Filed pursuant to Rule 424(b)(3)
Registration No. 333-99569
FINAL PROSPECTUS DATED OCTOBER 15, 2002
PROSPECTUS
METALDYNE CORPORATION
OFFER TO EXCHANGE ITS 11% SENIOR SUBORDINATED NOTES DUE 2012,
WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
FOR ANY AND ALL OF ITS 11% SENIOR SUBORDINATED NOTES DUE 2012.
------------------------
Terms of Exchange Offer
o Expires 9:00 a.m., New York City time, on November 20, 2002 unless
extended.
o Subject to certain customary conditions which may be waived by us.
o All outstanding 11% Senior Subordinated Notes due 2012 that are validly
tendered and not withdrawn will be exchanged.
o Tenders of outstanding notes may be withdrawn at any time prior to the
expiration of this exchange offer.
o The exchange of the outstanding notes will not be a taxable exchange
for U.S. federal income tax purposes.
o We will not receive any cash proceeds from the exchange offer.
o The terms of the notes to be issued in exchange for the outstanding
notes are substantially identical to the outstanding notes, except for
certain transfer restrictions and registration rights relating to the
outstanding notes.
o Any outstanding notes not validly tendered will remain subject to
existing transfer restrictions.
SEE "RISK FACTORS," BEGINNING ON PAGE 12, FOR A DISCUSSION OF CERTAIN
FACTORS THAT SHOULD BE CONSIDERED BY HOLDERS BEFORE TENDERING THEIR OUTSTANDING
NOTES IN THE EXCHANGE OFFER.
There has not previously been any public market for the exchange notes
that will be issued in the exchange offer. We do not intend to list the
exchange notes on any national stock exchange or on the Nasdaq National Market.
There can be no assurance that an active market for such exchange notes will
develop.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed upon the
adequacy or accuracy of this prospectus. Any representation to the contrary is
a criminal offense.
------------------------
THE DATE OF THIS PROSPECTUS IS OCTOBER 15, 2002.
TABLE OF CONTENTS
PAGE
-----
WHERE YOU CAN FIND MORE INFORMATION ................................ ii
INCORPORATION OF DOCUMENTS BY REFERENCE ............................ ii
FORWARD-LOOKING STATEMENTS ......................................... iii
PROSPECTUS SUMMARY ................................................. 1
RISK FACTORS ....................................................... 12
USE OF PROCEEDS .................................................... 23
CAPITALIZATION ..................................................... 24
UNAUDITED PRO FORMA FINANCIAL INFORMATION .......................... 26
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS ............... 32
THE EXCHANGE OFFER ................................................. 37
DESCRIPTION OF OTHER INDEBTEDNESS AND OUR PREFERRED STOCK .......... 45
DESCRIPTION OF NOTES ............................................... 51
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS ............ 91
PLAN OF DISTRIBUTION ............................................... 94
LEGAL MATTERS ...................................................... 95
EXPERTS ............................................................ 95
i
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and other
information with the Securities and Exchange Commission under the Securities
Exchange Act of 1934, as amended. The Exchange Act file number for our
Commission filings is 001-12068. You may read and copy any document we file at
the Commission public reference room at 450 Fifth Street, N.W., Washington,
D.C. 20549. You may obtain information on the operation of the public reference
room by calling the Commission at 1-800-SEC-0330. We file information
electronically with the Commission. Our Commission filings are available from
the Commission's Internet site at http://www.sec.gov, which contains reports,
proxy and information statements and other information regarding issuers that
file electronically.
INCORPORATION OF DOCUMENTS BY REFERENCE
The Commission allows us to "incorporate by reference" certain documents
we file with it, which means that we can disclose important information to you
by referring you to those documents. We are incorporating by reference the
documents listed below and any future filings we will make with the Commission
under Section 13(a), 13(c), 14 or 15(d) of the Exchange Act.
o Annual Report on Form 10-K for the year ended December 31, 2001 (other
than Item 8. Financial Statements and Supplemental Data which has been
superseded by Exhibit 99.1 in Current Report on Form 8-K, filed on
September 13, 2002);
o Quarterly Report on Form 10-Q for the period ended March 31, 2002,
filed on May 15, 2002, and for the period ended June 30, 2002 (other
than Item 8. Financial Statements and Supplementary Data which has been
superseded by Exhibit 99.2 in Current Report on Form 8-K, filed on
September 13, 2002), filed on August 14, 2002;
o Proxy Statement on Schedule 14A for our annual meeting of shareholders
held on May 9, 2002 (other than the sections entitled "Executive
Compensation--Committee Report," "Performance Group,"
"PricewaterhouseCoopers LLP Fees for Fiscal 2001" and "Audit Committee
Reports");
o Current Report on Form 8-K and Form 8-K/A, filed on June 11, 2002 and
June 21, 2002, respectively;
o Current Report on Form 8-K, filed on July 22, 2002 and;
o Current Report on Form 8-K, filed on September 13, 2002.
The information in the documents incorporated by reference is considered
to be part of this prospectus, and information in documents that we file later
with the Commission will automatically update and supersede such information.
Any statement contained in a document incorporated or deemed to be
incorporated by reference in this prospectus is modified or superseded for
purposes of this prospectus to the extent that a statement contained in this
prospectus or in any other subsequently filed document which also is or is
deemed to be incorporated by reference herein modifies or supersedes such
statement. Any statement so modified or superseded does not, except as so
modified or superseded, constitute a part of this prospectus.
We will provide a copy of the documents we incorporate by reference, at no
cost, to any person who receives this prospectus, including any beneficial
owner of our common stock. To request a copy of any or all of these documents,
you should write or telephone us at the following address and telephone number:
Metaldyne Corporation
47659 Halyard Drive
Plymouth, Michigan 48107
Attention: Investor Relations
http://www.metaldyne.com
ii
To obtain timely delivery, you must make your request no later than
November 13, 2002 (five business days prior to the expiration date for the
exchange offer).
FORWARD-LOOKING STATEMENTS
This prospectus contains "forward-looking" statements, as that term is
defined by the federal securities laws, about our financial condition, results
of operations and business. You can find many of these statements by looking
for words such as "may," "will," "expect," "anticipate," "believe," "estimate"
and similar words used in this prospectus.
These forward-looking statements are subject to numerous assumptions,
risks and uncertainties. Because the statements are subject to risks and
uncertainties, actual results may differ materially from those expressed or
implied by the forward-looking statements. We caution readers not to place
undue reliance on the statements, which speak only as of the date of this
prospectus.
The cautionary statements set forth above should be considered in
connection with any subsequent written or oral forward-looking statements that
we or persons acting on our behalf may issue. We do not undertake any
obligation to review or confirm analysts' expectations or estimates or to
release publicly any revisions to any forward-looking statements to reflect
events or circumstances after the date of this prospectus or to reflect the
occurrence of unanticipated events.
Risks and uncertainties that could cause actual results to vary materially
from those anticipated in the forward-looking statements included in this
prospectus include general economic conditions in the markets in which we
operate and industry-based factors such as:
o declines in North American automobile and light truck builds;
o reductions in outsourcing by our automotive customers;
o increases in our raw material and energy costs;
o labor costs and strikes at our major direct and indirect customers and
at our facilities;
o dependence on significant automotive customers;
o the level of competition in the automotive supply industry and pricing
pressures from our customers;
o technological developments that could competitively disadvantage us;
and
o risks associated with conducting business in foreign countries.
