of such
obligation to so restore if it is so required or once such election has been
made. In the event the Borrower shall be required to restore or shall notify the
Collateral Agent of its election to restore, the Borrower shall diligently and
continuously prosecute the restoration of the Mortgaged Property to completion.
In the circumstance where the Borrower shall be required to restore or shall so
elect to restore and no Event of Default has occurred and is continuing the
Borrower shall not be required to comply with the requirements of paragraph (f)
below in connection with such restoration (except as required by clauses
(f)(iii)(A) and (B)), so long as the cost of such restoration shall be less than
$500,000. In the event of a Casualty where the Borrower is required to make the
election set forth above and the Borrower either shall fail to notify the
Collateral Agent of its election within the period set forth above or shall
elect not to restore the Mortgaged Property, the Collateral Agent shall (after
being reimbursed for all reasonable costs of recovery of such Insurance Proceeds
including reasonable attorneys' fees and after reimbursing the Borrower for all
such reasonable costs incurred by the Borrower) apply such Insurance Proceeds to
prepay obligations outstanding under this Agreement to the extent required under
Section 2.12. In addition, upon such prepayment, the Borrower shall be obligated
to place the remaining portion, if any, of the Mortgaged Property in a safe
condition that is otherwise in compliance with the requirements of applicable
Governmental Authorities and the provisions of this Agreement and the applicable
Mortgage.
(f) Except as otherwise specifically provided in this Section
9.16, all Insurance Proceeds and all Condemnation Proceeds recovered by the
Collateral Agent (i) are to be applied to the restoration of the applicable
Mortgaged Property (or, if permitted in the event of a total or "substantially
all" Condemnation as contemplated in paragraph (c) above, to the location,
acquisition and construction of a replacement for the applicable Mortgaged
Property) (less the reasonable cost, if any, to the Collateral Agent of such
recovery and of paying out such proceeds, including reasonable (x) attorneys'
fees, (y) other charges and (z) disbursements and costs allocable to inspecting
the Work (as defined below)), (ii) shall be applied by the Collateral Agent to
the payment of the cost of restoring or replacing the Mortgaged Property so
damaged, destroyed or taken or of the portion or portions of the Mortgaged
Property not so taken (the "Work") and (iii) shall be paid out from time to time
to the Borrower (as certified by the Borrower) as and to the extent the Work (or
the location and acquisition of any replacement of any Mortgaged Property)
progresses for the payment thereof, but subject to each of the following
conditions:
<PAGE> 113
(A) the Borrower must promptly commence the restoration
process or the location, acquisition and replacement process (in the
case of a total or "substantially all" Condemnation) in connection with
the Mortgaged Property;
(B) upon completion thereof, the improvements shall (I) be in
compliance with all requirements of applicable Governmental Authorities
such that all representations or warranties of the Borrower relating to
the compliance of such Mortgaged Property with applicable laws, rules
or regulations in this Agreement or the Security Documents will be
correct in all respects and (II) be at least equal in value and general
utility to the improvements that were on such Mortgaged Property (or
that were on the Mortgaged Property that has been replaced, if
applicable) prior to the Casualty or Condemnation, and in the case of a
Condemnation, subject to the affect of such Condemnation;
(C) there shall be no Default or Event of Default that has
occurred and is continuing; and
(D) after commencing the Work, the Borrower shall continue to
perform the Work diligently and in good faith to completion.
Upon completion of the Work and payment in full therefor, the Collateral Agent
will disburse to the Borrower the amount of any Insurance Proceeds or
Condemnation Proceeds then or thereafter in the hands of the Collateral Agent on
account of the Casualty or Condemnation that necessitated such Work to be
applied (x) to prepay obligations outstanding under this Agreement to the extent
required under Section 2.12, with any excess being returned to the Borrower, or
(y) to be reinvested in the Borrower's principal lines of business within 180
days after the receipt thereof; provided, however, that the Borrower, pending
such reinvestment, promptly deposits such amounts in a cash collateral account
established with the Collateral Agent for the benefit of the Secured Parties.
(g) Notwithstanding any other provisions of this Section 9.16,
if the Borrower shall have elected to replace a Mortgaged Property in connection
with a total or "substantially all" Condemnation as contemplated in paragraph
(c) above, all Condemnation Proceeds held by the Collateral Agent in connection
therewith shall be applied to prepay obligations outstanding under this
Agreement to the extent required under Section 2.12 if (i) the Borrower notifies
the Collateral Agent and the Administrative Agent that it does not intend to
replace the related Mortgaged Property, (ii) an Officer of the Borrower shall
not have notified the Administrative Agent and the Collateral Agent in writing
that the Borrower has acquired or has entered into a binding contract to acquire
land upon which it will construct the replacement property within six months
after the related Condemnation or (iii) the Borrower shall have not notified the
Administrative Agent and the Collateral Agent in writing that it has begun
construction of the replacement structures within one year after the related
Condemnation. Any funds not required to be applied in accordance with Section
2.12 shall be returned to the Borrower.
<PAGE> 114
(h) Nothing in this Section 9.16 shall prevent the Collateral
Agent from applying at any time all or any part of the Insurance Proceeds or
Condemnation Proceeds to the curing of any Event of Default under this
Agreement.
SECTION 9.17. Confidentiality. Except as otherwise provided in
Section 9.04(g), each of the Agents, the Issuing Bank and each of the Lenders
agrees to keep confidential (and (i) to cause its respective officers, directors
and employees to keep confidential and (ii) to use its best efforts to cause its
respective agents and representatives to keep confidential) the Information and
all copies thereof, extracts therefrom and analyses or other materials based
thereon, except that the Agents, the Issuing Bank or any Lender shall be
permitted to disclose Information (a) to such of its respective officers,
directors, employees, affiliates, agents and representatives as need to know
such Information, (b) to the extent requested by any bank regulatory authority,
(c) to the extent otherwise required by applicable laws and regulations or by
any subpoena or similar legal process, (d) to prospective assignees (who agree
to be bound by this Section 9.17), (e) in any legal proceedings between the
Borrower and any Lender or (f) to the extent such Information (i) becomes
publicly available other than as a result of a breach of this Agreement or (ii)
becomes available to the Agents, the Issuing Agent or any Lender on a
non-confidential basis from a source other than the Borrower. For the purposes
of this Section 9.17, the term "Information" shall mean all financial
statements, certificates, reports, agreements and information (including all
analyses, compilations and studies prepared by the Agents, the Issuing Bank or
any Lender based on any of the foregoing) that are received by the Borrower and
relate to the Borrower, any shareholder of the Borrower or any employee,
customer or supplier of the Borrower, other than any of the foregoing that were
available to the Agents, the Issuing Bank or any Lender on a nonconfidential
basis prior to its disclosure thereto by the Borrower, and which are, in the
case of Information provided after the Closing Date, clearly identified at the
time of delivery as confidential. The provisions of this Section 9.17 shall
remain operative and in full force and effect regardless of the expiration and
term of this Agreement. Notwithstanding the foregoing, the parties hereto agree
that the filing of any of the Loan Documents (to the extent necessary in the
reasonably judgment of the Collateral Agent after consulting with the Borrower)
properly to ensure the validity or priority of the Collateral Agent's lien under
any Security Document or to the extent required by local counsel in order to
render an opinion in form and substance reasonably satisfactory to the
Collateral Agent in connection with such lien will not result in a violation of
the foregoing confidentiality provisions.
SECTION 9.18. Currencies. (a) Each Loan hereunder shall be
made in Dollars and each payment of principal of and interest on each Loan and
each L/C Disbursement, and each payment of fees hereunder and of any other
amount payable hereunder or under any other Loan Document shall be payable in
Dollars, notwithstanding that certain Letters of Credit may be denominated in
Alternative Currencies.
(b) The Borrower's obligations hereunder and under the other
Loan Documents to make payments in Dollars shall not be discharged or satisfied
by any tender or recovery pursuant to any judgment expressed in or converted
into any currency other than
<PAGE> 115
Dollars except to the extent that such tender or recovery results in the
effective receipt by the Administrative Agent, the Collateral Agent, the Issuing
Bank or a Lender of the full amount of Dollars expressed to be payable to the
Administrative Agent, the Collateral Agent, the Issuing Bank or such Lender
under this Agreement or the other Loan Documents. If, for the purpose of
obtaining or enforcing judgment against the Borrower or any Guarantor in any
court or in any jurisdiction, it becomes necessary to convert into or from any
currency other than Dollars (such other currency being hereinafter referred to
as the "Judgment Currency") an amount due in the conversion shall be made at the
Dollar Equivalent, in the case of any Alternative Currency and, in the case that
such Judgment Currency is not an Alternative Currency, the rate of exchange (as
quoted by the Administrative Agent or, if the Administrative Agent does not
quote a rate of exchange on such currency, by a known dealer in such currency
designated by the Administrative Agent) determined, in each case, as of the
Business Day immediately preceding the day on which the judgment is given (such
Business Day being hereinafter referred to as the "Judgment Currency Conversion
Date").
(c) If there is a change in the rate of exchange prevailing
between the Judgment Currency Conversion Date and the date of actual payment of
the amount due, the Borrower covenants and agrees to pay, or cause to be paid,
such additional amounts, if any (but in any event not a lesser amount), as may
be necessary to ensure that the amount paid in the Judgment Currency, when
converted at the rate of exchange prevailing on the date of payment, will
produce the amount of Dollars that could have been purchased with the amount of
Judgment Currency stipulated in the judgment or judicial award at the rate of
exchange prevailing on the Judgment Currency Conversion Date.
(d) For purposes of determining the Dollar Equivalent or rate
of exchange for this Section, such amounts shall include any premium and costs
payable in connection with the purchase of Dollars.
SECTION 9.19. European Economic and Monetary Union. (a)
Definitions. In this Section 9.19, Section 2.22 and in each other provision of
this Agreement to which reference is made in this Section 9.19 expressly or
impliedly, the following terms have the meanings given to them in this Section
9.19:
"commencement of the third stage of EMU" means the date of
commencement of the third stage of EMU (at the date of this Agreement
expected to be January 1, 1999) or the date on which circumstances
arise which (in the opinion of the Administrative Agent) have
substantially the same effect and result in substantially the same
consequences as commencement of the third stage of EMU as contemplated
by the Treaty on European Union.
"EMU" means economic and monetary union as contemplated in the
Treaty on European Union.
"EMU legislation" means legislative measures of the European
Council for the introduction of, changeover to or operation of a single
or unified European currency (whether known as the euro or otherwise),
being in part the implementation of the third stage of EMU;
<PAGE> 116
"euro" means the single currency of participating member
states of the European Union;
"euro unit" means the currency unit of the euro;
"national currency unit" means the unit of currency (other
than a euro unit) of a participating member state;
"participating member state" means each state so described in
any EMU legislation; and
"Treaty on European Union" means the Treaty of Rome of March
25, 1957, as amended by the Single European Act 1986 and the Maastricht
Treaty (which was signed at Maastricht on February 7, 1992, and came
into force on November 1, 1993), as amended from time to time.
(b) Effectiveness of Provisions. The provisions of paragraphs
(c) to (g) below (inclusive) shall be effective at and from the commencement of
the third stage of EMU, provided, that if and to the extent that any such
provision relates to any state (or the currency of such state) that is not a
participating member state on the commencement of the third stage of EMU, such
provision shall become effective in relation to such state (and the currency of
such state) at and from the date on which such state becomes a participating
member state.
(c) Redenomination and Alternative Currencies. Each obligation
under this Agreement of a party to this Agreement which has been denominated in
the national currency unit of a participating member state shall be
redenominated into the euro unit in accordance with EMU legislation, provided,
that if and to the extent that any EMU legislation provides that following the
commencement of the third stage of EMU an amount denominated either in the euro
or in the national currency unit of a participating member state and payable
within that participating member state by crediting an account of the creditor
can be paid by the debtor either in the euro unit or in that national currency
unit, each party to this Agreement shall be entitled to pay or repay any such
amount either in the euro unit or in such national currency unit.
(d) Business Days. With respect to any amount denominated or
to be denominated in the euro or a national currency unit, any reference to a
"Business Day" shall be construed as a reference to a day (other than a Saturday
or Sunday) on which banks are generally open for business in
(i) London and New York City and
<PAGE> 117
(ii) Frankfurt am Main, Germany (or such principal financial
center or centers in such participating member state or states as the
Administrative Agent may from time to time nominate for this purpose).
(e) Payments by the Administrative Agent Generally. With
respect to the payment of any amount denominated in the euro or in a national
currency unit, the Administrative Agent shall not be liable to the Borrower or
any of the Lenders in any way whatsoever for any delay, or the consequences of
any delay, in the crediting to any account of any amount required by this
Agreement to be paid by the Administrative Agent if the Administrative Agent
shall have taken all relevant steps to achieve, on the date required by this
Agreement, the payment of such amount in immediately available, freely
transferable, cleared funds (in the euro unit or, as the case may be, in a
national currency unit) to the account with the bank in the principal financial
center in the participating member state which the Borrower shall have specified
for such purpose. In this paragraph (e), "all relevant steps" means all such
steps as may be prescribed from time to time by the regulations or operating
procedures of such clearing or settlement system as the Administrative Agent may
from time to time determine for the purpose of clearing or settling payments of
the euro.
(f) Rounding and Other Consequential Changes. Without
prejudice and in addition to any method of conversion or rounding prescribed by
any EMU legislation and without prejudice to the respective liabilities for
indebtedness of the Borrower to the Lenders and the Lenders to the Borrower
under or pursuant to this Agreement:
(i) each reference in this Agreement to a minimum amount (or
an integral multiple thereof) in a national currency unit to be paid to
or by the Administrative Agent shall be replaced by a reference to such
reasonably comparable and convenient amount (or an integral multiple
thereof) in the euro unit as the Administrative Agent may from time to
time specify; and
(ii) except as expressly provided in this Section 9.19, each
provision of this Agreement shall be subject to such reasonable changes
of construction as the Administrative Agent may from time to time
specify to be necessary or appropriate to reflect the introduction of
or changeover to the euro in participating member states.
<PAGE> 118
(g) Increased Costs. The Borrower shall from time to time, at
the request of the Administrative Agent, pay to the Administrative Agent for the
account of each Lender the amount of any cost or increased cost incurred by, or
of any reduction in any amount payable to or in the effective return on its
capital to, or of interest or other return foregone by, such Lender or any
holding company of such Lender as a result of the introduction of, changeover to
or operation of the euro in any participating member state.
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.