In addition, factors more specific to us could cause actual results to
vary materially from those anticipated in the forward-looking statements
included in this prospectus such as substantial leverage, limitations imposed
by our debt instruments, our ability to identify attractive and other strategic
acquisition opportunities and to successfully integrate acquired businesses
including actions we have identified as providing cost-saving opportunities.
We disclose important factors that could cause our actual results to
differ materially from our expectations under "Risk Factors" and in the
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" sections in our Annual Report on Form 10-K and Quarterly Report on
Form 10-Q, which are incorporated by reference in this prospectus, and
elsewhere in this prospectus. These cautionary statements qualify all
forward-looking statements attributable to us or persons acting on our behalf.
When we indicate that an event, condition or circumstance could or would have
an adverse effect on us, we mean to include effects upon our business,
financial and other conditions, results of operations and ability to make
payments on the notes.
iii
PROSPECTUS SUMMARY
This summary highlights information contained elsewhere in this
prospectus. This summary does not contain all of the information you should
consider before investing in the notes. You should read this entire prospectus
carefully, including "Risk Factors" and our financial statements and the notes
to those financial statements included elsewhere in this prospectus and
contained in our Annual Report on Form 10-K and Quarterly Reports on Form 10-Q
incorporated by reference into this prospectus. Unless the context otherwise
requires, all information in this prospectus which refers to (i) the "Issuer"
refers only to Metaldyne Corporation and (ii) "us" or "we" or "our" refers to
the Issuer and its subsidiaries. For purposes of this prospectus, when we
describe information on a pro forma basis, we are giving effect only to those
adjustments set forth under "Unaudited Pro Forma Financial Information."
THE COMPANY
We are a leading supplier of highly engineered metal components for the
global light vehicle market. Through a combination of capabilities in design,
engineering, fabrication, machining and assembly, we supply components and
modular systems used in vehicle transmission, engine and chassis applications.
Our products are sold primarily to both North American and international light
vehicle original equipment manufacturers, or OEMs, and Tier I component
assemblers and provide content for approximately 95% of the top 40 NAFTA light
vehicles produced in 2001. Tier I component assemblers are direct suppliers to
OEMs of integrated modules, such as a complete engine assembly or drivetrain
assembly. Our metal forming processes include cold, warm and hot forging,
forged and conventional powder metal, tubular fabrications and
precision-aluminum die castings. In addition, we perform design, engineering,
machining, finishing and assembly functions. We have approximately 8,500
employees and more than 40 owned or leased manufacturing facilities worldwide.
In North America, we have leading market shares in several of our
products. We are the largest independent forging company, the second largest
independent "machining and assembly" supplier, and one of the largest powder
metal manufacturers for light vehicle applications. We believe our scale and
combined capabilities represent a significant competitive advantage over our
competitors, many of which are smaller and do not have the ability to combine
metal forming with machining and sub-assembly capabilities. We serve over 300
customers, including BMW, Dana, DaimlerChrysler, Ford, General Motors, Delphi,
Honda, New Venture Gear, Nissan, Renault, Toyota, TRW and Visteon.
We have organized our businesses into three principal product groups:
Transmission Products, Engine Products and Chassis Products.
o TRANSMISSION PRODUCTS. We are a leading independent manufacturer of
components, modules and systems, including precision shafts, hydraulic
controls, hot and cold forgings and integrated program management used
in a broad range of transmission applications. We believe that we have
leading market shares in several product areas, including the number
one position in transmission and transfer case shafts, transmission
valve bodies, cold extrusion and Hatebur hot forgings. In 2001, our
Transmission Products group generated sales of approximately $798
million (before eliminating intercompany sales).
o ENGINE PRODUCTS. We are a leading supplier of a broad range of engine
components, modules and systems. The group manufactures sintered metal,
powder metal, forged and tubular fabricated products used for a variety
of applications, including balance shaft modules and front cover
assemblies. We have leading market shares in powder metal connecting
rods and several categories of forgings. In 2001, the sales of the
Engine Products group were $460 million (before eliminating
intercompany sales).
o CHASSIS PRODUCTS. We are a leading supplier of components, modules and
systems used in a variety of engineered chassis applications, including
fittings, wheel-ends, axle shafts, knuckles, and mini-corner
assemblies. This group utilizes a variety of processes including hot,
warm and
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cold forging, powder metal forging and machinery and assembly. We apply
full-service integrated machining and assembly capabilities to an array
of chassis components. In 2001, the sales of the Chassis Products group
were $155 million (before eliminating intercompany sales).
MARKET OPPORTUNITY AND GROWTH STRATEGY
In order to reduce costs and consolidate volume with full scale suppliers,
we believe OEMs and Tier I suppliers will increasingly seek to outsource the
design, manufacture and assembly of fully integrated, modular assemblies of
metal parts in engine, transmission and chassis. We believe that the following
favorable market factors will drive the domestic OEM's desire to continue
outsourcing:
o emissions, fuel economy and customer preferences are driving the design
of a new generation of components for engine, transmission and chassis
applications to increase efficiency and performance and reduce weight;
o OEMs are consolidating their supply base among global, full service
suppliers capable of meeting their needs uniformly across their
geographic production base; and
o in many cases, full scale suppliers have lower production costs than
OEMs and are able to provide significant cost reduction opportunities.
Our strategy is to become one of the leading suppliers of high-quality,
low-cost metal formed components, assemblies and modules to the global light
vehicle industry. Key elements of our strategy include the following:
o FOCUS ON FULL-SERVICE, INTEGRATED SUPPLY OPPORTUNITIES. By offering a
full complement of metal solutions, we believe we provide OEMs with
"one-stop" shopping to optimize weight, cost, stress, durability,
fatigue resistance and other metal component attributes of products.
Our capabilities in engineering, design, machining and assembly
position us to capture a greater share of the "value chain" and deliver
to customers finished assemblies and modules rather than independent
parts. Currently, OEMs satisfy a significant portion of their metal
forming and assembly requirements with in-house production and assembly
of purchased components. We believe that, as OEMs seek to outsource the
design and manufacture of parts, they will choose suppliers with
expertise in multiple metal-forming technologies and the ability to
design, engineer and assemble components rather than supply independent
parts. We intend to enhance our strengths in forged steel, powder metal
and precision-aluminum die cast components by adding metal and process
capabilities in aluminum foundry and magnesium die casting.
o INCREASE CONTENT PER VEHICLE. We are aggressively pursuing new business
opportunities to supply a larger portion of value-added content
utilizing our integrated capabilities. These opportunities can result
in significant increases in content per vehicle on related programs.
For example, we were recently awarded a contract by a leading North
American OEM to manufacture clutch modules that incorporates our
metal-forming, aluminum die casting, product development and machining
and assembly capabilities. We have received various new business awards
from our domestic and transplant customers across many of our product
categories. We have been awarded net new business that is projected,
based on our customers' production forecasts, to generate additional
cumulative sales of approximately $1.9 billion from 2002 through 2006.
In 2001, our content per vehicle in North America was approximately $70
and we expect to materially increase our content per vehicle as a
result of new business awards that we are pursuing.
o LEVERAGE OUR ENGINEERING, DESIGN AND INFORMATION TECHNOLOGY
CAPABILITIES. We believe that in order to effectively develop total
metal component and assembly solutions it is necessary to integrate
research, development and design elements with product fabrication,
machining, finishing and assembly. We believe that our larger scale and
broader product line relative to
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most of our competitors will enable us to more efficiently invest in
engineering, design and information technology and develop a
significant competitive advantage. For example, we recently designed
and developed a front engine module that integrates multiple components
into one fully tested end item which increased the products'
performance and durability while reducing noise/vibration effects and
overall system costs.
o CONTINUE TO PURSUE COST SAVINGS OPPORTUNITIES AND OPERATING SYNERGIES.
We have pursued, and will continue to pursue, cost savings that enhance
our competitive position in serving OEMs and Tier I suppliers. In 2001,
we successfully completed cost savings programs involving a
consolidation of headquarter functions and the elimination of an
outsourcing agreement with our former controlling shareholder to reduce
annual corporate overhead expenses by 25%, the closure and
consolidation of manufacturing and distribution facilities and an
aggressive cash management program. In addition, we have invested in
and are implementing a comprehensive shared services platform for a
range of overhead functions including finance, procurement and human
resources. We believe the shared services program will improve
management information and result in further cost savings in the
future. We believe we have additional opportunities to improve our
margins as we achieve operating synergies with increased volumes and
continue to vertically integrate our machining and assembly capacity
with our metal forming abilities. We intend to pursue opportunities to
improve our sourcing costs for key commodity inputs, such as primary
and secondary scrap, hot bar and rod and other key raw material
components.
o PURSUE STRATEGIC COMBINATIONS AND GLOBAL EXPANSION OPPORTUNITIES. We
plan to continue to pursue acquisitions that strategically expand our
metal and process capabilities in aluminum foundry and magnesium die
casting and contribute to our geographic diversity and market share.
Global expansion is an important component of our growth strategy since
a significant portion of the global market for engineered metal parts
is outside of North America. Furthermore, as OEMs continue to
consolidate their supply base, they are seeking global suppliers that
can provide seamless product delivery across geographic production
regions. We believe our size, strong market shares in North America and
customer relationships strongly position us to capitalize on this
trend.
In November 2000, we were acquired by an investor group led by Heartland
Industrial Partners, L.P. and Credit Suisse First Boston Equity Partners, L.P.
Subsequent to this transaction, we completed two acquisitions to leverage our
leading market position with additional products and capabilities. In December
2000, we acquired Simpson Industries, Inc., a leader in design, machining and
sub-assembly of automotive components. In June 2001, we acquired Global Metal
Technologies, Inc., or GMTI, a leading provider of precision-aluminum die
castings for engine and driveline applications. The Issuer is a holding company
and substantially all of our operations are conducted through our subsidiaries.
RECENT DEVELOPMENTS
TriMas Divestiture. On June 6, 2002 our former wholly owned subsidiary
TriMas Corporation, or TriMas, issued approximaley 66% of its fully diluted
common equity to Heartland Industrial Partners, L.P. and other investors. Our
shareholders (other than Heartland) that are parties to our shareholders
agreement had a right to acquire a proportionate share of such 66% interest.
Accordingly, some of our shareholders exercised their rights and acquired an
aggregate 5% interest in TriMas, reducing Heartland's interest to 61%. We
retained approximately 34% of the fully diluted common equity of TriMas in the
form of common stock and a presently exercisable warrant to purchase shares of
common stock at a nominal exercise price. In connection with the TriMas
divestiture, we received $840 million in consideration in the form of cash and
debt reduction. As a result of the transaction, after payment of expenses, we
repaid approximately $496 million of term debt under our senior credit facility
and reduced our outstanding balances under our receivables facility by
approximately $136 million (of which approximately $86 million related to the
elimination of the TriMas receivables
3
base) and we utilized an additional $205 million in cash to repurchase, either
at prevailing market prices or pursuant to a tender offer described below, a
portion of our outstanding 4.5% convertible subordinated debentures due 2003.
For a more complete discussion of the transaction and its ongoing impact upon
us, see "Certain Relationships and Related Party Transactions" and our
Quarterly Report on Form 10-Q for the period ended June 30, 2002, which is
incorporated by reference in this prospectus. The purpose of this divestiture
was to allow us to repay some of our debt maturing in 2003, defer some of our
credit facility amortization by repaying term debt with the proceeds in forward
order of maturity, enhance our liquidity and allow us to focus on our core
metal-forming businesses while retaining an interest in TriMas.
Goodwill and Other Intangible Assets. Effective January 1, 2002, we
adopted Statement of Financial Accounting Standards, or SFAS, No. 142,
"Goodwill and Other Intangible Assets" and ceased amortizing goodwill. At June
30, 2002, our unamortized balance was approximately $522 million. Our step 1
test as required by SFAS No. 142 indicated a carrying value in excess of fair
value relating to the TriMas reporting units at January 1, 2002. As discussed
in our June 30, 2002 Form 10-Q filing, we completed our assessment for the
Automotive Group which indicated that the fair value of these units exceed
their corresponding carrying value. Fair value was determined based upon the
discounted cash flows of the reporting units. Subsequent to filing the June 30,
2002 Form 10-Q, we completed our transitional impairment test needed to measure
the amount of any goodwill impairment for our former TriMas subsidiary. A
non-cash, after tax charge of $36.6 million as of January 1, 2002, related to
the industrial fasteners business which was divested by Metaldyne in June 2002,
was taken. Sales, operating profits and cash flows for this TriMas owned
business were lower than expected beginning in the first quarter of 2001, due
to the overall economic downturn and cyclical declines in certain markets for
industrial fastener products. Based on that trend, the earnings and cash flow
forecasts for the next five years indicated the goodwill impairment loss.
Consistent with the requirements of SFAS 142, as of January 1, 2002, we will
recognize this impairment charge as the cumulative effect of change in
accounting principle during the nine months ended September 29, 2002.
This effect of adoption of SFAS 142 on our condensed results of operations
for the six months ended June 30, 2002 was as follows:
AS AS
REPORTED ADJUSTED
------------- -------------
(IN MILLIONS, EXCEPT PER SHARE
AMOUNTS)
Sales ........................................................ $1,090.3 $1,090.3
Gross profit ................................................. 217.8 217.8
Operating profit ............................................. 89.0 89.0
Income before extraordinary item and cumulative effect of
accounting change ........................................... 29.0 29.0
Cumulative effect of change in recognition and measurement of
goodwill impairment ......................................... -- (36.6)
Net loss attributable to common stock ........................ (8.6) (45.3)
Basic loss per share ......................................... (0.20) (1.06)
Diluted loss per share ....................................... (0.19) (1.02)
Tender Offer for Debentures. On August 21, 2002, we completed an offer to
purchase up to, and subsequently accepted for purchase, $78.2 million aggregate
principal amount of our outstanding 4 1/2% convertible subordinated debentures
due 2003. After giving effect to the purchase, there is $100.0 million
aggregate principal amount of debentures outstanding. We utilized cash
specifically retained from the TriMas divestiture to fund the debenture
purchase. In addition, we paid approximately $1.1 million in accrued interest,
fees and expenses in connection with the tender offer. As a result of our
November 2000 acquisition, the convertible subordinated debentures are no
longer convertible into our common stock.