WESTINGHOUSE AIR BRAKE COMPANY,
by
/s/ GARCIA ALVARO TUNON
----------------------------------------
Name: Garcia Alvaro Tunon
Title: Vice President
THE CHASE MANHATTAN BANK, individually
and as Administrative Agent, Collateral
Agent and Swingline Lender,
by
/s/ JULI LONG
----------------------------------------
Name: Juli Long
Title: Vice President
CHASE MANHATTAN BANK DELAWARE, as
Issuing Bank,
by
/s/ MICHAEL P. HANDAGO
----------------------------------------
Name: Michael P. Handago
Title: Vice President
<PAGE> 119
THE BANK OF NEW YORK,
individually and as Documentation Agent,
by
/s/ DEMETRIC A. DUCKETT
----------------------------------------
Name: Demetric A. Duckett
Title: Vice President
BANKBOSTON, N.A.,
by
/s/ ROBERT J. JOYCE
----------------------------------------
Name: Robert J. Joyce
Title: Vice President
THE BANK OF NEW YORK,
by
/s/ F.C.H. ASHBY
----------------------------------------
Name: F.C.H. Ashby
Title: Senior Manager Loan Operations
CREDIT AGRICOLE INDOSUEZ,
by
/s/ DAVID BOUHL
----------------------------------------
Name: David Bouhl
Title: Head of Corporate Banking Chicago
by
/s/ KATHERINE L. ABBOT
----------------------------------------
Name: Katherine L. Abbot
Title: First Vice President
<PAGE> 120
CREDIT LYONNAIS, NEW YORK BRANCH,
by
/s/ VLADIMIR LEBUN
----------------------------------------
Name: Vladimir Lebun
Title: First Vice President-Manager
CREDIT SUISSE FIRST BOSTON,
by
/s/ KRISTIN LEPRI
----------------------------------------
Name: Kristin Lepri
Title: Associate
by
/s/ CHRIS T. HORGAN
----------------------------------------
Name: Chris T. Horgan
Title: Vice President
THE DAI-ICHI KANGYO BANK, LTD.,
by
/s/ BERTRAM H. TANG
----------------------------------------
Name: Bertram H. Tang
Title: Vice President
THE FIRST NATIONAL BANK OF CHICAGO,
by
/s/ LORI J. MCCARTHY
----------------------------------------
Name: Lori J. McCarthy
Title: Vice President
FIRST UNION NATIONAL BANK,
by
/s/ JARED M. CANNON
----------------------------------------
Name: Jared M. Cannon
Title: AVP
<PAGE> 121
THE LONG-TERM CREDIT BANK OF JAPAN,
LIMITED, NEW YORK BRANCH,
by
/s/ KOJI SASAYAMA
----------------------------------------
Name: Koji Sasayama
Title: Deputy General Manager
MANUFACTURERS AND TRADERS TRUST COMPANY,
by
/s/ R. BUFORD SEARS
----------------------------------------
Name: R. Buford Sears
Title: Administrative Vice President
MELLON BANK, N.A.,
by
/s/ MARK F. JOHNSON
----------------------------------------
Name: Mark F. Johnson
Title: Assistant Vice President
BANK OF MONTREAL, CHICAGO BRANCH,
by
/s/ L.A. DURNING
----------------------------------------
Name: L.A. Durning
Title: Portfolio Manager
<PAGE> 122
NATIONAL BANK OF CANADA,
by
/s/ ERIC L. MOORE
----------------------------------------
Name: Eric L. Moore
Title: Vice President
by
/s/ DONALD B. HADDAD
----------------------------------------
Name: Donald B. Haddad
Title: Vice President
NATIONAL CITY BANK OF PENNSYLVANIA,
by
/s/ VINCENT J. DELIE, JR.
----------------------------------------
Name: Vincent J. Delie, Jr.
Title: Vice President & Regional Manager
THE BANK OF NOVA SCOTIA,
by
/s/ F. C. H. ASHBY
----------------------------------------
Name: F. C. H. Ashby
Title: Senior Manager Loan Operations
PNC BANK NATIONAL ASSOCIATION,
by
/s/ TARA M. GENTILE
----------------------------------------
Name: Tara M. Gentile
Title: Corporate Banking Officer
<PAGE> 123
THE SUMITOMO TRUST & BANKING CO., LTD.,
NEW YORK BRANCH,
by
/s/ PAUL P. MALECKI
----------------------------------------
Name: Paul P. Malecki
Title: Vice President
SUNTRUST BANK, CENTRAL FLORIDA, N.A.,
by
/s/ RHONDA S. SMITH
----------------------------------------
Name: Rhonda S. Smith
Title: Assistant Vice President
BANK OF TOKYO-MITSUBISHI TRUST COMPANY,
by
/s/ PAUL P. MALECKI
----------------------------------------
Name: Paul P. Malecki
Title: Vice President
U.S. BANK NATIONAL ASSOCIATION,
by
/s/ GREG WILSON
----------------------------------------
Name: Greg Wilson
Title: Commercial Banking Officer
<PAGE> 1
EXHIBIT 10.15
WESTINGHOUSE AIR BRAKE COMPANY
1995 STOCK INCENTIVE PLAN
(AS AMENDED THROUGH MAY 26, 1998)
The purposes of the 1995 Stock Incentive Plan (as amended, the "Plan")
are to encourage eligible employees of Westinghouse Air Brake Company (the
"Corporation") and its Subsidiaries to increase their efforts to make the
Corporation and each Subsidiary more successful, to provide an additional
inducement for such employees to remain with the Corporation or a Subsidiary, to
reward such employees by providing an opportunity to acquire shares of the
Common Stock, par value $0.01 per share, of the Corporation (the "Common Stock")
on favorable terms and to provide a means through which the Corporation may
attract able persons to enter the employ of the Corporation or one of its
Subsidiaries. For the purposes of the Plan, the term "Subsidiary" means any
corporation in an unbroken chain of corporations beginning with the Corporation,
if each of the corporations other than the last corporation in the unbroken
chain owns stock possessing at least fifty percent (50%) or more of the total
combined voting power of all classes of stock in one of the other corporations
in the chain.
SECTION 1
ADMINISTRATION
The Plan shall be administered by a Committee (the
"Committee") appointed by the Board of Directors of the Corporation (the
"Board") and consisting of not less than two members of the Board, each of whom
at the time of appointment to the Committee and at all times during service as a
member of the Committee shall be (i) "Non-Employee Directors" as then defined
under Rule 16b-3 under the Securities Exchange Act of 1934, as amended (the
"1934 Act"), or any successor Rule and (ii) if so determined by the Board, an
"outside director" under Section 162(m)(4)(C) of the Internal Revenue Code of
1986 (the "Code"), or any successor provision.
The Committee shall interpret the Plan and prescribe such
rules, regulations and procedures in connection with the operation of the Plan
as it shall deem to be necessary and advisable for the administration of the
Plan consistent with the purposes of the Plan. All questions of interpretation
and application of the Plan, or as to grants or awards under the Plan, shall be
subject to the determination of the Committee which shall be final and binding.
The Committee shall keep records of action taken. A majority
of the Committee shall constitute a quorum at any meeting, and the acts of a
majority of the members present at any meeting at which a quorum is present, or
acts approved in writing by all the members of the Committee, shall be the acts
of the Committee.
SECTION 2
ELIGIBILITY
Those key employees of the Corporation or any Subsidiary (including,
but not limited to, covered employees as defined in Section 162(m)(3) of the
Code, or any successor provision) who share responsibility for the management,
growth or protection of the business of the Corporation or any Subsidiary shall
be eligible to be granted stock options (with or without cash payment rights)
and to receive awards of restricted shares and performance units as described
herein.
Subject to the provisions of the Plan, the Committee shall have full
and final authority, in its discretion, to grant stock options (with or without
cash payment rights) and to award restricted shares and performance units as
described herein and to determine the employees to whom any such grant or award
shall be made and the number of shares to be covered thereby. In determining the
eligibility of any employee, as well as in determining the number of shares or
units covered by each grant or award and
<PAGE> 2
whether cash payment rights shall be granted in conjunction with a stock option,
the Committee shall consider the position and the responsibilities of the
employee being considered, the nature and value to the Corporation or a
Subsidiary of his or her services, his or her present and/or potential
contribution to the success of the Corporation or a Subsidiary and such other
factors as the Committee may deem relevant.
SECTION 3
SHARES AVAILABLE UNDER THE PLAN
The aggregate number of shares of the Common Stock that may be issued
and as to which grants or awards may be made under the Plan is 3,100,000 shares,
subject to adjustment and substitution as set forth in Section 7. If any stock
option granted under the Plan is canceled by mutual consent or terminates or
expires for any reason without having been exercised in full, the number of
shares subject thereto shall again be available for purposes of the Plan. If
shares of Common Stock are forfeited to the Corporation pursuant to the
restrictions applicable to restricted shares awarded under the Plan, the shares
so forfeited shall again be available for purposes of the Plan. To the extent
any award of performance units is not earned or is paid in cash rather than
shares, the number of shares covered thereby shall again be available for
purposes of the Plan.
The shares which may be issued under the Plan may be either
authorized but unissued shares or treasury shares or partly each, as shall be
determined from time to time by the Board.
SECTION 4
GRANT OF STOCK OPTIONS
AND CASH PAYMENT RIGHTS AND AWARD OF
RESTRICTED SHARES AND PERFORMANCE UNITS
The Committee shall have authority, in its discretion, (i) to grant
"incentive stock options" pursuant to Section 422 of the Code, to grant
"nonstatutory stock options" (i.e., stock options which do not qualify under
Sections 422 or 423 of the Code) or to grant both types of stock options (but
not in tandem), (ii) to award restricted shares and (iii) to award performance
units, all as provided herein. The Committee also shall have the authority, in
its discretion, to grant cash payment rights in conjunction with nonstatutory
stock options with the effect provided in Section 5(D). Cash payment rights may
not be granted in conjunction with incentive stock options. Cash payment rights
granted in conjunction with a nonstatutory stock option may be granted either at
the time the stock option is granted or at any time thereafter during the term
of the stock option.
During the duration of the Plan, the maximum number of shares as to
which stock options may be granted and as to which shares may be awarded under
the Plan to any one employee is 800,000 shares, subject to adjustment and
substitution as set forth in Section 7. For the purposes of this limitation, any
adjustment or substitution made pursuant to Section 7 with respect to the
maximum number of shares set forth in the preceding sentence shall also be made
with respect to any shares subject to stock options or share awards previously
granted under the Plan to such employee.
Notwithstanding any other provision contained in the Plan or in any
agreement referred to in Section 5(H), but subject to the possible exercise of
the Committee's discretion contemplated in the last sentence of this paragraph,
the aggregate fair market value, determined as provided in Section 5(I) on the
date of grant, of the shares with respect to which incentive stock options are
exercisable for the first time by an employee during any calendar year under all
plans of the corporation employing such employee, any parent or subsidiary
corporation of such corporation and any predecessor corporation of any such
corporation shall not exceed $100,000. If the date on which one or more of such
incentive stock options could first be exercised would be accelerated pursuant
to any provision of the Plan or any stock option agreement, and the acceleration
of such exercise date would result in a violation of the limitation set forth in
the preceding sentence, then, notwithstanding any such provision, but subject to
the provisions of the
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next succeeding sentence, the exercise dates of such incentive stock options
shall be accelerated only to the date or dates, if any, that do not result in a
violation of such limitation and, in such event, the exercise dates of the
incentive stock options with the lowest option prices shall be accelerated to
the earliest such dates. The Committee may, in its discretion, authorize the
acceleration of the exercise date of one or more incentive stock options even if
such acceleration would violate the $100,000 limitation set forth in the first
sentence of this paragraph and even if such incentive stock options are thereby
converted in whole or in part to nonstatutory stock options.
SECTION 5
TERMS AND CONDITIONS OF
STOCK OPTIONS AND CASH PAYMENT RIGHTS
Stock options and cash payment rights granted under the Plan shall be
subject to the following terms and conditions:
(A) The purchase price at which each stock option may be exercised (the
"option price") shall be such price as the Committee, in its discretion, shall
determine, but shall not be less than one hundred percent (100%) of the fair
market value per share of the Common Stock covered by the stock option on the
date of grant, except that in the case of an incentive stock option granted to
an employee who, immediately prior to such grant, owns stock possessing more
than (10%) of the total combined voting power of all classes of stock of the
Corporation or any Subsidiary (a "Ten Percent Employee"), the option price shall
be one hundred ten percent (110%) of such fair market value on the date of
grant; provided, however, that with respect to employees who become employees of
the Corporation or any Subsidiary as a result of the acquisition by the
Corporation or any Subsidiary of the stock or assets of another entity or
business (an "Acquisition"), and who are not deemed to be reporting persons of
the Corporation or any Subsidiary for purposes of Section 16(b) of the 1934 Act,
the option price with respect to nonstatutory stock options granted to such
persons within 12 months of such Acquisition shall be such price as the
Committee, in its discretion, shall determine, which may be less than the fair
market value per share of the Common Stock on the date of grant. For purposes of
this Section 5(A), the fair market value of the Common Stock shall be determined
as provided in Section 5(I); provided, however, that notwithstanding any other
provision of the Plan, if the IPO (as defined in Section 5(I) does not occur on
or before December 31, 1995, the fair market value of the Common Stock for
purposes of any nonstatutory stock options granted under the Plan in calendar
year 1995 shall be $15.00 per share. For purposes of this Section 5(A), an
individual (i) shall be considered as owning not only shares of stock owned
individually but also all shares of stock that are at the time owned, directly
or indirectly, by or for the spouse, ancestors, lineal descendants and brothers
and sisters (whether by the whole or half blood) of such individual and (ii)
shall be considered as owning proportionately any shares owned, directly or
indirectly, by or for any corporation, partnership, estate or trust in which
such individual is a stockholder, partner or beneficiary.
(B) The option price for each stock option shall be payable in
cash in United States dollars (including check, bank draft or money order);
provided, however, that in lieu of cash the person exercising the stock option
may (if authorized by the Committee at the time of grant in the case of an
incentive stock option, or at any time in the case of a nonstatutory stock
option) pay the option price in whole or in part by delivering to the
Corporation shares of the Common Stock having a fair market value on the date of
exercise of the stock option, determined as provided in Section 5(I), equal to
the option price for the shares being purchased, except that (i) any portion of
the option price representing a fraction of a share shall in any event be paid
in cash and (ii) no shares of the Common Stock which have been held for less
than six months may be delivered in payment of the option price of a stock
option. Delivery of shares, if authorized, may also be accomplished through the
effective transfer to the Corporation of shares held by a broker or other agent.
The Corporation will also cooperate with any person exercising a stock option
who participates in a cashless exercise program of a broker or other agent under
which all or part of the shares received upon exercise of the stock option are
sold through the broker or other agent or under which the broker or other agent
makes a loan to such person. Notwithstanding the foregoing,
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<PAGE> 4
unless the Committee, in its discretion, shall otherwise determine at the time
of grant in the case of an incentive stock option, or at any time in the case of
a nonstatutory stock option, the exercise of the stock option shall not be
deemed to occur and no shares of Common Stock will be issued by the Corporation
upon exercise of the stock option until the Corporation has received payment of
the option price in full. The date of exercise of a stock option shall be
determined under procedures established by the Committee, and as of the date of
exercise the person exercising the stock option shall be considered for all
purposes to be the owner of the shares with respect to which the stock option
has been exercised. Payment of the option price with shares shall not increase
the number of shares of the Common Stock which may be issued under the Plan as
provided in Section 3.