4
SUMMARY OF THE EXCHANGE OFFER
The Exchange Offer.......... We are offering to exchange $1,000 principal
amount of our 11% Senior Subordinated Notes due
2012, which have been registered under the
Securities Act, for $1,000 principal amount of
our outstanding 11% Senior Subordinated Notes due
2012, which were issued in a private offering on
June 20, 2002. As of the date of this prospectus,
there are $250,000,000 principal amount at
maturity of outstanding notes. We will issue
exchange notes promptly after the expiration of
the exchange offer.
Registration Rights......... You are entitled to exchange your outstanding
notes for freely tradeable exchange notes with
substantially identical terms. The exchange offer
is intended to satisfy your exchange rights.
After the exchange offer is complete, you will no
longer be entitled to any exchange or
registration rights with respect to your
outstanding notes. Accordingly, if you do not
exchange your outstanding notes, you will not be
able to reoffer, resell or otherwise dispose of
your outstanding notes unless you comply with the
registration and prospectus delivery requirements
of the Securities Act, or there is an exemption
available.
Resales..................... We believe that the exchange notes issued in
the exchange offer may be offered for resale,
resold or otherwise transferred by you without
compliance with the registration and prospectus
delivery requirements of the Securities Act,
provided that:
o you are acquiring the exchange notes in the
ordinary course of your business;
o you are not participating, do not intend to
participate and have no arrangement or
understanding with any person to participate
in a distribution of the exchange notes; and
o you are not an "affiliate" of ours.
If you do not meet the above criteria you will
have to comply with the registration and
prospectus delivery requirements of the
Securities Act in connection with any reoffer,
resale or other disposition of your exchange
notes.
Each broker or dealer that receives exchange
notes for its own account in exchange for
outstanding notes that were acquired as a result
of market-making or other trading activities
must acknowledge that it will deliver this
prospectus in connection with any sale of
exchange notes.
Expiration Date............. 9:00 a.m., New York City time, on November 20,
unless we extend the expiration date.
5
Conditions to the
Exchange Offer.............. The exchange offer is subject to certain
customary conditions, which may be waived by us.
The exchange offer is not conditioned upon any
minimum principal amount of outstanding notes
being tendered.
Procedures for Tendering
Outstanding Notes........... If you wish to tender outstanding notes, you
must complete, sign and date the letter of
transmittal, or a facsimile of it, in accordance
with its instructions and transmit the letter of
transmittal, together with your notes to be
exchanged and any other required documentation,
to The Bank of New York, who is the exchange
agent, at the address set forth in the letter of
transmittal to arrive by 9:00 a.m., New York City
time, on the expiration date. See "The Exchange
Offer--Procedures for Tendering Outstanding
Notes." By executing the letter of transmittal,
you will represent to us that you are acquiring
the exchange notes in the ordinary course of your
business, that you are not participating, do not
intend to participate and have no arrangement or
understanding with any person to participate in
the distribution of exchange notes, and that you
are not an "affiliate" of ours. See "The Exchange
Offer--Procedures for Tendering Outstanding
Notes."
Special Procedures for
Beneficial Holders.......... If you are the beneficial holder of outstanding
notes that are registered in the name of your
broker, dealer, commercial bank, trust company or
other nominee, and you wish to tender in the
exchange offer, you should contact the person in
whose name your outstanding notes are registered
promptly and instruct such person to tender on
your behalf. See "The Exchange Offer--Outstanding
Notes."
Guaranteed Delivery
Procedures.................. If you wish to tender your outstanding notes and
you cannot deliver such notes, the letter of
transmittal or any other required documents to
the exchange agent before the expiration date,
you may tender your outstanding notes according
to the guaranteed delivery procedures set forth
in "The Exchange Offer--Guaranteed Delivery
Procedures."
Withdrawal Rights........... Tenders may be withdrawn at any time before
9:00 a.m., New York City time, on the expiration
date.
Acceptance of Outstanding
Notes and Delivery of
Exchange Notes.............. Subject to certain conditions, we will accept for
exchange any and all outstanding notes which are
properly tendered in the exchange offer before
9:00 a.m., New York City time, on the expiration
date. The exchange notes will be delivered
promptly after the expiration date. See "The
Exchange Offer--Terms of the Exchange Offer."
6
Certain Federal Income Tax
Considerations............. The exchange of outstanding notes for exchange
notes will not be a taxable event for federal
income tax purposes. You will not recognize any
taxable gain or loss as a result of exchanging
outstanding notes for exchange notes, and you
will have the same tax basis and holding period
in the exchange notes as you had in the
outstanding notes immediately before the
exchange. See "Certain Federal Income Tax
Considerations."
Use of Proceeds............. We will not receive any proceeds from the
issuance of the exchange notes
Exchange Agent.............. The Bank of New York is serving as exchange
agent in connection with the exchange offer. The
address, telephone number and facsimile number of
the exchange agent are set forth in "The Exchange
Offer--Exchange Agent."
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SUMMARY OF THE EXCHANGE NOTES
The summary below describes the principal terms of the exchange notes. The
form and terms of the exchange notes are substantially identical to the form
and term of the original notes, except that we will register the exchange notes
under the Securities Act, and therefore, the exchange notes will not bear
legends restricting their transfer. Certain of the terms and conditions
described below are subject to important limitations and exceptions. The
"Description of Notes" section of this prospectus contains a more detailed
description of the terms and conditions of the exchange notes.
Issuer...................... Metaldyne Corporation.
Securities Offered.......... $250,000,000 in aggregate principal amount of
11% Senior Subordinated Notes due 2012.
Maturity.................... June 15, 2012.
Interest.................... 11% per annum, payable semi-annually in arrears
on June 15 and December 15, commencing December
15, 2002.
Guarantees.................. All payments on the exchange notes, including
principal and interest, will be jointly and
severally guaranteed on a senior subordinated
unsecured basis by each of our existing and
future domestic restricted subsidiaries that is a
guarantor or direct borrower under our credit
facility.
Ranking..................... The exchange notes and the guarantees will
rank:
o junior to all of our and the guarantors'
existing and future senior indebtedness and
secured indebtedness, including any borrowings
under our credit facility;
o equally with any of our and the guarantors'
future unsecured senior subordinated
indebtedness, including trade payables;
o senior to any of our and the guarantors'
future indebtedness that is expressly
subordinated in right of payment to the notes;
and
o effectively junior to all of the liabilities
of our subsidiaries, that have not guaranteed
the notes.
At June 30, 2002, the exchange notes and the
guarantees would have ranked junior to
approximately $400.0 million of senior
indebtedness. In addition, our non-guarantor
subsidiaries would have had approximately $13.6
million of indebtedness, excluding intercompany
obligations of our non-guarantor subsidiaries,
plus other liabilities, including trade
payables.