(C) Unless the Committee, in its discretion, shall otherwise
determine, stock options shall be exercisable by a grantee during employment
commencing on the date of grant. No stock option shall be exercisable after the
expiration of ten years (five years in the case of an incentive stock option
granted to a Ten Percent Employee) from the date of grant. Unless the Committee,
in its discretion, shall otherwise determine, a stock option to the extent
exercisable at any time may be exercised in whole or in part.
(D) Cash payment rights granted in conjunction with a
nonstatutory stock option shall entitle the person who is entitled to exercise
the stock option, upon exercise of the stock option or any portion thereof, to
receive cash from the Corporation (in addition to the shares to be received upon
exercise of the stock option) equal to such percentage as the Committee, in its
discretion, shall determine not greater than one hundred percent (100%) of the
excess of the fair market value of a share of the Common Stock on the date of
exercise of the stock option over the option price per share of the stock option
times the number of shares covered by the stock option, or portion thereof,
which is exercised. Payment of the cash provided for in this Section 5(D) shall
be made by the Corporation as soon as practicable after the time the amount
payable is determined. For purposes of this Section 5(D), the fair market value
of the Common Stock shall be determined as provided in Section 5(I).
(E) (i) No stock option shall be transferable by the grantee
otherwise than by Will, or if the grantee dies intestate, by the laws of descent
and distribution of the state of domicile of the grantee at the time of death
and (ii) all stock options shall be exercisable during the lifetime of the
grantee only by the grantee.
(F) Subject to the provisions of Section 4 in the case of
incentive stock options, unless the Committee, in its discretion, shall
otherwise determine:
(i) If the employment of a grantee who is not
disabled within the meaning of Section 422(c)(6) of the Code
(a "Disabled Grantee") is voluntarily terminated with the
consent of the Corporation or a Subsidiary or a grantee
retires under any retirement plan of the Corporation or a
Subsidiary, any then outstanding incentive stock option held
by such grantee shall be exercisable by the grantee (but only
to the extent exercisable by the grantee immediately prior to
the termination of employment) at any time prior to the
expiration date of such incentive stock option or within three
months after the date of termination of employment, whichever
is the shorter period;
(ii) If the employment of a grantee who is not a
Disabled Grantee is voluntarily terminated with the consent of
the Corporation or a Subsidiary or a grantee retires under any
retirement plan of the Corporation or a Subsidiary, any then
outstanding nonstatutory stock option held by such grantee
shall be exercisable by the grantee (but only to the extent
exercisable by the grantee immediately prior to the
termination of employment) at any time prior to the expiration
date of such nonstatutory stock option or within one year
after the date of termination of employment, whichever is the
shorter period;
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<PAGE> 5
(iii) If the employment of a grantee who is a
Disabled Grantee is voluntarily terminated with the consent of
the Corporation or a Subsidiary, any then outstanding stock
option held by such grantee shall be exercisable by the
grantee in full (whether or not so exercisable by the grantee
immediately prior to the termination of employment) by the
grantee at any time prior to the expiration date of such stock
option or within one year after the date of termination of
employment, whichever is the shorter period;
(iv) Following the death of a grantee during
employment, any outstanding stock option held by the grantee
at the time of death shall be exercisable in full (whether or
not so exercisable by the grantee immediately prior to the
death of the grantee) by the person entitled to do so under
the Will of the grantee, or, if the grantee shall fail to make
testamentary disposition of the stock option or shall die
intestate, by the legal representative of the grantee at any
time prior to the expiration date of such stock option or
within one year after the date of death of the grantee,
whichever is the shorter period;
(v) Following the death of a grantee after
termination of employment during a period when a stock option
is exercisable, the stock option shall be exercisable by such
person entitled to do so under the Will of the grantee or by
such legal representative (but only to the extent the stock
option was exercisable by the grantee immediately prior to the
death of the grantee) at any time prior to the expiration date
of such stock option or within one year after the date of
death, whichever is the shorter period;
(vi) Unless the exercise period of a stock option
following termination of employment has been extended as
provided in Section 8(C), if the employment of a grantee
terminates for any reason other than voluntary termination
with the consent of the Corporation or a Subsidiary,
retirement under any retirement plan of the Corporation or a
Subsidiary or death, all outstanding stock options held by the
grantee at the time of such termination of employment shall
automatically terminate.
Whether termination of employment is a voluntary termination with the consent of
the Corporation or a Subsidiary shall be determined, in its discretion, by the
Committee and any such determination by the Committee shall be final and
binding.
(G) If a grantee of a stock option (i) engages in the operation or
management of a business (whether as owner, partner, officer, director, employee
or otherwise and whether during or after termination of employment) which is in
competition with the Corporation or any of its Subsidiaries (provided, however,
that this clause shall not apply if Section 8(C) applies following termination
of employment), (ii) induces or attempts to induce any customer, supplier,
licensee or other individual, corporation or other business organization having
a business relationship with the Corporation or any of its Subsidiaries to cease
doing business with the Corporation or any of its Subsidiaries or in any way
interferes with the relationship between any such customer, supplier, licensee
or other person and the Corporation or any of its Subsidiaries or (iii) solicits
any employee of the Corporation or any of its Subsidiaries to leave the
employment thereof or in any way interferes with the relationship of such
employee with the Corporation or any of its Subsidiaries, the Committee, in its
discretion, may immediately terminate all outstanding stock options held by the
grantee. Whether a grantee has engaged in any of the activities referred to in
the preceding sentence which would cause the outstanding stock options to be
terminated shall be determined, in its discretion, by the Committee, and any
such determination by the Committee shall be final and binding.
(H) All stock options and cash payment rights shall be confirmed by an
agreement which shall be executed on behalf of the Corporation by the Chief
Executive Officer (if other than the President), the President or any Vice
President and by the grantee. The agreement confirming a stock option shall
specify whether the stock option is an incentive stock option or a nonstatutory
stock option. The provisions of such agreements need not be identical.
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<PAGE> 6
(I) Fair market value of the Common Stock shall be the mean between the
following prices, as applicable, for the date as of which fair market value is
to be determined as quoted in The Wall Street Journal (or in such other reliable
publication as the Committee, in its discretion, may determine to rely upon):
(i) if the Common Stock is listed on the New York Stock Exchange, the highest
and lowest sales prices per share of the Common Stock as quoted in the
NYSE-Composite Transactions listing for such date, (ii) if the Common Stock is
not listed on such exchange the highest and lowest sales prices per share of
Common Stock for such date on (or on any composite index including) the
principal United States securities exchange registered under the 1934 Act on
which the Common Stock is listed or (iii) if the Common Stock is not listed on
any such exchange, the highest and lowest sales prices per share of the Common
Stock for such date on the National Association of Securities Dealers Automated
Quotations System or any successor system then in use ("NASDAQ"); provided,
however, the fair market value of the Common Stock for the date of the initial
public offering of the Common Stock (the "IPO") shall be the IPO price of the
Common Stock. If there are no such sale price quotations for the date as of
which fair market value is to be determined but there are such sale price
quotations within a reasonable period both before and after such date, then fair
market value shall be determined by taking a weighted average of the means
between the highest and lowest sales prices per share of the Common Stock as so
quoted on the nearest date before and the nearest date after the date as of
which fair market value is to be determined. The average should be weighted
inversely by the respective numbers of trading days between the selling dates
and the date as of which fair market value is to be determined. If there are no
such sale price quotations on or within a reasonable period both before and
after the date as of which fair market value is to be determined, then fair
market value of the Common Stock shall be the mean between the bona fide bid and
asked prices per share of Common Stock as so quoted for such date on NASDAQ, or
if none, the weighted average of the means between such bona fide bid and asked
prices on the nearest trading date before and the nearest trading date after the
date as of which fair market value is to be determined, if both such dates are
within a reasonable period. The average is to be determined in the manner
described above in this Section 5(I). If the fair market value of the Common
Stock cannot be determined on any basis previously set forth in this Section
5(I) for the date as of which fair market value is to be determined, the
Committee shall in good faith determine the fair market value of the Common
Stock on such date. Fair market value shall be determined without regard to any
restriction other than a restriction which, by its terms, will never lapse.
(J) The obligation of the Corporation to issue shares of the Common
Stock under the Plan shall be subject to (i) the effectiveness of a registration
statement under the Securities Act of 1933, as amended, with respect to such
shares, if deemed necessary or appropriate by counsel for the Corporation, (ii)
the condition that the shares shall have been listed (or authorized for listing
upon official notice of issuance) upon each stock exchange, if any, on which the
Common Stock may then be listed and (iii) all other applicable laws,
regulations, rules and orders which may then be in effect.
Subject to the foregoing provisions of this Section 5 and the
other provisions of the Plan, stock options and cash payment rights granted
under the Plan shall be subject to such restrictions and other terms and
conditions, if any, as shall be determined, in its discretion, by the Committee
and set forth in the agreement referred to in Section 5(H), or an amendment
thereto.
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SECTION 6
RESTRICTED SHARES AND PERFORMANCE UNITS
(A) RESTRICTED SHARES
Awards of restricted shares shall be confirmed by a written agreement
in the form prescribed by the Committee in its discretion, which shall set forth
the number of shares of the Common Stock awarded, restrictions imposed thereon
(including, without limitation, restrictions on the right of the grantee to
sell, assign, transfer or encumber such shares (except as provided below) while
such shares are subject to other restrictions imposed under this Section 6(A)),
the duration of such restrictions, events (which may, in the discretion of the
Committee, include termination of employment and/or performance-based events)
the occurrence of which would cause a forfeiture of the restricted shares and
such other terms and conditions as shall be determined, in its discretion, by
the Committee. The agreement shall be executed on behalf of the Corporation by
the Chief Executive Officer (if other than the President), the President or any
Vice President and by the grantee. The provisions of such agreements need not be
identical. Awards of restricted shares shall be effective on the date
determined, in its discretion, by the Committee.
Following the award of restricted shares and prior to the lapse or
termination of the applicable restrictions, share certificates for the
restricted shares shall be issued in the name of the grantee and deposited with
the Corporation in escrow together with related stock powers signed by the
grantee. Except as provided in Section 7, the Committee, in its discretion, may
determine that dividends and other distributions on the shares held in escrow
shall not be paid to the grantee until the lapse or termination of the
applicable restrictions. Unless otherwise provided, in its discretion, by the
Committee, any such dividends or other distributions shall not bear interest.
Upon the lapse or termination of the applicable restrictions (and not before
such time), the grantee shall receive the share certificates for the restricted
shares (subject to the provisions of Section 10) and unpaid dividends, if any.
From the date the award of restricted shares is effective, the grantee shall be
a stockholder with respect to all the shares represented by the share
certificates and shall have all the rights of a stockholder with respect to all
the restricted shares, including the right to vote such shares and to receive
all dividends and other distributions paid with respect to such shares, subject
only to the preceding provisions of this paragraph and the other restrictions
imposed by the Committee. If a grantee of restricted shares (i) engages in the
operation or management of a business (whether as owner, partner, officer,
director, employee or otherwise and whether during or after termination of
employment) which is in competition with the Corporation or any of its
Subsidiaries (provided, however, that this clause shall not apply if Section
8(D) applies), (ii) induces or attempts to induce any customer, supplier,
licensee or other individual, corporation or other business organization having
a business relationship with the Corporation or any of its Subsidiaries to cease
doing business with the Corporation or any of its Subsidiaries or in any way
interferes with the relationship between any such customer, supplier, licensee
or other person and the Corporation or any of its Subsidiaries or (iii) solicits
any employee of the Corporation or any of its Subsidiaries to leave the
employment thereof or in any way interferes with the relationship of such
employee with the Corporation or any of its Subsidiaries, the Committee may
immediately declare forfeited all restricted shares held by the grantee as to
which the restrictions have not yet lapsed. Whether a grantee has engaged in any
of the activities referred to in the preceding sentence which would cause the
restricted shares to be forfeited shall be determined, in its discretion, by the
Committee, and any such determination by the Committee shall be final and
binding.
Neither this Section 6(A) nor any other provision of the Plan shall
preclude a grantee from transferring or assigning restricted shares to (i) the
trustee of a trust that is revocable by such grantee alone, both at the time of
the transfer or assignment and at all times thereafter prior to such grantee's
death or (ii) the trustee of any other trust to the extent approved in advance
by the Committee in writing. A transfer or assignment of restricted shares from
such trustee to any person other than such grantee shall be permitted only to
the extent approved in advance by the Committee in writing, and restricted
shares held by such trustee shall be subject to all of the conditions and
restrictions set forth in the Plan and in the applicable agreement as if such
trustee were a party to such agreement.
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(B) PERFORMANCE UNITS
The Committee may award performance units which shall be
earned by an awardee based on the level of performance over a specified period
of time by the Corporation, a Subsidiary or Subsidiaries, any branch, department
or other portion thereof or the awardee individually, as determined by the
Committee. For the purposes of the grant of performance units, the following
definitions shall apply:
(i) "Performance unit" shall mean an award, expressed in
dollars or shares of Common Stock, granted to an awardee with respect
to a Performance Period. Awards expressed in dollars may be established
as fixed dollar amounts, as a percentage of salary, as a percentage of
a pool based on earnings of the Corporation, a Subsidiary or
Subsidiaries or any branch, department or other portion thereof or in
any other manner determined by the Committee in its discretion,
provided that the amount thereof shall be capable of being determined
as a fixed dollar amount as of the close of the Performance Period.
(ii) "Performance Period" shall mean an accounting period of
the Corporation or a Subsidiary of not less than one year, as
determined by the Committee in its discretion.
(iii) "Performance Target" shall mean that level of
performance established by the Committee which must be met in order for
the performance unit to be fully earned. The Performance Target may be
expressed in terms of earnings per share, return on assets, asset
growth, ratio of capital to assets or such other level or levels of
accomplishment by the Corporation, a Subsidiary or Subsidiaries, any
division, branch, department or other portion thereof or the awardee
individually as may be established or revised from time to time by the
Committee.
(iv) "Minimum Target" shall mean a minimal level of
performance established by the Committee which must be met before any
part of the performance unit is earned. The Minimum Target may be the
same as or less than the Performance Target in the discretion of the
Committee.
(v) "Performance shares" shall mean shares of Common Stock
issued in payment of earned performance units.
An awardee shall earn the performance unit in full by meeting the
Performance Target for the Performance Period. If the Minimum Target has not
been attained at the end of the Performance Period, no part of the performance
unit shall have been earned by the awardee. If the Minimum Target is attained
but the Performance Target is not attained, the portion of the performance unit
earned by the awardee shall be determined on the basis of a formula established
by the Committee.
At any time prior to the end of a Performance Period, the
Committee may adjust downward (but not upward) the Performance Target and/or
Minimum Target as a result of major events unforeseen at the time of the award,
such as changes in the economy, in the industry or laws affecting the operations
of the Corporation or a Subsidiary, or any division, branch, department or other
portion thereof, or any other event the Committee determines would have a
significant impact upon the probability of attaining the previously established
Performance Target.