At June 30, 2002, on a pro forma basis after
giving effect to the repurchase of $78.2 million
aggregate principal amount of our outstanding
4.5% convertible subordinated debentures due
2003 in August 2002, the obligations of the
Issuer and our direct wholly owned subsidiary,
Metaldyne Company
8
LLC, in respect of the notes and the guarantees
would have ranked pari passu with $100.0 million
principal amount of our convertible subordinated
debentures, but the subordinated debentures are
not obligations of any of the other guarantors
and, therefore, guarantees in respect of the
exchange notes rank structurally senior to the
convertible subordinated debentures.
Optional Redemption......... We may redeem the exchange notes, in whole or
in part, at the redemption prices set forth in
this prospectus plus accrued and unpaid interest,
if any, to the date of redemption. In addition,
at any time prior to June 15, 2005, we may redeem
up to 35% of the exchange notes at 111% of the
principal amount, plus accrued and unpaid
interest, with the net proceeds of certain equity
issuances, provided at least 65% of the original
aggregate principal amount of the exchange notes
remains outstanding immediately after such
redemption.
Change of Control........... Upon the occurrence of a change of control, we
will be required to make an offer to purchase
each holder's exchange notes at a price equal to
101% of the principal amount, plus accrued and
unpaid interest, if any, to the date of purchase.
Restrictive Covenants....... The exchange notes will be issued under an
indenture with The Bank of New York, as trustee.
The indenture governing the exchange notes will
limit the ability of the Issuer and its
restricted subsidiaries to, among other things:
o incur or guarantee additional indebtedness;
o pay dividends or make other distributions or
repurchase or redeem our stock;
o make investments;
o sell assets;
o create liens;
o enter into agreements restricting our
restricted subsidiaries' ability to pay
dividends;
o enter into transactions with affiliates; and
o consolidate, merge or sell all or
substantially all of our assets.
These covenants are subject to important
exceptions and qualifications, which are
described under the heading "Description of
Notes" in this prospectus.
-----------------------------------
Metaldyne Corporation is a Delaware corporation. Our principal executive
offices are located at 47659 Halyard Drive, Plymouth, Michigan 48170. Our
telephone number is (734) 207-6200. Our Internet address is www.metaldyne.com.
Information on our web site does not constitute a part of this prospectus.
9
SUMMARY HISTORICAL FINANCIAL DATA
The following table sets forth our summary historical financial data for
the five years ended December 31, 2001 and the six months ended June 30, 2001
and 2002. The financial data for the fiscal years ended December 31, 1999, 2000
and 2001 have been derived from our audited consolidated financial statements
and the notes to those financial statements, which have been audited by
PricewaterhouseCoopers LLP, independent accountants. The financial data for the
fiscal year ended December 31, 1997 and 1998 have been derived from our audited
consolidated financial statements not included in this prospectus. The selected
information for the six months ended June 30, 2001 and 2002 has been derived
from our unaudited consolidated financial statements, which, in the opinion of
management, include all adjustments, which are normal and recurring in nature
necessary for the fair presentation of that data for such periods.
On November 28, 2000, Metaldyne was acquired by an investor group led by
Heartland Industrial Partners, L.P. The pre-acquisition basis of accounting for
periods prior to November 28, 2000 is reflected on the historical basis of
accounting and all periods subsequent to November 28, 2000 are reflected on a
purchase accounting basis and are therefore not comparable. In reviewing the
following information, it should be noted that there is or will be significant
non-compatibility across recent periods or with future periods. This
non-compatibility arises because in December 2000 we acquired Simpson
Industries, Inc., a leader in design, machining and sub-assembly of automotive
components, beginning in January 2001, our results include the results for
Global Metal Technologies, Inc., or GMTI, a leading provider of
precision-aluminum die castings for engine and driveline applications, in
January 1998 we acquired TriMas and effective January 1, 2002 we adopted SFAS
142 and stopped the amortization of goodwill. In June 2002, we divested
ourselves of 66% of our equity interests in TriMas.
PRE-ACQUISITION BASIS
--------------------------------------------------------------------
YEAR YEAR YEAR
ENDED ENDED ENDED 1/1/2000-
12/31/1997 12/31/1998 12/31/1999 11/27/2000
------------ ------------- ------------- -------------
(DOLLARS IN MILLIONS)
STATEMENT OF OPERATIONS DATA:
Net sales ......................... $ 922.1 $ 1,635.5 $ 1,679.7 $ 1,545.4
Cost of sales ..................... (735.4) (1,208.9) (1,246.7) (1,163.6)
------- --------- --------- ---------
Gross profit ...................... 186.7 426.0 433.0 381.8
Selling, general and
administrative expense ........... (85.3) (199.0) (209.8) (191.9)
(Gains) charge on disposition of
business, net .................... (5.0) 15.6 (14.4) (0.7)
Legacy restricted stock award
expense .......................... (4.7) (5.2) (4.7) (5.3)
------- --------- --------- ---------
Operating profit (1) .............. 101.7 206.8 215.4 185.3
Net income (loss) ................. 115.2 97.5 92.4 59.0
Preferred stock dividends ......... 6.2 -- -- --
Earnings (loss) attributable to
common stock ..................... 109.0 97.5 92.4 59.0
OTHER FINANCIAL DATA:
Depreciation and amortization in
operating profit ................. $ 37.9 $ 75.2 $ 75.9 $ 72.5
Capital expenditures .............. 54.8 106.3 135.7 97.9
Ratio of earnings to fixed charges 4.6 2.5 2.4 2.7
POST-ACQUISITION BASIS
---------------------------------------------------------------
SIX SIX
MONTHS MONTHS
YEAR ENDED ENDED
11/28/2000- ENDED JUNE 30, JUNE 30,
12/31/2000 12/31/2001 2001 2002
---------- ---------- --------- --------
(DOLLARS IN MILLIONS)
STATEMENT OF OPERATIONS DATA:
Net sales ......................... $ 104.8 $ 2,127.8 $ 1,128.9 $1,090.3
Cost of sales ..................... (93.6) 1,729.6 (904.0) (872.5)
------- --------- --------- --------
Gross profit ...................... 11.2 398.2 224.9 217.8
Selling, general and
administrative expense ........... (36.0) (257.2) (138.9) (125.7)
(Gains) charge on disposition of
business, net .................... -- -- -- --
Legacy restricted stock award
expense .......................... (1.2) (7.9) (3.5) (3.2)
------- --------- --------- --------
Operating profit (1) .............. (26.0) 133.1 82.5 89.0
Net income (loss) ................. (26.9) (43.3) (13.3) (5.3)
Preferred stock dividends ......... 0.4 5.9 2.3 3.4
Earnings (loss) attributable to
common stock ..................... (27.3) (49.2) (15.6) (8.7)
OTHER FINANCIAL DATA:
Depreciation and amortization in
operating profit ................. $ 11.0 $ 153.4 $ 82.3 $ 58.9
Capital expenditures .............. 9.2 118.0 64.8 57.2
Ratio of earnings to fixed charges (1.7)(2) 0.7 (2) 0.9 (2) 1.2
10
AS OF JUNE 30, 2002
---------------------
(IN MILLIONS)
SELECTED BALANCE SHEET DATA:
Cash and cash investments .............................. $ 10.8
Working capital ........................................ 123.4
Total assets ........................................... 2,123.6
Total debt(3) .......................................... 830.4
Redeemable preferred stock and common stock(4) ......... 86.6
Shareholders' equity ................................... 671.4
- ----------
(1) Reflects an asset impairment charge of $17.5 million in 1999.