Payment of earned performance units shall be made to awardees following
the close of the Performance Period as soon as practicable after the time the
amount payable is determined by the Committee. Payment in respect of earned
performance units, whether expressed in dollars or shares, may be made in cash,
in shares of Common Stock, or partly in cash and partly in shares of Common
Stock, as determined by the Committee at the time of payment. For this purpose,
performance units expressed in dollars shall be converted to shares, and
performance units expressed in shares shall be converted to
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<PAGE> 9
dollars, based on the fair market value of the Common Stock, determined as
provided in Section 5(I), as of the date the amount payable is determined by the
Committee. The Committee, in its discretion, may determine that awardees shall
also be entitled to any dividends or other distributions that would have been
paid on earned performance shares had the shares been outstanding during the
period from the award to the payment of the performance shares. Unless otherwise
provided, in its discretion, by the Committee, any such dividends or other
distributions shall not bear interest.
Unless otherwise provided in the agreement confirming the
award of the performance units, if prior to the close of a Performance Period,
the employment of an awardee of performance units is voluntarily terminated with
the consent of the Corporation or a Subsidiary, the grantee retires under any
retirement plan of the Corporation or a Subsidiary or the grantee dies during
employment, the Committee in its discretion may determine to pay to the grantee
all or part of the performance unit based upon the extent to which the Committee
determines the Performance Target or Minimum Target has been achieved as of the
date of termination of employment, retirement or death, the period of time
remaining until the end of the Performance Period and/or such other factors as
the Committee may deem relevant. If the Committee, in its discretion, determines
that all or any part of the performance unit shall be paid, payment shall be
made to the awardee or the estate of the awardee as promptly as practicable
following such determination and may be made in cash, in shares of Common Stock,
or partly in cash and partly in shares of Common Stock, as determined by the
Committee at the time of payment. For this purpose, performance units expressed
in dollars shall be converted to shares, and performance units expressed in
shares shall be converted to dollars, based on the fair market value of the
Common Stock, determined as provided in Section 5(I), as of the date the amount
payable is determined by the Committee.
Except as otherwise provided in Section 8(E), if the employment of a
grantee of an award of performance units terminates prior to the close of the
Performance Period for any reason other than voluntary termination with the
consent of the Corporation or a Subsidiary, retirement under any retirement plan
of the Corporation or a Subsidiary or death, the unearned performance units
shall be deemed not to have been earned and such unearned units shall not be
paid.
Whether termination of employment is a voluntary termination with the
consent of the Corporation or a Subsidiary shall be determined, in its
discretion, by the Committee and any such determination by the Committee shall
be final and binding.
If an awardee of performance units (i) engages in the operation or
management of a business (whether as owner, partner, officer, director, employee
or otherwise and whether during or after termination of employment) which is in
competition with the Corporation or any of its Subsidiaries (provided, however,
that this clause shall not apply if Section 8(E) applies), (ii) induces or
attempts to induce any customer, supplier, licensee or other individual,
corporation or other business organization having a business relationship with
the Corporation or any of its Subsidiaries to cease doing business with the
Corporation or any of its Subsidiaries or in any way interferes with the
relationship between any such customer, supplier, licensee or other person and
the Corporation or any of its Subsidiaries or (iii) solicits any employee of the
Corporation or any of its Subsidiaries to leave the employment thereof or in any
way interferes with the relationship of such employee with the Corporation or
any of its Subsidiaries, the Committee may immediately cancel the award. Whether
an awardee has engaged in any of the activities referred to the preceding
sentence which would cause the award of performance units to be canceled shall
be determined, in its discretion, by the Committee, and any such determination
by the Committee shall be final and binding.
Performance unit awards shall be evidenced by a written
agreement in the form prescribed by the Committee which shall set forth the
amount or manner of determining the amount of the performance unit, the
Performance Period, the Performance Target and any Minimum Target and such other
terms and conditions as the Committee in its discretion deems appropriate.
Performance unit awards shall be effective only upon execution of the applicable
performance unit agreement on behalf of
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<PAGE> 10
the Corporation by the Chief Executive Officer (if other than the President),
the President or any Vice President, and by the awardee.
SECTION 7
ADJUSTMENT AND SUBSTITUTION OF SHARES
If a dividend or other distribution shall be declared upon the Common
Stock payable in shares of the Common Stock, (i) the number of shares of the
Common Stock subject to any outstanding stock options or performance unit
awards, (ii) the number of shares of the Common Stock which may be issued under
the Plan but are not subject to outstanding stock options or performance unit
awards and (iii) the maximum number of shares as to which stock options may be
granted and as to which shares may be awarded under the Plan to any employee
under Section 4 on the date fixed for determining the stockholders entitled to
receive such stock dividend or distribution shall be adjusted by adding thereto
the number of shares of the Common Stock which would have been distributable
thereon if such shares had been outstanding on such date. Shares of Common Stock
so distributed with respect to any restricted shares held in escrow shall also
be held by the Corporation in escrow and shall be subject to the same
restrictions as are applicable to the restricted shares on which they were
distributed.
If the outstanding shares of Common Stock shall be changed into or
exchangeable for a different number or kind of shares of stock or other
securities of the Corporation or another corporation, whether through
reorganization, reclassification, recapitalization, stock split-up, combination
of shares, merger or consolidation, then there shall be substituted for each
share of the Common Stock subject to any then outstanding stock option or
performance unit award, for each share of the Common Stock which may be issued
under the Plan but which is not then subject to any outstanding stock option or
performance unit award and for the maximum number of shares as to which stock
options may be granted and as to which shares may be awarded under the Plan to
any employee under Section 4, the number and kind of shares of stock or other
securities into which each outstanding share of the Common Stock shall be so
changed or for which each such share shall be exchangeable. Unless otherwise
determined by the Committee, in its discretion, any such stock or securities, as
well as any cash or other property, into or for which any restricted shares held
in escrow shall be changed or exchangeable in any such transaction shall also be
held by the Corporation in escrow and shall be subject to the same restrictions
as are applicable to the restricted shares in respect of which such stock,
securities, cash or other property was issued or distributed.
In case of any adjustment or substitution as provided for in the first
two paragraphs of this Section 7, the aggregate option price for all shares
subject to each then outstanding stock option prior to such adjustment or
substitution shall be the aggregate option price for all shares of stock or
other securities (including any fraction) to which such shares shall have been
adjusted or which shall have been substituted for such shares.
Any new option price per share shall be carried to at least three
decimal places with the last decimal place rounded upwards to the nearest whole
number.
If the outstanding shares of the Common Stock shall be changed in value
by reason of any spin-off, split-off or split-up, or dividend in partial
liquidation, dividend in property other than cash or extraordinary distribution
to holders of the Common Stock, (i) the Committee shall make any adjustments to
any then outstanding stock option which it determines are equitably required to
prevent dilution or enlargement of the rights of grantees which would otherwise
result from any such transaction, and (ii) unless otherwise determined by the
Committee, in its discretion, any stock, securities, cash or other property
distributed with respect to any restricted shares held in escrow or for which
any restricted shares held in escrow shall be exchanged in any such transaction
shall also be held by the Corporation in escrow and shall be subject to the same
restrictions as are applicable to the restricted shares in respect of which such
stock, securities, cash or other property was distributed or exchanged.
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No adjustment or substitution provided for in this Section 7 shall
require the Corporation to issue or sell a fraction of a share or other
security. Accordingly, all fractional shares or other securities which result
from any such adjustment or substitution shall be eliminated and not carried
forward to any subsequent adjustment or substitution. Owners of restricted
shares held in escrow shall be treated in the same manner as owners of Common
Stock not held in escrow with respect to fractional shares created by an
adjustment or substitution of shares, except that, unless otherwise determined
by the Committee, in its discretion, any cash or other property paid in lieu of
a fractional share shall be subject to restrictions similar to those applicable
to the restricted shares exchanged therefor.
If any adjustment or substitution provided for in this Section 7
requires the approval of stockholders in order to enable the Corporation to
grant incentive stock options or to comply with Section 162(m) of the Code, then
no such adjustment or substitution shall be made without the required
stockholder approval. Notwithstanding the foregoing, in the case of incentive
stock options, if the effect of any such adjustment or substitution would be to
cause the stock option to fail to continue to qualify as an incentive stock
option or to cause a modification, extension or renewal of such stock option
within the meaning of Section 424 of the Code, the Committee may elect that such
adjustment or substitution not be made but rather shall use reasonable efforts
to effect such other adjustment of each then outstanding stock option as the
Committee, in its discretion, shall deem equitable and which will not result in
any disqualification, modification, extension or renewal (within the meaning of
Section 424 of the Code) of the incentive stock option.
Except as provided in this Section 7, a grantee shall have no rights by
reason of any issue by the Corporation of stock of any class or securities
convertible into stock of any class, any subdivision or consolidation of shares
of stock of any class, the payment of any stock dividend or any other increase
or decrease in the number of shares of stock of any class.
SECTION 8
ADDITIONAL RIGHTS IN CERTAIN EVENTS
(A) DEFINITIONS
For purposes of this Section 8, the following terms shall have the
following meanings:
(1) The term "Person" shall be used as that term is used in Sections
13(d) and 14(d) of the 1934 Act as in effect on the effective date of the Plan.
(2) "Beneficial Ownership" shall be determined as provided in Rule
13d-3 under the 1934 Act as in effect on the effective date of the Plan.
(3) A specified percentage of "Voting Power" of a company shall mean
such number of the Voting Shares as shall enable the holders thereof to cast
such percentage of all the votes which could be cast in an annual election of
directors (without consideration of the rights of any class of stock other than
the common stock of the company to elect directors by a separate class vote);
and "Voting Shares" shall mean all securities of a company entitling the holders
thereof to vote in an annual election of directors (without consideration of the
rights of any class of stock other than the common stock of the company to elect
directors by a separate class vote).
(4) "Tender Offer" shall mean a tender offer or exchange offer to
acquire securities of the Corporation (other than such an offer made by the
Corporation or any Subsidiary), whether or not such offer is approved or opposed
by the Board.
(5) "Continuing Directors" shall mean a director of the Corporation who
either (a) was a director of the Corporation on the effective date of the Plan
or (b) is an individual whose election, or nomination for election, as a
director of the Corporation was approved by a vote of at least two-thirds of
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<PAGE> 12
the directors then still in office who were Continuing Directors (other than an
individual whose initial assumption of office is in connection with an actual or
threatened election contest relating to the election of directors of the
Corporation which would be subject to Rule 14a-11 under the 1934 Act, or any
successor Rule).
(6) "Initial Public Offering" shall mean the first public offering of
Common Stock consummated after the effective date of the Plan (whether or not
registered under the Securities Act of 1933, as amended).
(7) "Designated Person" shall mean (a) the Westinghouse Air Brake
Company Employee Stock Ownership Plan and the Westinghouse Air Brake Company
Employee Stock Ownership Trust (collectively, the "ESOP"), (b) the RAC Voting
Trust (the "Voting Trust") and (c) any Person serving on the Committee
administering the ESOP or as Trustee of the Voting Trust, to the extent that
such Person is deemed to have Beneficial Ownership of shares of Common Stock
held by the ESOP or the Voting Trust.
(8) "SIH" shall mean Incentive AB or Scandinavian Incentive Holding
B.V. or any of their respective subsidiaries.
(9) "Section 8 Event" shall mean the date upon which any of the
following events occurs:
(a) The Corporation acquires actual knowledge that (i) any
Person, other than the Corporation, a Subsidiary, any employee benefit
plan(s) sponsored by the Corporation or a Subsidiary, any Designated
Person or SIH, has acquired the Beneficial Ownership, directly or
indirectly, of securities of the Corporation entitling such Person to
30% or more of the Voting Power of the Corporation, or (ii) SIH has
acquired Beneficial ownership, directly or indirectly, of securities of
the Corporation entitling SIH to 40% or more of the Voting Power of the
Corporation (30% if the Initial Public Offering has been consummated
and the Common Stock is registered pursuant to Section 12(b) or 12(g)
of the 1934 Act); or (iii) SIH and any Person or Persons who agree to
act together for the purpose of acquiring, holding, voting or disposing
of securities of the Corporation or who act in concert or otherwise
with the purpose or effect of changing or influencing control of the
Corporation, or in connection with or as a participant in any
transaction having such purpose or effect, have acquired the Beneficial
Ownership, directly or indirectly, of securities of the Corporation
entitling SIH and such Person(s) to 40% or more of the Voting Power of
the Corporation (30% if the Initial Public Offering has been
consummated and the Common Stock is registered pursuant to Section 12
(b) or 12 (g) of the 1934 Act);
(b) A Tender Offer is made to acquire securities of the
Corporation entitling the holders thereof to 30% or more of the Voting
Power of the Corporation; or
(c) A solicitation subject to Rule 14a-11 under the 1934 Act
(or any successor Rule) relating to the election or removal of 50% or
more of the members of the Board or any class of the Board shall be
made by any person other than the Corporation or less than 51% of the
members of the Board (excluding vacant seats) shall be Continuing
Directors; or
(d) The stockholders of the Corporation shall approve a
merger, consolidation, share exchange, division or sale or other
disposition of assets of the Corporation as a result of which the
stockholders of the Corporation immediately prior to such transaction
shall not hold, directly or indirectly, immediately following such
transaction a majority of the Voting Power of (i) in the case of a
merger or consolidation, the surviving or resulting corporation, (ii)
in the case of a share exchange, the acquiring corporation or (iii) in
the case of a division or a sale or other disposition of assets, each
surviving, resulting or acquiring corporation which, immediately
following the transaction, holds more than 30% of the consolidated
assets of the Corporation immediately prior to the transaction;
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<PAGE> 13
provided, however, that (i) if securities beneficially owned by a grantee are
included in determining the Beneficial Ownership of a Person referred to in
paragraph 9(a)(i) above, (ii) a grantee is required to be named pursuant to Item
2 of the Schedule 14D-1 (or any similar successor filing requirement) required
to be filed by the bidder making a Tender Offer referred to in paragraph
9(a)(ii) above or (iii) if a grantee is a "participant" as defined in
Instruction 3 to Item 4 of Schedule 14A under the 1934 Act (or any successor
Rule) in a solicitation (other than a solicitation by the Corporation) referred
to in paragraph 9(a)(iii) above, then no Section 8 Event with respect to such
grantee shall be deemed to have occurred by reason of such event. Neither SIH
nor any other Person shall be deemed to have agreed to act together or to be
acting in concert or otherwise for purposes of paragraph 9(a)(iii) above to the
extent that they are acting pursuant to and in accordance with the terms of the
Voting Trust Agreement creating the Voting Trust or the Stockholders Agreement
dated as of January 31, 1995 among the Corporation, SIH and the Voting Trust.
(B) ACCELERATION OF THE EXERCISE DATE OF STOCK OPTIONS
Subject to the provisions of Section 4 in the case of incentive stock
options, unless the agreement referred to in Section 5(H), or an amendment
thereto, shall otherwise provide, notwithstanding any other provision contained
in the Plan, in case any "Section 8 Event" occurs all outstanding stock options
(other than those held by a person referred to in the proviso to Section
8(A)(9)) shall become immediately and fully exercisable whether or not otherwise
exercisable by their terms.