(2) Results of operations for the six months ended June 30, 2001, the year
ended December 31, 2001 and the 34 days ended December 31, 2000 are
inadequate to cover fixed charges by $12.9 million, $56.9 million and
$41.6 million, respectively.
(3) Does not reflect the purchase of $78.2 aggregate principal amount of our
4 1/2% convertible subordinated debentures due 2003 in August 2002.
(4) Such preferred stock is excluded from shareholders' equity in accordance
with GAAP because it is redeemable and such common stock is excluded from
shareholders' equity in accordance with GAAP because it represents
restricted stock which is subject to repurchase by Metaldyne. The
majority of such capital stock is preferred stock that is mandatorily
redeemable following the maturity of the notes, except under limited
circumstances. See "Capitalization" and "Description of Other
Indebtedness and Our Preferred Stock."
11
RISK FACTORS
You should carefully consider each of the risks described below, together
with all of the other information contained in this prospectus, before deciding
to invest in the notes.
RISKS RELATED TO OUR BUSINESS
THE INDUSTRIES IN WHICH WE OPERATE DEPEND UPON GENERAL ECONOMIC CONDITIONS AND
ARE HIGHLY CYCLICAL.
Our financial performance depends, in large part, on conditions in the
cyclical markets that we serve, such as the automotive and light-duty truck
industries, and on the U.S. and global economies generally. Our sales to OEMs
and Tier I and Tier II suppliers in the automotive and light- and heavy-duty
truck industries accounted for virtually all of our net sales in 2001. Tier II
suppliers are direct suppliers to both OEMs and Tier I suppliers of integrated
modules, such as engine and suspension modules and brake corner modules. Demand
for new vehicles fluctuates in response to overall economic conditions and is
particularly sensitive to changes in interest rate levels, consumer confidence
and fuel costs. In our largest market, the North American automotive market,
reported results from our customers in 2001 reflected lower sales volumes and
lower prices for vehicles than in 2000. This is reflected in our lower sales
and margins in 2001. The September 11, 2001 terrorist attacks, recession and
other recent developments adversely affected confidence throughout the U.S. and
much of the world. These developments exacerbated the uncertainty in our
markets and their future impact on us is difficult to predict. Any sustained
weakness in demand or continued downturn or uncertainty in the economy
generally would negatively impact our financial results.
Our sales are also impacted by retail inventory levels and our customers'
production schedules. In 2001, our OEM customers significantly reduced their
production and inventory levels and reduced their orders from us due to the
uncertain economic environment. In this environment, we cannot predict future
production rates and inventory levels and the sustainability of any recovery.
In addition, we have experienced historical sales declines during OEMs'
scheduled shutdowns, which usually occur during the third calendar quarter.
Continued uncertainty and other unexpected fluctuations may have a material
adverse effect upon us.
OUR BASE OF CUSTOMERS IS CONCENTRATED AND THE LOSS OF BUSINESS FROM A MAJOR
CUSTOMER, THE DISCONTINUANCE OF PARTICULAR VEHICLE MODELS OR A CHANGE IN AUTO
CONSUMER PREFERENCES OR REGULATIONS COULD MATERIALLY ADVERSELY EFFECT US.
Because of the relative importance of our largest customers and the high
degree of concentration of OEMs in the North American automotive industry, our
business is exposed to a high degree of risk related to customer concentration.
While our three largest OEM customers accounted for approximately 39.9% of our
net sales in 2001, our customers include Tier I and Tier II suppliers, such as
New Venture Gear, Delphi, Dana and Visteon, that serve the large OEMs.
Accordingly, while Ford, General Motors and DaimlerChrysler directly accounted
for approximately 16.6%, 12.9% and 10.4%, respectively, of our net sales in
2001, we have a material indirect exposure to these and other OEMs due to our
significant Tier I and Tier II supplier base. New Venture Gear (a joint venture
of General Motors and DaimlerChrysler) represented approximately 11.7% of our
net sales in 2001, for example. A loss of significant business from, or adverse
performance by, any of these OEM customers or of our significant Tier I and
Tier II suppliers serving these OEM customers would be harmful to us and make
it more difficult for us to meet our obligations in respect of the notes.
Further deterioration of the market share held by the three largest domestic
automakers could also impact our revenues. Production cuts at these OEMs could
also adversely impact our sales to Tier I and Tier II suppliers. The contracts
we have entered into with most of our customers provide for supplying the
customers' annual requirements against a blanket purchase order for certain
vehicle models, rather than for manufacturing a specific quantity of products.
Most of these purchase orders are terminable at will by the customers.
Therefore, the loss of a contract or a significant decrease in demand for
certain key models or group of related models sold by any of our major
customers could have a material adverse effect on us.
12
In addition, our sales are influenced by customer preferences and
regulatory changes. A significant portion of our sales have been derived from
products used in sports utility vehicles, or SUVs, and light trucks, which has
been favorable due to their high metal content. Until recently, these vehicles
had experienced positive sales trends for several years. There can be no
assurance that sales of these vehicles will not continue to decline. In
addition, government regulations, including those relating to fuel economy,
could impact vehicle content and volume and, accordingly, have a material
adverse impact on us.
WE INTEND TO ACTIVELY PURSUE ACQUISITIONS AND/OR JOINT VENTURES BUT WE MAY NOT
BE ABLE TO IDENTIFY ATTRACTIVE ACQUISITION AND/OR JOINT VENTURE CANDIDATES,
SUCCESSFULLY INTEGRATE OUR ACQUIRED OPERATIONS OR REALIZE THE INTENDED BENEFITS
OF OUR ACQUISITIONS AND/OR JOINT VENTURES.
Our strategy is to become a full-service, integrated global provider of
engineered-metal products. This will necessitate further acquisition and/or
joint venture activity. We continually evaluate potential acquisitions and
joint ventures and are engaged in discussions with material acquisition and
joint venture candidates. On July 18, 2002, we and DaimlerChrysler Corporation
announced a non-binding letter of intent to form a joint venture to operate the
new Castle Machining Forge facility presently owned by DaimlerChrysler in New
Castle, Indiana. All of our present discussions are preliminary and there can
be no assurance that suitable acquisition candidates will be identified and
acquired in the future, that the financing or necessary consents for any such
acquisitions will be available on satisfactory terms or that we will be able to
accomplish our strategic objectives in making any such acquisition. Nor can we
assure you that our full metal services strategies will be successfully
received by customers or achieve their intended benefits. Acquisitions are
often undertaken to improve the operating results of either or both of the
acquirer and the acquired company, and we cannot assure you that we will be
successful in this regard or that the expenses that we may incur to implement
cost savings plans will not be excessive relative to the anticipated benefits.