(C) EXTENSION OF THE EXPIRATION DATE OF STOCK OPTIONS
Subject to the provisions of Section 4 in the case of incentive stock
options, unless the agreement referred to in Section 5(H), or an amendment
thereto, shall otherwise provide, notwithstanding any other provision contained
in the Plan, all outstanding stock options held by a grantee (other than a
grantee referred to in the proviso to Section 8(A)(9)) whose employment with the
Corporation or a Subsidiary terminates within one year of any Section 8 Event
for any reason other than voluntary termination with the consent of the
Corporation or a Subsidiary, retirement under any retirement plan of the
Corporation or a Subsidiary or death which are exercisable shall continue to be
exercisable for a period of three years from the date of such termination of
employment, but in no event after the expiration date of the stock option.
(D) LAPSE OF RESTRICTIONS ON RESTRICTED SHARE AWARDS
Unless the agreement referred to in Section 6(A), or an amendment
thereto, shall otherwise provide, notwithstanding any other provision contained
in the Plan, if any "Section 8 Event" occurs prior to the scheduled lapse of all
restrictions applicable to restricted share awards under the Plan (other than
those held by a person referred to in the proviso to Section 8(A)(9)), all such
restrictions shall lapse upon the occurrence of any such "Section 8 Event"
regardless of the scheduled lapse of such restrictions.
(E) PAYMENT OF PERFORMANCE UNITS
Unless the agreement referred to in Section 6(B), or an amendment
thereto, shall otherwise provide, notwithstanding any other provision contained
in the Plan, if any "Section 8 Event" occurs prior to the end of any Performance
Period, all performance units (unless the awardee is a person referred to in the
proviso to Section 8(A)(9)) shall be deemed to have been fully earned as of the
date of the Section 8 Event, regardless of the attainment or nonattainment of
any Performance Target or any Minimum Target and shall be paid to the awardee
thereof as promptly as practicable after the Section 8 Event. If the performance
unit is not expressed as a fixed amount in dollars or shares, the Committee may
provide in the performance unit agreement for the amount to be paid in the case
of Section 8 Event.
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<PAGE> 14
(F) TAX-RELATED CASH PAYMENTS
Unless the agreements referred to in Sections 5(H), 6(A) or 6(B), or an
amendment thereto, shall otherwise provide, if the independent auditors most
recently selected by the Board determine that (i) any grant, payment or transfer
to or for the benefit of a grantee or awardee under the Plan (whether granted,
paid or payable or transferred or transferable pursuant to the Plan or
otherwise) (a "Payment") would be deemed to be an "excess parachute payment" for
Federal income tax purposes because of Section 280G of the Code, or any
successor provision ("Section 280G"), and (ii) any grant, payment or transfer
under the Plan to or for the benefit of a grantee or awardee within one year of
or following the occurrence of a Section 8 Event constitutes in whole or in part
a "parachute payment" under Section 280G (without regard to Section 280G(b)(4))
used in calculating such "excess parachute payment," the Payment will be grossed
up through the payment by the Corporation to the grantee or awardee in cash of
the amount of any excise tax under Section 4999 of the Code, or any successor
provision ("Section 4999"), on the "excess parachute payment" and the amount of
any excise tax under Section 4999 and applicable income tax on the total amount
of such gross up payment, so that the grantee or awardee will receive the full
amount of the Payment after the grantee or awardee has paid any excise tax under
Section 4999 of the Code on the "excess parachute payment" and any excise tax
under Section 4999 and applicable income tax on the amount of such gross up
payment. On the later of the date an "excess parachute payment" is paid to or
for the benefit of the grantee or awardee or the date on which it can be first
determined that a Payment would be deemed to be an "excess parachute payment,"
the Corporation shall pay or distribute to or for the benefit of the grantee or
awardee the gross up payment due to the grantee or awardee under this Section
8(F).
SECTION 9
EFFECT OF THE PLAN ON THE RIGHTS OF EMPLOYEES AND EMPLOYER
Neither the adoption of the Plan nor any action of the Board or the
Committee pursuant to the Plan shall be deemed to give any employee any right to
be granted a stock option (with or without cash payment rights) or to be awarded
restricted shares or performance units under the Plan. Nothing in the Plan, in
any stock option or cash payment rights granted under the Plan or in any award
of restricted shares or performance units under the Plan or in any agreement
providing for any of the foregoing shall confer any right on any employee to
continue in the employ of the Corporation or any Subsidiary or interfere in any
way with the rights of the Corporation or any Subsidiary to terminate the
employment of any employee at any time.
SECTION 10
WITHHOLDING
Income, excise or employment taxes may be required to be withheld by
the Corporation or a Subsidiary in connection with the grant or exercise of a
stock option, upon a "disqualifying disposition" of the shares acquired upon
exercise of an incentive stock option, at the time restricted shares are granted
or vest or performance units are earned or upon the receipt by the grantee of
cash in payment of cash payment rights or dividends on restricted stock which
has not vested. Any taxes required to be withheld by the Corporation or any of
its Subsidiaries upon the receipt by the grantee of cash in payment of cash
payment rights or dividends will be satisfied by the Corporation by withholding
the taxes required to be withheld from the cash the grantee would otherwise
receive. The Corporation will request that the grantee pay any additional amount
required to be withheld directly to the Corporation in cash. If a grantee does
not pay any taxes required to be withheld by the Corporation or any of its
Subsidiaries within ten days after a request for the payment of such taxes, the
Corporation or such Subsidiary may withhold such taxes from any compensation to
which the grantee is entitled.
SECTION 11
AMENDMENT
The right to alter and amend the Plan at any time to time and the right
to revoke or terminate the Plan are hereby specifically reserved to the Board;
provided that no such alteration or amendment of the
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<PAGE> 15
Plan shall, without stockholder approval, (i) increase the number of shares
which may be issued under the Plan as set forth in Section 3, (ii) increase the
maximum number of shares as to which stock options may be granted and as to
which shares may be awarded under the Plan to any one employee as set forth in
Section 4, (iii) make any changes in the class of employees eligible to receive
options or awards under the Plan or (iv) be made if stockholder approval of the
amendment is at the time required for grants or awards under the Plan to qualify
for the exemption from Section 16(b) of the 1934 Act provided by Rule 16b-3 or
by the rules of the New York Stock Exchange or any other stock exchange on which
the Common Stock may then be listed. No alteration, amendment, revocation or
termination of the Plan shall, without the written consent of the holder of an
outstanding grant or award under the Plan, adversely affect the rights of such
holder with respect to such outstanding grant or award.
SECTION 12
EFFECTIVE DATE AND DURATION OF PLAN
The effective date and date of adoption of the Plan shall be May 26,
1995, the date of adoption of the Plan by the Board, and the effective date of
the amendments to the Plan adopted by the Board on July 29, 1997 shall be July
29, 1997. No stock option or cash payment rights may be granted and no
restricted shares or performance units payable in performance shares may be
awarded under the Plan subsequent to May 26, 2005.
<PAGE> 1
EXHIBIT 10.16
WESTINGHOUSE AIR BRAKE COMPANY
1995 NON-EMPLOYEE DIRECTORS' FEE AND STOCK OPTION PLAN
(AS AMENDED THROUGH JULY 29, 1997)
The purposes of the 1995 Non-Employee Directors' Fee and Stock
Option Plan (as amended, the "Plan") are to provide for each director of
Westinghouse Air Brake Company (the "Company") who is not also an employee of
the Company or any of its subsidiaries (a "non-employee Director") the payment
of a portion of the retainer fees for future services to be performed by such
non-employee Director ("Director Fees") as a member of the Board of Directors of
the Company (the "Board") in shares of Common Stock of the Company. The purposes
of the Plan are further to promote the long-term success of the Company by
creating a long-term mutuality of interests between the non-employee Directors
and stockholders of the Company, to provide an additional inducement for such
non-employee Directors to remain with the Company and to provide a means through
which the Company may attract able persons to serve as Directors of the Company.
SECTION 1
ADMINISTRATION
The Plan shall be administered by a Committee (the
"Committee") appointed by the Board of Directors of the Company (the "Board")
and consisting of not less than two members of the Board, each of whom at the
time of appointment to the Committee and at all times during service as a member
of the Committee shall be "Non-Employee Directors" as then defined under Rule
16b-3 under the Securities Exchange Act of 1934, as amended (the "1934 Act"), or
any successor Rule. The Committee shall keep records of action taken at its
meetings. A majority of the Committee shall constitute a quorum at any meeting,
and the acts of a majority of the members present at any meeting at which a
quorum is present, or acts approved in writing by all the members of the
Committee, shall be the acts of the Committee.
The Committee shall interpret the Plan and prescribe such
rules, regulations and procedures in connection with the operations of the Plan
as it shall deem to be necessary and advisable for the administration of the
Plan consistent with the purposes of the Plan. All questions of interpretation
and application of the Plan, or as to stock issued or stock options granted
under the Plan, shall be subject to the determination of the Committee, which
shall be final and binding.
Notwithstanding the above, the selection of the Directors to
whom stock may be issued for Director Fees or to whom stock options are to be
granted, the timing of such issuance or grants, the number of shares subject to
any issuance or stock option, the exercise price of any stock option, the
vesting or forfeiture of any stock option, the periods during which any stock
option may be exercised and the term of any stock option shall be as hereinafter
provided, and the Committee shall have no discretion as to such matters.
<PAGE> 2
SECTION 2
SHARES AVAILABLE UNDER THE PLAN
The aggregate number of shares which may be issued or
delivered and as to which grants of stock options may be made under the Plan is
100,000 shares of the Common Stock, par value $.01 per share, of the Company
(the "Common Stock"), subject to adjustment and substitution as set forth in
Section 6. If any stock option granted under the Plan is canceled by mutual
consent, is forfeited or terminates or expires for any reason without having
been exercised in full, the number of shares subject thereto shall again be
available for purposes of the Plan. The shares which may be issued or delivered
under the Plan may be either authorized but unissued shares or reacquired shares
or partly each, as shall be determined from time to time by the Board. If the
number of shares then remaining available, either for the payment of Directors
Fees through the use of shares as described in Section 3 below or for the grant
of stock options as described in Section 4 below, is not sufficient for each
non-employee Director entitled to receive the same to be issued the number of
shares or to be granted an option for the number of shares, as the case may be,
to which such non-employee Director is entitled (or the number of adjusted or
substituted shares pursuant to Section 6), then each non-employee Director shall
be issued a number of whole shares or granted an option for a number of whole
shares, as the case may be, equal to the number of shares then remaining times a
percentage obtained by dividing the number of shares or option shares to which
such non-employee Director is entitled by the total number of shares or option
shares to be granted to all non-employee Directors at such time, disregarding
any fractions of a share.
SECTION 3
PAYMENT OF DIRECTOR FEES
Each non-employee Director shall automatically and without
further action by the Board or the Committee receive payment of Director Fees by
the issuance to the non-employee Director of 1,000 shares of Common Stock each
calendar year, payable (i) on the first business day following the initial
election of such non-employee Director to the Board after the date of adoption
of this Plan by the Board, unless such first election occurs at an annual
meeting of the Company or within three months prior to the anniversary date of
the prior year's annual meeting, in which case payment of such Director Fees
shall only occur under subsection (ii) as hereinafter set forth and (ii) for all
subsequent issuances, on the first business day following the annual meeting of
the stockholders of the Company to the non-employee Directors as of that date.
Instead of the payment described in subsection (i) above, each person who is a
non-employee Director as of the date of adoption of this Plan shall receive
1,000 shares of Common Stock on the first business day following the date of
adoption of this Plan.
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<PAGE> 3
SECTION 4
GRANT OF STOCK OPTIONS
Except as otherwise provided in the last sentence of this
Section 4, on the first business day following the initial election and any
subsequent re-election of a non-employee Director after the date of adoption of
this Plan by the Board or, with respect to persons who are non-employee
Directors upon the date of adoption of this Plan by the Board, on the first
business day following such adoption, such person shall automatically and
without further action by the Board or the Committee be granted (subject to the
vesting provisions set forth in Section 5(C)) a "nonstatutory stock option"
(i.e., a stock option which does not qualify under Sections 422 or 423 of the
Internal Revenue Code of 1986 (the "Code")) to purchase 5,000 shares of Common
Stock, subject to adjustment and substitution as set forth in Section 6. With
respect to any person who is a non-employee Director upon the date of adoption
of this Plan by the Board, such person shall not receive additional grants of
stock options pursuant to this Section 4 beyond the initial grant provided in
the first sentence of this Section 4 unless and until such person is re-elected
to the Board at an annual meeting of stockholders of the Company held after
January 1, 1997.
SECTION 5
TERMS AND CONDITIONS OF STOCK OPTIONS
Stock options granted under the Plan shall be subject to the
following terms and conditions:
(A) The purchase price at which each stock option may be
exercised (the "option price") shall be one hundred percent (100%) of
the fair market value per share of the Common Stock on the date of the
grant of such stock option pursuant to the Plan, determined as provided
in Section 5(G); provided, however, that for any stock option granted
under the Plan on or prior to October 31, 1998, the option price shall
be the greater of the aforesaid amount or $14.00 per share.
(B) The option price for each stock option shall be paid in
full upon exercise and shall be payable in cash in United States
dollars (including check, bank draft or money order), which may include
cash forwarded through a broker or other agent-sponsored exercise or
financing program; provided, however, that in lieu of such cash the
person exercising the stock option may pay the option price in whole or
in part by delivering to the Company shares of the Common Stock having
a fair market value on the date of exercise of the stock option,
determined as provided in Section 5(G), equal to the option price for
the shares being purchased; except that (i) any portion of the option
price representing a fraction of a share shall in any event be paid in
cash and (ii) no shares of the Common
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<PAGE> 4
Stock which have been held for less than one year may be delivered in
payment of the option price of a stock option. If the person exercising
a stock option participates in a broker or other agent-sponsored
exercise or financing program, the Company will cooperate with all
reasonable procedures of the broker or other agent to permit
participation by the person exercising the stock option in the exercise
or financing program. Notwithstanding any procedure of the broker or
other agent-sponsored exercise or financing program, if the option
price is paid in cash, the exercise of the stock option shall not be
deemed to occur and no shares of the Common Stock will be issued or
delivered until the Company has received full payment in cash
(including check, bank draft or money order) for the option price from
the broker or other agent. The date of exercise of a stock option shall
be determined under procedures established by the Committee, and as of
the date of exercise the person exercising the stock option shall be
considered for all purposes to be the owner of the shares with respect
to which the stock option has been exercised. Payment of the option
price with shares shall not increase the number of shares of the Common
Stock which may be issued or delivered under the Plan as provided in
Section 2.
(C) Except in the case of death as set forth in section
5(E)(iii), the stock options granted under the Plan shall vest and
become exercisable as follows:
(i) options with respect to 2,000 shares shall vest on
the first anniversary of the date of grant;
(ii) options with respect to 2,000 shares shall vest on
the second anniversary of the date of grant; and
(iii) options with respect to the final 1,000 shares shall
vest on the third anniversary of the date of grant.
Subject to the terms of Section 5(E) providing for earlier
termination of a stock option, no stock option shall be exercisable
after the expiration of ten years from the date of grant. A stock
option to the extent exercisable at any time may be exercised in whole
or in part.
(D) No stock option shall be transferable by the grantee
otherwise than by Will or, if the grantee dies intestate, by the laws
of descent and distribution of the state of domicile of the grantee at
the time of death. All stock options shall be exercisable during the
lifetime of the grantee only by the grantee or the grantee's guardian
or legal representative.
(E) If a grantee ceases to be a Director of the Company, any
outstanding stock options held by the grantee shall vest and be
exercisable and shall terminate, according to the following provisions:
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(i) If a grantee ceases to be a non-employee Director
of the Company because he is removed without cause or because
his term lapses and he is not re-nominated for a new term, any
then outstanding stock option held by such grantee shall vest
and become exercisable in accordance with the normal vesting
schedule applicable to such option and shall remain
exercisable until the expiration date of such stock option;
(ii) If during his term of office as a non-employee
Director a grantee is removed from office for cause, any then
outstanding stock option held by such grantee shall be
exercisable by the grantee (but only to the extent that such
stock option is vested and exercisable by the grantee
immediately prior to ceasing to be a non-employee Director) at
any time prior to the expiration date of such stock option or
within 90 days after the date of removal, whichever is the
shorter period;
(iii) Following the death of a grantee whether during
service as a non-employee Director of the Company or
thereafter, any outstanding stock option held by the grantee
at the time of death (whether or not vested and exercisable by
the grantee immediately prior to death) shall vest and be
exercisable by the person entitled to do so under the Will of
the grantee, or, if the grantee shall fail to make
testamentary disposition of the stock option or shall die
intestate, by the legal representative of the grantee at any
time prior to the expiration date of such stock option or
within one year after the date of death, whichever is the
longer period; and
(iv) If during his or her term of office as a
non-employee Director a grantee resigns from the Board during
his or her term or is nominated for re-election to the Board
but fails to win such re-election, any then outstanding stock
option held by such grantee shall be exercisable by the
grantee (but only to the extent that such stock option is
vested and exercisable by the grantee immediately prior to
ceasing to be a non-employee Director) at any time prior to
the expiration date of such stock option.
(F) All stock options shall be confirmed by an agreement, or
an amendment thereto, which shall be executed on behalf of the Company
by the Chief Executive Officer (if other than the President), the
President or any Vice President and by the grantee.
(G) Fair market value of the Common Stock shall be the mean
between the following prices, as applicable, for the date as of which
fair market value is to be determined as quoted in The Wall Street
Journal (or in such other reliable publication as the Committee, in its
discretion, may determine to rely upon): (a) if the Common Stock is
listed on the New York Stock Exchange, the highest and lowest sales
prices per share of
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<PAGE> 6
the Common Stock as quoted in the NYSE-Composite Transactions listing
for such date, (b) if the Common Stock is not listed on such exchange,
the highest and lowest sales prices per share of Common Stock for such
date on (or on any composite index including) the principal United
States securities exchange registered under the Securities Exchange Act
of 1934 (the "1934 Act") on which the Common Stock is listed, or (c) if
the Common Stock is not listed on any such exchange, the highest and
lowest sales prices per share of the Common Stock for such date on the
National Association of Securities Dealers Automated Quotations System
or any successor system then in use ("NASDAQ"). If there are no such
sale price quotations for the date as of which fair market value is to
be determined but there are such sale price quotations within a
reasonable period both before and after such date, then fair market
value shall be determined by taking a weighted average of the means
between the highest and lowest sales prices per share of the Common
Stock as so quoted on the nearest date before and the nearest date
after the date as of which fair market value is to be determined. The
average should be weighted inversely by the respective numbers of
trading days between the selling dates and the date as of which fair
market value is to be determined. If there are no such sale price
quotations on or within a reasonable period both before and after the
date as of which fair market value is to be determined, then fair
market value of the Common Stock shall be the mean between the bona
fide bid and asked prices per share of Common Stock as so quoted for
such date on NASDAQ, or if none, the weighted average of the means
between such bona fide bid and asked prices on the nearest trading date
before and the nearest trading date after the date as of which fair
market value is to be determined, if both such dates are within a
reasonable period. The average is to be determined in the manner
described above in this Section 5(G). If the fair market value of the
Common Stock cannot be determined on the basis previously set forth in
this Section 5(G) for the date as of which fair market value is to be
determined, the Committee shall in good faith determine the fair market
value of the Common Stock on such date. Fair market value shall be
determined without regard to any restriction other than a restriction
which, by its terms, will never lapse.
(H) The obligation of the Company to issue or deliver shares
of the Common Stock under the Plan shall be subject to (i) the
effectiveness of a registration statement under the Securities Act of
1933, as amended, with respect to such shares, if deemed necessary or
appropriate by counsel for the Company, (ii) the condition that the
shares shall have been listed (or authorized for listing upon official
notice of issuance) upon each stock exchange, if any, on which the
Common Stock shares may then be listed and (iii) all other applicable
laws, regulations, rules and orders which may then be in effect.
Subject to the foregoing provisions of this Section 5 and the
other provisions of the Plan, any stock option granted under the Plan may be
subject to such restrictions and other terms and conditions, if any, as shall be
determined, in its discretion, by the Committee and set forth in the agreement
referred to in Section 5(F), or an amendment thereto.
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<PAGE> 7
SECTION 6
ADJUSTMENT AND SUBSTITUTION OF SHARES
If a dividend or other distribution payable in shares of the
Common Stock shall be declared upon the Common Stock, the number of shares of
the Common Stock set forth in Sections 3 and 4, the number of shares of the
Common Stock then subject to any outstanding stock options and the number of
shares of the Common Stock which may be issued or delivered under the Plan but
are not then subject to outstanding stock options shall be adjusted by adding
thereto the number of shares of the Common Stock which would have been
distributable thereon if such shares had been outstanding on the date fixed for
determining the stockholders entitled to receive such stock dividend or
distribution.
If the outstanding shares of the Common Stock shall be changed
into or exchangeable for a different number or kind of shares of stock or other
securities of the Company or another corporation, whether through
reorganization, reclassification, recapitalization, stock split-up, combination
of shares, merger or consolidation, then there shall be substituted for each
share of the Common Stock set forth in Sections 3 and 4, for each share of the
Common Stock subject to any then outstanding stock option, and for each share of
the Common Stock which may be issued or delivered under the Plan but which is
not then subject to any outstanding stock option, the number and kind of shares
of stock or other securities into which each outstanding share of the Common
Stock shall be so changed or for which each such share shall be exchangeable.
In case of any adjustment or substitution as provided for in
this Section 6, the aggregate option price for all shares subject to each then
outstanding stock option prior to such adjustment or substitution shall be the
aggregate option price for all shares of stock or other securities (including
any fraction) to which such shares shall have been adjusted or which shall have
been substituted for such shares. Any new option price per share shall be
carried to at least three decimal places with the last decimal place rounded
upwards to the nearest whole number.
If the outstanding shares of Common Stock shall be changed in
value by reason of spin-off, split-off, or dividend in partial liquidation,
dividend in property other than cash or extraordinary distribution to holders of
the Common Stock, the Committee shall make any adjustments to any then
outstanding stock option which it determines are equitably required to prevent
dilution or enlargement of the rights of grantees which would otherwise result
from any such transaction.
No adjustment or substitution provided for in this Section 6
shall require the Company to issue or deliver or sell a fraction of a share or
other security. Accordingly, all fractional shares or other securities which
result from any such adjustment or substitution shall be eliminated and not
carried forward to any subsequent adjustment or substitution.
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<PAGE> 8
Except as provided in this Section 6, a grantee shall have no
rights by reason of any issue by the Company of stock of any class or securities
convertible into stock of any class, any subdivision or consolidation of shares
of stock of any class, the payments of any stock dividends or any other increase
or decrease in the number of shares of stock of any class.
SECTION 7
EFFECT OF THE PLAN ON THE RIGHTS OF COMPANY AND STOCKHOLDERS
Nothing in the Plan, in any Director Fees paid or stock option
granted under the Plan, or in any stock option agreement shall confer any right
to any person to continue as a Director of the Company or interfere in any way
with the rights of the stockholders of the Company or the Board of Directors to
elect and remove Directors.
SECTION 8
AMENDMENT AND TERMINATION
The right to amend the Plan at any time and from time to time
and the right to terminate the Plan at any time are hereby specifically reserved
to the Board; provided always that no such termination shall terminate any
outstanding stock options granted under the Plan; and provided further that no
amendment of the Plan shall (a) be made without stockholder approval if
stockholder approval of the amendment is at the time required for stock issued
for Director Fees or stock options under the Plan to qualify for the exemption
from Section 16(b) of the 1934 Act provided by Rule 16b-3 or by the rules of the
New York Stock Exchange or any other stock exchange on which the Common Stock
may then be listed, (b) amend more than once every six months the provisions of
the Plan relating to the selection of the Directors to whom stock may be issued
for Directors Fees or to whom stock options are to be granted, the timing of
such issuance or grants, the number of shares subject to any issuance or stock
option, the exercise price of any stock option, the periods during which any
stock option may be exercised and the term of any stock option other than to
comport with changes in the Code or the rules and regulations thereunder or (c)
otherwise amend the Plan in any manner that would cause stock issued for
Director Fees or stock options under the Plan not to qualify for the exemption
provided by Rule 16b-3. No amendment or termination of the Plan shall, without
the written consent of the holder of a stock option theretofore awarded under
the Plan, adversely affect the rights of such holder with respect thereto.
Notwithstanding anything contained in the preceding paragraph
or any other provision of the Plan or any stock option agreement, the Board
shall have the power to amend the Plan in any manner deemed necessary or
advisable for stock issued for Director Fees or stock
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<PAGE> 9
options granted under the Plan to qualify for the exemption provided by Rule
16b-3 (or any successor rule relating to exemption from Section 16(b) of the
1934 Act), and any such amendment shall, to the extent deemed necessary or
advisable by the Board, be applicable to any outstanding stock options
theretofore granted under the Plan notwithstanding any contrary provisions
contained in any stock option agreement. In the event of any such amendment to
the Plan, the holder of any stock option outstanding under the Plan shall, upon
request of the Committee and as a condition to the exercisability of such
option, execute a conforming amendment in the form prescribed by the Committee
to the stock option agreement referred to in Section 5(F) within such reasonable
time as the Committee shall specify in such request.
SECTION 9
EFFECTIVE DATE AND DURATION OF PLAN
The effective date and date of adoption of the Plan shall be
November 1, 1995, the date of adoption of the Plan by the Board (such adoption
of the Plan by the Board having been approved by the majority of the votes cast
at a meeting of the holders of voting stock of the Company) and the effective
date of the amendments to the Plan adopted by the Board on July 29, 1997 shall
by July 29, 1997. No stock may be issued for Director Fees and no stock option
may be granted under the Plan subsequent to October 31, 2005.
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<PAGE> 1
EXHIBIT 10.25
WESTINGHOUSE AIR BRAKE COMPANY
1998 EMPLOYEE STOCK PURCHASE PLAN
(ADOPTED BY THE STOCKHOLDERS ON MAY 26, 1998)
The purposes of the 1998 Employee Stock Purchase Plan (the "Plan") are
to provide eligible employees of Westinghouse Air Brake Company (the "Company")
and its Subsidiaries a convenient opportunity to purchase shares of the Common
Stock, par value $.01 per share, of the Company (the "Common Stock") through
quarterly offerings financed by payroll deductions and to provide a stock
ownership incentive for such employees to promote the continued success of the
Company. For the purposes of the Plan, the term "Subsidiary" means any
corporation 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 at least fifty percent (50%) or more of the total combined
voting power of all classes of stock in one of the other corporations in the
chain. The Plan is intended to qualify as an "employee stock purchase plan"
under Section 423 of the Internal Revenue Code of 1986 (the "Code"). The
provisions of the Plan shall accordingly be construed so as to extend and limit
participation in a manner consistent with the requirements of Section 423 of the
Code and the regulations thereunder. For the purposes of the Plan, the term
"Agent" shall mean Mellon Bank, N.A. or ChaseMellon Shareholder Services L.L.C.
or such successor agent as the Company may employ. The Company reserves the
right to change the Agent without notice.
PARTICIPATION IN THE PLAN IS VOLUNTARY, AND NO RECOMMENDATION IS MADE
TO EMPLOYEES AS TO WHETHER THEY SHOULD OR SHOULD NOT PARTICIPATE IN THE PLAN.
THERE IS NO GUARANTEE UNDER THE PLAN AGAINST LOSS BECAUSE OF FLUCTUATIONS IN THE
MARKET PRICE OF THE COMMON STOCK AND, IN THE CASE OF NON-UNITED STATES
EMPLOYEES, BECAUSE OF FLUCTUATIONS IN THE U.S. DOLLAR EXCHANGE RATE. IN SEEKING
THE BENEFITS OR SHARE OWNERSHIP, EACH EMPLOYEE MUST ALSO ACCEPT THE RISKS
ATTENDANT TO SUCH OWNERSHIP.
SECTION 1
ADMINISTRATION
The Plan shall be administered by a Committee (the "Committee")
appointed by the Board of Directors of the Company (the "Board") and consisting
of not less than two members of the Board.
The Committee shall keep records of action taken at its meetings. A
majority of the Committee shall constitute a quorum at any meeting, and the acts
of a majority of the members present at any meeting at which a quorum is
present, or acts unanimously approved in writing by the Committee, shall be the
acts of the Committee.
The Committee shall interpret the Plan and prescribe such rules,
regulations and procedures in connection with the operations of the Plan as it
shall deem to be necessary and advisable for the administration of the Plan
consistent with the purposes of the Plan. All questions of interpretation and
application of the Plan shall be subject to the determination of the Committee,
which shall be final and binding. Neither the Company nor the Committee is
liable for any act done in good faith or for any good faith omission to act,
including, without limitation, any claim of liability with respect to the prices
or times at which shares of Common Stock are issued or delivered or sold, or
with respect to any fluctuation in market value before or after any issuance or
delivery or sale of shares.
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<PAGE> 2
The day-to-day administrative and procedural matters associated with
the Plan shall be the responsibility of an on-site Plan administrator (the
"Administrator") who shall be under the direction of the Committee and whose
duties shall include, without limitation, communication with employees, periodic
reporting to the Committee and decision-making with respect to certain matters
under the Plan; provided, however, that any decisions made by the Administrator
may be subject to the Committee's ratification or reversal in its discretion.
SECTION 2
ELIGIBILITY
Any person who as of the first day of a Purchase Period (as defined in
Section 4) is a full-time or a regular part-time employee of the Company or a
full-time or a regular part-time employee of a Subsidiary authorized by the
Committee to participate in the Plan shall be eligible to participate in the
Plan during such Purchase Period. A full-time employee of the Company or one of
its Subsidiaries is an employee who has been employed by the Company or one of
its Subsidiaries on a full-time basis for at least one year, and a regular
part-time employee of the Company or one of its Subsidiaries is one who has been
employed by the Company or one of its Subsidiaries for at least one year and
whose customary employment is 20 or more hours per week during the period of
employment by the Company or one of its Subsidiaries. Employees of the Company
or one of its Subsidiaries who are citizens of countries or jurisdictions the
laws of which make participation illegal will not be permitted to participate.