We will encounter various risks in acquiring other companies, including the
possible inability to integrate successfully an acquired business into our
operations and unanticipated problems or liabilities, whether or not known at
the time of acquisition, some or all of which could materially and adversely
affect us. We could incur additional indebtedness in connection with our
acquisition strategy and increase our leverage. We expect to acquire companies
and operations in geographic markets in which we do not currently operate.
Acquisitions outside of North America will present unique structuring,
integration, legal, operating and cultural challenges and difficulties and will
increase our exposure to risks generally attendant to international operations.
IF WE ARE UNABLE TO MEET FUTURE CAPITAL REQUIREMENTS, OUR BUSINESS MAY BE
ADVERSELY AFFECTED.
We operate in a capital intensive industry. We have made substantial
capital investments from 1996 through 2001 to, among other things, maintain and
upgrade our facilities and enhance our production processes. This level of
capital expenditures was needed to:
o increase production capacity;
o improve productivity;
o satisfy customer requirements; and
o upgrade selected facilities to meet competitive requirements.
We have planned capital expenditures of up to approximately $116 million
in 2002. In addition, as we expand our book of business, we may have to incur
other significant expenditures to prepare for and manufacture these products.
We believe that we will be able to fund these expenditures through cash flow
from operations, borrowings under our credit facility and sales of receivables
under our receivables facility. Our credit facility contains limitations which
could affect our ability to fund our capital expenditures and other needs. We
cannot assure you that we will have adequate funds to make all capital
expenditures, when required, or that the amount of future capital expenditures
will not be materially in excess of our anticipated expenditures. If we are
unable to make necessary capital
13
expenditures, our business will be adversely affected. See the "Management's
Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources" section of our Annual Report on
Form 10-K and Quarterly Reports on Form 10-Q incorporated by reference in this
prospectus.
INCREASES IN OUR RAW MATERIAL OR ENERGY COSTS OR THE LOSS OF A SUBSTANTIAL
NUMBER OF OUR SUPPLIERS COULD NEGATIVELY AFFECT OUR FINANCIAL HEALTH.
Generally, our raw materials requirements are obtainable from various
sources and in the desired quantities. While we currently maintain alternative
sources for raw materials, our businesses are subject to the risk of price
fluctuations and periodic delays in the delivery of certain raw materials,
component parts and specialty fasteners. Under two- to five-year supply
contracts for special bar quality steel, we have established the prices at
which we will purchase much of our steel requirements. We may not be able to
renegotiate future prices under those contracts at prices favorable to us,
depending on industry conditions. The domestic steel industry has experienced
substantial financial instability due to numerous factors, including energy
costs and the effect of foreign competition. In response to this instability,
tariffs on imported steel were imposed by the U.S. government in March 2002. As
a result, steel prices have begun to rise and we expect to experience increased
steel prices in 2003 when our current contracts expire. See the
"Business--Materials and Supply Arrangements" section of our Annual Report on
Form 10-K incorporated by reference in this prospectus. In addition, a failure
by our suppliers to continue to supply us with certain raw materials or
component parts on commercially reasonable terms, or at all, would have a
material adverse effect on us. Our energy costs are a substantial element of
our cost structure. To the extent there are energy supply disruptions or
material fluctuations in energy costs, our margins could be materially
adversely impacted.
RECENT TRENDS AMONG OUR CUSTOMERS WILL INCREASE COMPETITIVE PRESSURES IN OUR
BUSINESSES.
The markets for our products are highly competitive. Our competitors
include driveline component manufacturing facilities of existing OEMs, as well
as independent domestic and international suppliers. Certain competitors of our
businesses are large companies that have greater financial resources than us.
At times, we may be in a position of competing with some of our own customers,
such as Tier I suppliers which could have adverse consequences. We believe that
the principal competitive factors for all of our businesses are product quality
and conformity to customer specifications, design and engineering capabilities,
product development, timeliness of delivery and price. In addition, our
competitors may develop products that are superior to our products or may adapt
more quickly than us to new technologies or evolving customer requirements.
Recent trends by our customers in many of our markets to limit their number of
outside vendors have resulted in increased competition as many manufacturers
and distributors have reduced prices to compete more effectively. In addition,
financial and operating difficulties experienced by our major customers may
result in further pricing pressures. We expect competitive pressures in our
markets to remain strong. Such pressures arise from existing competitors, other
companies that may enter our existing or future markets and, in certain cases,
our customers, which may decide to internalize production of certain items sold
by us. There can be no assurance that we will be able to compete successfully
with our existing competitors or with new competitors. Failure to compete
successfully could have a material adverse effect on us.
OUR PRODUCTS ARE SUBJECT TO CHANGING TECHNOLOGY, WHICH COULD PLACE US AT A
COMPETITIVE DISADVANTAGE RELATIVE TO ALTERNATIVE PRODUCTS INTRODUCED BY
COMPETITORS.
We believe that our customers rigorously evaluate their suppliers on the
basis of product quality, price competitiveness, technical expertise and
development capability, new product innovation, reliability and timeliness of
delivery, product design capability, manufacturing expertise, operational
flexibility, customer service and overall management. Our success will depend
on our ability to continue to meet our customers' changing specifications with
respect to these criteria. We may, therefore, require significant ongoing and
recurring additional capital expenditures and investment in research and
development, manufacturing and other areas to remain competitive. We cannot
assure
14
you that we will be able to achieve the technological advances or introduce new
products that may be necessary to remain competitive within our business. In
addition, any decreasing demand by our customers in favor of plastics could
have a material adverse effect. Further, we cannot assure you that any
technology development by us can be adequately protected such that we can
maintain a sustainable competitive advantage.
WE DEPEND ON THE SERVICES OF KEY INDIVIDUALS AND RELATIONSHIPS, THE LOSS OF
WHICH WOULD MATERIALLY HARM US.
Our success will depend, in part, on the efforts of our executive officers
and other key employees. In addition, our future success will depend on, among
other factors, our ability to attract and retain other qualified personnel. The
loss of the services of any of our key employees or the failure to attract or
retain employees could have a material adverse effect on us. In addition, our
largest stockholder, Heartland, provides us with valuable strategic,
operational and financial support, the loss of which could materially adversely
affect us.
WE MAY BE SUBJECT TO WORK STOPPAGES AT OUR FACILITIES OR THOSE OF OUR PRINCIPAL
CUSTOMERS, WHICH COULD SERIOUSLY IMPACT THE PROFITABILITY OF OUR BUSINESS.
As of June 30, 2002, approximately 30% of our work force was unionized,
principally through the United Auto Workers union, or UAW. We experienced a
labor strike at our Fraser, Michigan plant which lasted from July 1997 to June
1998 and involved approximately 140 employees. If our unionized workers were to
engage in a strike, work stoppage or other slowdown in the future, we could
experience a significant disruption of our operations, which could have a
material adverse effect on us. In addition, if a greater percentage of our work
force becomes unionized, our business and financial results could be materially
adversely affected. See the "Business--Employees and Labor Relations" section
of our Annual Report on Form 10-K incorporated by reference in this prospectus.
Many of our direct or indirect customers have unionized work forces.