Notwithstanding any other provision of the Plan, no employee shall be
granted an option under the Plan if such employee, immediately after the option
is granted, owns stock possessing five percent (5%) or more of the total
combined voting power or value of all classes of stock of the Company or any
Subsidiary. For purposes of the preceding sentence, the rules of Section 424(d)
of the Code shall apply in determining the stock ownership of an employee, and
stock which the employee may purchase under outstanding options shall be treated
as stock owned by the employee.
SECTION 3
SHARES AVAILABLE UNDER THE PLAN
The aggregate number of shares of the Common Stock which may be issued
under the Plan is 200,000 shares, subject to adjustment and substitution as set
forth in Section 11. The shares which may be issued under the Plan shall be
reacquired (treasury) shares.
SECTION 4
PURCHASE PERIODS; GRANT OF STOCK OPTIONS
Unless otherwise determined by the Committee, (a) there shall be twenty
quarterly Purchase Periods under the Plan, (b) each such Purchase Period shall
be equivalent to a calendar quarter, beginning on the first day of a calendar
quarter and ending on the last day of a calendar quarter and (c) the first
Purchase Period under the Plan shall commence on July 1, 1998 and shall end on
September 30, 1998. In no event shall the duration of any Purchase Period exceed
twenty-seven (27) months.
On the first day of each Purchase Period, each employee participating
in the Plan on such date shall be granted an option to purchase a number of
shares of Common Stock (subject to adjustment as provided in Section 11
determined by dividing (a) twenty percent (20%) of the employee's Basic
Compensation, as defined in Section 5, for the last three calendar months of the
immediately preceding calendar year, by (b) eighty-five percent (85%) of the
fair market value of a share of Common Stock on the first day of such Purchase
Period, determined as provided in Section 7. To the extent an option to purchase
shares of Common Stock is not exercised at the end of the Purchase Period as
provided for in Section 6, the option shall terminate.
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<PAGE> 3
If as a result of a merger, acquisition or similar transaction
occurring after the first day of the then current Purchase Period a corporation
or other entity becomes a Subsidiary authorized to participate in the Plan, the
Committee may in its sole discretion authorize a special Purchase Period to
accommodate the employees of such Subsidiary, provided that such special
Purchase Period is consistent with the requirements of Section 423 of the Code
and the regulations thereunder.
Notwithstanding any other provision of the Plan, no employee
participating in the Plan shall be granted an option which permits the
employee's rights to purchase stock under all employee stock purchase plans
under Section 423 of the Code of the Company or any Subsidiary to accrue at a
rate which exceeds $25,000 of the fair market value of the Common Stock,
determined at the time such option is granted, or such other maximum as may be
prescribed for qualifying employee stock purchase plans under Section 423 of the
Code, for each calendar year in which such option is outstanding at any time.
SECTION 5
PAYROLL DEDUCTIONS
An eligible employee may become a participant in the Plan for a
Purchase Period by enrolling and authorizing payroll deductions from his or her
compensation using the telephone authorization system which will be provided by
the Agent (details concerning the use of the system will be provided separately
to employees) by the enrollment deadline established for the Purchase Period.
Unless otherwise determined by the Committee, the enrollment deadline for each
Purchase Period shall be five days prior to the first day of such Purchase
Period. Any enrollment completed after such deadline shall be effective only for
the beginning of the next succeeding Purchase Period. An eligible employee who
was a participant in the Plan at the close of the preceding Purchase Period
shall automatically be enrolled as a participant in the Plan for the succeeding
Purchase Period, if any, unless the employee's notice of disenrollment and
withdrawal as described below in this Section 5 is received via the telephone
authorization system of the Agent prior to the enrollment deadline established
for the Purchase Period.
At the time an employee enrolls and authorizes payroll deductions via
the telephone authorization system of the Agent, the employee shall elect to
have deductions made from the employee's pay for each pay period ending during
the Purchase Period at a rate of not less than two percent (2%) and not more
than twenty percent (20%), in whole percentages, of the employee's Basic
Compensation for such pay periods. Unless the employee changes his or her prior
payroll deduction amount via the telephone authorization system of the Agent
prior to the enrollment deadline for a Purchase Period, an employee who is
automatically re-enrolled in the Plan for a Purchase Period by virtue of having
been a participant for the preceding Purchase Period shall be deemed to have
elected the same level of payroll deductions for the new Purchase Period as was
in effect for the participant as of the close of the preceding Purchase Period.
For this purpose and the purposes of Section 4, Basic Compensation shall mean
the sum of (a) base salary or base wages paid to an employee, including
overtime, vacation pay and holiday pay but excluding the items set forth in the
next succeeding sentence to the extent they are included in such definition of
base salary or base wages, and (b) salary reduction contributions to a cafeteria
plan or cash or deferred Section 401(k) plan sponsored by the Company or a
Subsidiary (exclusive of any employer's matching contribution). Basic
Compensation shall exclude (a) bonuses or other incentive compensation
(including compensation from the exercise of stock options or similar incentive
compensation), (b) any fringe benefits (including any benefits required to be
provided by any governmental authority), and (c) contributions or benefits
(except as specifically listed in the preceding sentence) under any employee
benefit plans maintained by the Company or a subsidiary. Notwithstanding the
foregoing, no payroll deduction shall be made pursuant to a payroll deduction
authorization form filed by any employee who has made a hardship withdrawal from
the Westinghouse Air Brake Company Savings Plan for a period of 12 months from
the date of such hardship withdrawal if the hardship withdrawal has been made in
reliance on Treasury Regulation Section 1.401(k)-1(d)(2)(iv)(B) or any successor
regulation.
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<PAGE> 4
Payroll deductions made under the Plan need not be set aside or
segregated from other corporate funds of the Company or any Subsidiary and may
be used for any corporate purpose. With respect to such payroll deductions, the
rights of participants shall be those of an unsecured general creditor.
An employee contribution account will be established by the Company for
each employee participating in the Plan, and payroll deductions made pursuant to
this Section 5 shall be credited to the individual employee's contribution
account. Unless otherwise determined by the Committee in its discretion, no
interest shall be credited or paid on such account.
Subject to such rules, regulations or procedures as may be adopted by
the Committee, an employee may at any time increase, decrease or suspend the
employee's payroll deduction by using the telephone authorization system of the
Agent. The change shall be effective as soon as practicable but in no event
shall it become effective earlier than the first pay period ending after the
employee makes such change via the telephone authorization system of the Agent.
Unless otherwise provided in rules, regulations or procedures established by the
Committee, a payroll deduction may be changed only once during a Purchase
Period. In addition, all payroll deductions for an employee will be
automatically suspended for a period of 12 months from the date of a hardship
withdrawal by the employee from the Westinghouse Air Brake Company Savings Plan
if the hardship withdrawal has been made in reliance on Treasury Regulation
Section 1.401(k)-1(d)(2)(iv)(B) or any successor regulation.
An employee may at any time prior to five days before the last day of a
Purchase Period and for any reason disenroll and permanently withdraw the
balance accumulated in the employee's contribution account, and thereby withdraw
from participation in the Plan. An employee electing to do the same must use the
telephone authorization system of the Agent to provide notice of disenrollment
and withdrawal, and the disenrollment and withdrawal shall be effective as soon
as practicable after the employee makes such election via the telephone
authorization system of the Agent. Payroll deductions shall cease and the
amounts credited to the employee's contribution account shall be paid to the
employee by the Company as soon as practicable after receipt of the notice of
disenrollment and withdrawal. Further, such employee's Common Stock account
shall be terminated in accordance with Section 10. The employee may thereafter
elect to re-enroll and participate in the Plan for a subsequent Purchase Period
but may not again elect participation for the Purchase Period including the date
of disenrollment and withdrawal.
Partial withdrawals shall not be permitted.
SECTION 6
PURCHASE OF SHARES
Subject to Section 10, and unless a notice of withdrawal has been
received prior to such date as provided in Section 5, an employee having a
balance in the employee's contribution account on the last day of the Purchase
Period shall automatically exercise the employee's option to purchase shares of
Common Stock under the Plan. The number of shares purchased by each
participating employee shall be determined by dividing (a) the balance in the
employee's contribution account by (b) the Purchase Price for such Purchase
Period, provided that the number of shares purchased shall not exceed the
maximum number of shares subject to the option granted to the employee as
provided in Section 4. Fractional shares shall be purchased and credited to an
employee's Common Stock account with the Agent as set forth below. Any balance
in an employee's contribution account after the exercise of the option and
purchase of shares shall be paid to the employee as soon as practicable.
As soon as practicable after each Purchase Period, the Company shall
(through the Agent) issue or deliver shares of Common Stock from the treasury of
the Company into each purchasing employee's respective Common Stock account
maintained by the Agent for such employee. Notwithstanding the foregoing, as of
the date of exercise, the purchasing employee shall be considered for all
purposes to be the owner of the shares with respect to which the stock options
have been exercised.
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<PAGE> 5
Each employee with respect to a Common Stock account shall acquire full
ownership of all shares and of any fractional interest in a share issued or
delivered to a Common Stock account. All shares in such Common Stock accounts
shall be registered in the name of the Agent or another nominee or custodian for
the benefit of the employees under the Plan. Although an employee may not assign
or hypothecate an interest in the Plan as such, upon crediting of shares under
the Plan such shares may be sold pursuant to the procedures set forth in
Sections 9 and 10 below or, following distribution of such shares to the
employee, may be sold, assigned, hypothecated or otherwise dealt with by the
employee, subject to Section 12 hereof, as is the case with respect to any other
shares of Common Stock the employee may own.
SECTION 7
PURCHASE PRICE
The Purchase Price of shares of Common Stock under the Plan for each
Purchase Period shall be the lesser of (a) an amount equal to eight-five percent
(85%) of the fair market value of the Common Stock as of the first day of such
Purchase Period, the day the options are granted under the Plan, or (b) an
amount equal to eighty-five percent (85%) of the fair market value of the Common
Stock as of the last day of the Purchase Period, the day the options may be
exercised under the Plan.
Fair market value of the Common Stock shall be the mean between the
following prices, as applicable, for the date as of which fair market value is
to be determined as quoted in The Wall Street Journal (or in such other reliable
publication as the Committee, in its discretion, may determine to rely upon):
(a) if the Common Stock is listed on the New York Stock Exchange, the highest
and lowest sales prices per share of the Common Stock as quoted in the
NYSE-Composite Transactions listing for such date, (b) if the Common Stock is
not listed on such exchange, the highest and lowest sales prices per share of
the Common Stock for such date on (or on any composite index including) the
principal United States securities exchange registered under the 1934 Act on
which the Common Stock is listed, or (c) if the Common Stock is not listed on
any such exchange, the highest and lowest sales prices per share of the Common
Stock for such date on the National Association of Securities Dealers Automated
Quotations System or any successor system then in use ("NASDAQ"). If there are
no such sale price quotations for the date as of which fair market value is to
be determined but there are such sale price quotations within a reasonable
period both before and after such date, then fair market value shall be
determined by taking a weighted average of the means between the highest and
lowest sales prices per share of the Common Stock as so quoted on the nearest
date before and the nearest date after the date as of which fair market value is
to be determined. The average should be weighted inversely by the respective
numbers of trading days between the selling dates and the date as of which fair
market value is to be determined. If there are no such sale price quotations on
or within a reasonable period both before and after the date as of which fair
market value is to be determined, then fair market value of the Common Stock
shall be the mean between the bona fide bid and asked prices per share of the
Common Stock as so quoted for such date on NASDAQ, or if none, the weighted
average of the means between such bona fide bid and asked prices on the nearest
trading date before and the nearest trading date after the date as of which fair
market value is to be determined, if both such dates are within a reasonable
period. The average is to be determined in the manner described above in this
Section 7. If the fair market value of the Common Stock cannot be determined on
the basis previously set forth in this Section 7 for the date as of which fair
market value is to be determined, the Committee shall in good faith determine
the fair market value of the Common Stock on such date.
SECTION 8
DIVIDENDS AND OTHER DISTRIBUTION
Except as provided below, all cash dividends and other cash
distributions, if any, paid in respect of the shares credited to a Common Stock
account, less any amount the Company is required to deduct as backup withholding
in respect of the dividend or distribution received, or considered to be
received, shall be paid directly to an employee.
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<PAGE> 6
Any stock dividends or stock splits in respect of shares of the Common
Stock credited to a Common Stock account shall be reflected in the account
without charge. Any distributions of other securities or rights to subscribe for
additional shares in respect of shares of the Common Stock credited to a Common
Stock account relating to a employee shall be made directly to the employee.
SECTION 9
VOLUNTARY SALE OR WITHDRAWAL OF SHARES
An employee may direct at any time that any or all of the shares
credited to the Common Stock account relating to the employee be sold. Upon such
sale, a check for the proceeds, less any brokerage commissions and other charges
applicable to the sale and less any amount required to be deducted as backup
withholding, shall be delivered to the employee. The employee may also request
at any time that a certificate or certificates representing any or all of the
full shares credited to the Common Stock account relating to the employee be
delivered to the employee.
Unless the employee directs that all shares credited to the Common
Stock account relating to the employee be sold and the net proceeds delivered to
the employee or requests that a certificate or certificates representing all
full shares credited to the Common Stock account relating to the employee be
delivered to the employee and the employee has also disenrolled from the Plan in
accordance with Section 5, the Common Stock account shall remain in effect even
if all shares in the account have been sold.
Unless the Committee otherwise directs, each direction or request
referred to in this Section 9 shall be made by the employee by using the
telephone authorization system of the Agent.
SECTION 10
TERMINATION OF EMPLOYMENT; TERMINATION OF
COMMON STOCK ACCOUNT; TRANSFERABILITY
Participation in the Plan shall terminate as of the date of termination
of employment of a participating employee (whether by death, retirement,
disability or otherwise) and the employee's Common Stock account shall be
terminated thereafter as set forth in this Section 10. In the event of a
participating employee's termination of employment on or before five days prior
to the last day of a Purchase Period, payroll deductions shall be terminated as
soon as practicable, no shares shall be purchased for such employee under
Section 6 and the balance in the employee's contribution account shall be paid
as soon as practicable to the employee, or in the event of the employee's death,
to the employee's estate. The Committee shall have the power to determine the
date of an employee's retirement or other termination of employment, and any
such determination by the Committee shall be final and binding. The Company
shall have no liability to any person in the event shares are purchased for a
deceased employee under Section 6 prior to receipt by the Agent through the
telephone authorization system of the Agent of notice of the death of the
participating employee.
The employee may direct within 30 days of notice of disenrollment and
withdrawal described in Section 5 or termination of employment, as the case may
be, that all shares credited to the Common Stock account be sold and the net
proceeds delivered to the employee, or the employee may request within 30 days
of such notice or termination of employment that a certificate or certificates
representing all full shares credited to the account be delivered to the
employee. Any brokerage commissions and other charges applicable to sales and
any amount required to be withheld as backup withholding are payable by the
employee and will be deducted in determining the net proceeds. If no direction
is received within 30 days of such notice or termination of employment, a
certificate or certificates representing all full shares credited to the account
will be delivered to the employee.
Unless the Committee otherwise directs, each direction or request
referred to in the prior paragraph shall be made by the employee by using the
telephone authorization system of the Agent.
6
<PAGE> 7
Upon termination of a Common Stock account, any fractional interest in a share
credited to the Common Stock account may be sold and the net proceeds delivered
to the employee or the value of the fractional interest may be determined by
reference to the current fair market value (determined as set forth in Section 7
above) of the Common Stock and paid to the employee in cash.
Rights granted under the Plan may not be assigned, transferred, pledged
or otherwise disposed of in any way by a participating employee, other than on
death as described above. Any other attempt to assign, transfer, pledge or
otherwise dispose of rights under the Plan shall be without effect, except that
the Company may treat such act as a notice of disenrollment and withdrawal from
participation in the Plan in accordance with Section 5. Stock options granted
under the Plan are not transferable by the participating employee otherwise than
by Will or the laws of descent and distribution, and are exercisable during the
employee's lifetime only by the employee.
SECTION 11
ADJUSTMENT AND SUBSTITUTION OF SHARES
If a dividend or other distribution shall be declared upon the Common
Stock payable in shares of the Common Stock, the number of shares of the Common
Stock then subject to any outstanding stock options and the number of shares of
the Common Stock which may be issued under the Plan but are not then subject to
outstanding stock options shall be adjusted by adding thereto the number of
shares of the Common Stock which would have been distributable thereon if such
shares had been outstanding on the date fixed for determining the shareholders
entitled to receive such stock dividend or distribution.
Subject to the Board's ability to terminate the Plan pursuant to
Section 16, if the outstanding shares of the Common Stock shall be changed into
or exchangeable for a different number or kind of shares of stock or other
securities of the Company or another corporation, whether through
reorganization, reclassification, recapitalization, stock split-up, combination
of shares, merger or consolidation, then there shall be substituted for each
share of the Common Stock subject to any then outstanding stock option and for
each share of the Common Stock which may be issued under the Plan but which is
not then subject to any outstanding stock option, the number and kind of shares
of stock or other securities into which each outstanding share of the Common
Stock shall be so changed or for which each such share shall be exchangeable.
In case of any adjustment or substitution as provided for in this
Section 11, the Committee shall equitably adjust the formula for determining the
Purchase Price of outstanding stock options in accordance with the requirements
of Sections 423 and 424 of the Code.
If the outstanding shares of the Common Stock shall be changed in value
by reason of any spin-off, split-off or split-up, or dividend in partial
liquidation, dividend in property other than cash or extraordinary distribution
to holders of the Common Stock, the Committee shall make any adjustments to any
then outstanding stock option which it determines are equitably required to
prevent dilution or enlargement of the rights of participating employees which
would otherwise result from any such transaction.
If any adjustment or substitution provided for in this Section 11
requires the approval of stockholders in order to enable the Company to grant
stock options under the Plan, then no such adjustment or substitution shall be
made without the required stockholder approval. Notwithstanding the foregoing,
if the effect of any such adjustment or substitution would be to cause any
outstanding option granted under the Plan to fail to continue to qualify as an
option subject to Sections 421 and 423 of the Code or to cause a modification,
extension or renewal of such option within the meaning of Section 424 of the
Code, the Committee may elect that such adjustment or substitution not be made
but rather shall use reasonable efforts to effect such other adjustment of each
then outstanding stock option as the Committee, in its discretion, shall deem
equitable and which will not result in any disqualification, modification,
extension or renewal (within the meaning of Section 424 of the Code) of such
outstanding stock option.
7
<PAGE> 8
SECTION 12
CERTAIN TERMS AND CONDITIONS OF PLAN
The obligation of the Company to issue or deliver shares of the Common
Stock under the Plan, or to permit the resale of such shares from an employee's
Common Stock account, shall be subject to (i) the effectiveness of a
registration statement under the Securities Act of 1933, as amended, with
respect to such shares, if deemed necessary or appropriate by counsel for the
Company, (ii) the condition that the shares shall have been listed (or
authorized for listing upon official notice of issuance) upon each stock
exchange, if any, on which the Common Stock may then be listed and (iii)
compliance with all other applicable laws, regulations, rules and orders which
may then be in effect.
The Plan is intended to enable employees to obtain the Company's Common
Stock for investment and not for resale. The Company does not, however, intend
to restrict or influence any employee in the conduct of his or her own affairs.
An employee may, therefore, sell the Common Stock received under the Plan at any
time he or she chooses; provided, however, the sale of such Common Stock must be
made in accordance with the Company's policy against insider trading (a copy of
which will be delivered by the applicable Human Resources Department or Payroll
Location to each employee upon entering the Plan) and in conformance with U.S.
federal and state securities laws, Canadian provincial securities laws and
securities laws of other countries, as applicable. The employee assumes the risk
of any market fluctuations in the price of such Common Stock.
SECTION 13
EFFECT OF THE PLAN ON THE RIGHTS OF EMPLOYEES AND EMPLOYER
Nothing in the Plan or any stock option under the Plan shall confer any
right to any employee to continue in the employ of the Company or any Subsidiary
or interfere in any way with the rights of the Company or any Subsidiary to
terminate the employment of any employee at any time.
SECTION 14
INFORMATION FOR ELIGIBLE EMPLOYEES; VOTING RIGHTS
Each participating employee shall receive at least quarterly each year
a statement of all transactions affecting the Common Stock account relating to
the employee and the number of shares (including any fractional interests in a
share) of the Common Stock credited to the Common Stock account. Each employee
shall also receive copies of all reports, proxy statements and other
communications distributed by the Company to its stockholders generally at the
time and in the manner such material is sent to such stockholders.
Participating employees with Common Stock in a Common Stock account
shall receive proxy soliciting material in connection with each meeting of
stockholders of the Company. Shares can be voted only by the holder of record.
The shares of the Common Stock credited to each Common Stock account (including
any fractional interests in a share) shall be voted by the holder of record only
in accordance with the employee's signed proxy instructions duly delivered to
the holder of record.
SECTION 15
EXPENSES OF THE PLAN
The Company will pay all expenses incident to the operation of the
Plan, including the costs of record keeping, accounting fees, legal fees, the
costs of delivery of stock certificates to employees and the costs of delivery
of shareholder communications. The Company will not pay any expenses, broker's
or other commissions or taxes incurred in connection with the sale of shares of
the Common Stock credited to a Common Stock account at the direction of the
employee. Expenses in connection with any such sale will be deducted from the
proceeds of sale prior to any remittance to the employee.
8
<PAGE> 9
SECTION 16
AMENDMENT AND TERMINATION
The right to amend the Plan at any time and from time to time and the
right to terminate the Plan at any time are hereby specifically reserved to the
Board, provided that no amendment of the Plan shall, without stockholder
approval, (a) increase the total number of shares which may be issued under the
Plan, except as provided in Section 11, (b) amend the first paragraph of Section
7 to lower the minimum Purchase Price or (c) make any changes in the class of
corporations whose employees may be offered options under the Plan.
The Plan and all rights of employees under the Plan shall terminate on
the earlier of:
(a) June 30, 2003
(b) the date the Plan is terminated by the Board, in its discretion; or
(c) the last day of the Purchase Period that participating employees
become entitled to purchase a number of shares equal to or greater than the
number of shares remaining available for purchase under the Plan. If the number
of shares so purchasable is greater than the shares remaining available, the
available shares shall be allocated by the Committee among the participating
employees in such manner as it deems fair and which complies with the
requirements under Section 423 of the Code for employee stock purchase plans. In
the event at any time during a Purchase Period it appears that the shares
purchasable with authorized payroll deductions may exceed the number of shares
remaining available for purchase under the Plan, the Committee shall have
discretion to reduce the payroll deductions authorized by participating
employees in such manner as it deems fair and which complies with the
requirements under Section 423 of the Code for employee stock purchase plans.
The Company shall provide written notice to each affected employee of any such
reduction.
As soon as practicable following termination of the Plan, all amounts
credited to the contribution accounts of participating employees shall, to the
extent not applied to the purchase of shares as provided in subparagraph (c)
above, be refunded to the participating employees.
SECTION 17
GOVERNING LAW; CONSTRUCTION; INTEGRATION
The validity and construction of the Plan shall be governed by the laws
of the Commonwealth of Pennsylvania. In construing the Plan, the singular shall
include the plural and the masculine gender shall include the feminine, unless
the context requires otherwise. The Plan contains all of the understandings and
representations between the Company and its Subsidiaries and their employees and
supersedes any prior understandings and agreements entered into between them
regarding the subject matter of the Plan. There are no representations,
agreements, arrangements or understandings, oral or written, between the Company
and its Subsidiaries and their employees relating to the subject matter of the
Plan which are not fully expressed in the Plan.
SECTION 18
WITHHOLDING
Any taxes required to be withheld by the Company or any of its
Subsidiaries shall be paid by an employee in cash upon the request of the
Company. If an employee does not pay any taxes required to be withheld by the
Company or any of its Subsidiaries within ten days after a request for the
payment of such taxes, the Company or such Subsidiary may withhold such taxes
from any compensation to which an employee is entitled and may cause the Agent
to withhold the delivery or sale of shares until such taxes are paid.
9
<PAGE> 10
SECTION 19
EFFECT ON OTHER PLANS
No income, if any, received by an employee due to the discount in the
Purchase Price from the fair market value of the Common Stock provided by the
Company under the Plan shall be considered compensation for purposes of any
pension or retirement plan, insurance plan or any other employee benefit plan of
the Company or a Subsidiary (notwithstanding the definition of compensation
provided in such plans), including but not limited to the Westinghouse Air Brake
Company Retirement Plan for Non-Bargaining Employees and the Westinghouse Air
Brake Company Savings Plan.
SECTION 20
EFFECTIVE DATE OF PLAN
The effective date and date of adoption of the Plan shall be October 22
1997, the date adoption of the Plan was approved by the Board, provided that on
or prior to October 21, 1998 such adoption of the Plan by the Board is approved
by the affirmative vote of the holders of at least a majority of the shares of
Common Stock represented in person or by proxy and entitled to vote at a duly
called and convened meeting of such holders. Notwithstanding any other provision
contained in the Plan, no stock option granted under the Plan may be exercised
until after such stockholder approval. In the event stockholder approval of the
Plan is not obtained on or before October 21, 1998, all amounts credited to the
contribution accounts of participating employees, if any, shall be refunded to
the participating employees.
10
<PAGE> 1
EXHIBIT 21
SUBSIDIARIES OF
WESTINGHOUSE AIR BRAKE COMPANY
<TABLE>
<CAPTION>
WABCO'S
JURISDICTION OF OWNERSHIP
COMPANY INCORPORATION INTEREST
--------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Allied Friction Products Australia Pty Ltd. Australia 100%
Benn Iron Foundry Ltd. Canada 100%
Cobra Europe S.A. France 100%
Evand Pty Ltd. Australia 100%
F.I.P. Pty Ltd. Australia 100%
Greysham Railway Friction Products India 65%
H.P. s.r.l. Italy 100%
Pioneer Friction India 51%
Railroad Friction Products Corporation Delaware 100%
RFI Properties, Inc. Delaware 100%
RFPC Holding Corporation Delaware 100%
RFS (E) Limited United Kingdom 100%
Stone Safety Service Corp New Jersey 100%
Stone U.K. United Kingdom 100%
Technical Service & Marketing Delaware 100%
TFL, Inc. Delaware 100%
ThermoSealed Castings Ltd. Canada 100%
Vapor Canada Inc. Canada 100%
Vapor Corporation Delaware 100%
Vapor UK Limited United Kingdom 100%
WABCO/MPI De Mexico, S. A. De C.V. Mexico 51%
Westinghouse Railway (Canada), Ltd. Canada 100%
Westinghouse Railway Holdings (Canada) Inc. Canada 100%
</TABLE>
<PAGE> 1
EXHIBIT 23
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation of our
reports, included in or incorporated by reference in this Form 10-K, into the
Company's previously filed Registration Statements on Form S-8, Registration
Numbers 33-80417 and 333-59441, Form S-8, Registration Number 333-53753, Form
S-8, Registration Number 333-39159, and Form S-8, Registration Number 333-02979,
included the Prospectuses therein, relating to the Company's 1995 Stock
Incentive Plan, 1998 Employee Stock Purchase Plan, 1997 Executive Retirement
Plan and 1995 Non-Employee Directors' Fee and Stock Option Plan. It should be
noted that we have not audited any financial statements of the Company
subsequent to December 31, 1998 or performed any audit procedures subsequent to
the date of our report.
/s/ ARTHUR ANDERSEN LLP
Pittsburgh, Pennsylvania
March 23, 1999
48
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM WESTINGHOUSE
AIR BRAKE COMPANY'S CONSOLIDATED FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 3,323
<SECURITIES> 0
<RECEIVABLES> 132,901
<ALLOWANCES> 0
<INVENTORY> 103,560
<CURRENT-ASSETS> 262,961
<PP&E> 214,461
<DEPRECIATION> (89,480)
<TOTAL-ASSETS> 596,184
<CURRENT-LIABILITIES> 167,550
<BONDS> 437,238
0
0
<COMMON> 474
<OTHER-SE> (34,327)
<TOTAL-LIABILITY-AND-EQUITY> 596,184
<SALES> 670,909
<TOTAL-REVENUES> 670,909
<CGS> 451,730
<TOTAL-COSTS> 114,513
<OTHER-EXPENSES> 919
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 31,217
<INCOME-PRETAX> 72,530
<INCOME-TAX> 27,561
<INCOME-CONTINUING> 44,969
<DISCONTINUED> 0
<EXTRAORDINARY> (3,315)
<CHANGES> 0
<NET-INCOME> 41,654
<EPS-PRIMARY> 1.66
<EPS-DILUTED> 1.62
</TABLE>
<PAGE> 1
Exhibit 99
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 11-K
(Mark One):
[X] ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended DECEMBER 31, 1998
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from __________ to ___________
COMMISSION FILE NUMBER 1-13782
A. Full title of the plan and the address of the plan, if different from
that of the issuer named below:
Westinghouse Air Brake Company Employee Stock Ownership Plan and Trust
B. Name of issuer of the securities held pursuant to the plan and the address of
the principal executive office:
Westinghouse Air Brake Company
1001 Air Brake Avenue
Wilmerding, PA 15148
<PAGE> 2
The Westinghouse Air Brake Company Employee Stock Ownership Plan and
Trust is subject to the Employee Retirement Income Security Act of
1974. The required financial statements will be filed by amendment
within the time prescribed by the rules of Form 11-K.
SIGNATURE
Pursuant to the requirements of the Securities and Exchange Act of
1934, the ESOP Committee of Westinghouse Air Brake Company has duly
caused this annual report to be signed on its behalf by the undersigned
hereunto duly authorized.
Westinghouse Air Brake Company
Employee Stock Ownership Plan and
Trust
By /s/ KEVIN P. CONNER
----------------------------
Kevin P. Conner
Member of the ESOP Committee
February 26, 1999