Strikes, work stoppages or slowdowns experienced by automotive OEMs or their
suppliers could result in slowdowns or closures of assembly plants where our
products are included in assembled vehicles. For example, over the past four
years, there have been a number of labor strikes against General Motors that
have resulted in work stoppages at General Motors. In addition, organizations
responsible for shipping our customers' products may be impacted by occasional
strikes staged by the Teamsters Union. Any interruption in the delivery of our
customers' products would reduce demand for our products and could have a
material adverse effect on us.
OUR STRATEGY MAY NOT SUCCEED IF ANTICIPATED OUTSOURCING FAILS TO OCCUR DUE TO
UNION CONSIDERATIONS.
Because of the economic benefits inherent in outsourcing to suppliers and
the costs associated with reversing a decision to purchase products from an
outside supplier, automotive OEMs' commitment to purchasing modules from
outside suppliers, particularly on a "just-in-time" basis, are expected to
increase. However, under the contracts currently in effect in the United States
and Canada between each of Ford, General Motors and DaimlerChrysler with the
UAW and the Canadian Auto Workers, or CAW, in order for any of such automotive
OEMs to obtain components from external sources that it currently produces, it
must first notify the UAW or the CAW of such intention. If the UAW or the CAW
objects to the proposed outsourcing, some agreement will have to be reached
between the UAW or the CAW and the automotive OEM. Factors that will normally
be taken into account by the UAW, the CAW and the automotive OEM include:
o whether the proposed new supplier is technologically more advanced than
the automotive OEM;
o whether the new supplier is unionized;
o whether cost benefits exist; and
o whether the automotive OEM will be able to reassign union members whose
jobs are being displaced to other jobs within the same factories.
15
In the event that outsourcing does not occur for any reason, it may have a
material adverse effect on us.
A GROWING PORTION OF OUR REVENUE MAY BE DERIVED FROM INTERNATIONAL SOURCES,
WHICH EXPOSES US TO CERTAIN RISKS.
Approximately 19% of our sales in 2001 were derived from sales by our
subsidiaries located outside of the United States. As part of our business
strategy, we intend to expand our international operations through internal
growth and acquisitions. Significant market share has shifted to foreign OEMs
in the SUV and light truck platforms where we derive a significant portion of
our sales. Sales outside of the United States, particularly sales to emerging
markets, are subject to other various risks including governmental embargoes or
foreign trade restrictions such as antidumping duties, changes in U.S. and
foreign governmental regulations, the difficulty of enforcing agreements and
collecting receivables through certain foreign local systems, foreign customers
may have longer payment cycles than customers in the U.S., more expansive legal
rights of foreign unions, tariffs and other trade barriers, the potential for
nationalization of enterprises, foreign exchange risk and other political,
economic and social instability. In addition, there are tax inefficiencies in
repatriating cash flow from non-U.S. subsidiaries. To the extent such
repatriation is necessary for us to meet our debt service or other obligations,
this will adversely affect us.
WE MAY INCUR MATERIAL LOSSES AND COSTS AS A RESULT OF PRODUCT LIABILITY AND
WARRANTY CLAIMS THAT MAY BE BROUGHT AGAINST US.
We face an inherent business risk of exposure to product liability claims
in the event that the use of our current and formerly manufactured or sold
products results, or is alleged to result, in bodily injury and/or property
damage. We cannot assure you that we will not experience any material product
liability losses in the future or that we will not incur significant costs to
defend such claims. We cannot assure you that our product liability insurance
coverage will be adequate for any liabilities that may ultimately be incurred
or that it will continue to be available on terms acceptable to us. In
addition, if any of our products are or are alleged to be defective, we may be
required to participate in a government-required or manufacturer-instituted
recall involving such products. In the automotive industry, each vehicle
manufacturer has its own policy regarding product recalls and other product
liability actions relating to its suppliers. However, as suppliers become more
integrally involved in the vehicle design process and assume more of the
vehicle assembly functions, vehicle manufacturers are increasingly looking to
their suppliers for contribution when faced with product liability claims. A
successful claim brought against us in excess of our available insurance
coverage or a requirement to participate in a product recall may have a
materially adverse effect on our business. In the ordinary course of our
business, contractual disputes over warranties can also arise. In the past five
years or more, we have not been required to make any material payments in
respect of warranty claims. In addition, we cannot assure you that claims will
not be asserted against us with respect to former businesses disposed of by us,
whether or not we are legally responsible or entitled to contractual
indemnification. For example, in June 2002, we divested a significant interest
in TriMas. Certain of TriMas' subsidiaries have historical contingent and other
liabilities, including liabilities associated with their former manufacture of
asbestos containing gaskets, for which we are indemnified. In the event of
financial difficulty at one of those companies or otherwise, we cannot assure
you that claims will not be made against us or that TriMas will be in a
position to meet its indemnification obligations.
OUR BUSINESS MAY BE MATERIALLY AND ADVERSELY AFFECTED BY COMPLIANCE OBLIGATIONS
AND LIABILITIES UNDER ENVIRONMENTAL LAWS AND REGULATIONS.
We are subject to federal, state, local and foreign environmental, and
health and safety, laws and regulations that:
o affect ongoing operations and may increase capital costs and operating
expenses in order to maintain compliance with such requirements; and
o impose liability relating to contamination at our facilities, and at
other locations such as former facilities, facilities where we have
sent wastes for treatment or disposal, and other
16
properties to which we (or a company or business for which we are
responsible) are linked. Such liability may include, for example,
investigation and clean-up of the contamination, personal injury and
property damage caused by the contamination, and damages to natural
resources. Some of these liabilities may be imposed without regard to
fault, and may also be joint and several (which can result in a liable
party being held responsible for the entire obligation, even where other
parties are also liable).
We are legally or contractually responsible or alleged to be responsible
for the investigation and remediation of contamination at various sites, and
for personal injury or property damages, if any, associated with such
contamination. Our subsidiaries have been named as potentially responsible
parties under the Federal Superfund law or similar state laws in several sites
requiring cleanup related to disposal of wastes we generated. These laws
generally impose liability for costs to investigate and remediate contamination
without regard to fault and under certain circumstances liability may be joint
and several resulting in one responsible party being held responsible for the
entire obligation. Liability may also include damages to natural resources. Our
businesses have incurred and likely will continue to incur expenses to
investigate and clean up existing and former company-owned or leased property.
Additional sites may be identified at which we are a potentially responsible
party under the federal Superfund law or similar state laws. We cannot assure
you that these or other liabilities will not have a material adverse effect
upon us. See the "Business--Environmental Matters" section of our Annual Report
on Form 10-K incorporated by reference in this prospectus.
WE ARE CONTROLLED BY HEARTLAND, WHOSE INTERESTS IN OUR BUSINESS MAY BE
DIFFERENT THAN YOURS.
Heartland and its affiliates are able to control our affairs in all cases,
except for certain actions specified in a shareholders agreement among
Heartland, Credit Suisse First Boston Equity Partners, L.P. together with its
affiliated funds, or CSFB Private Equity, Masco Corporation, Richard Manoogian
and their various affiliates and certain other investors. Under the
shareholders agreement, holders of approximately 94% of our outstanding shares
of common stock have agreed to vote their shares for directors representing a
majority of our board that have been designated by Heartland. You should
consider that the interests of Heartland, as well as our other owners, will
likely differ from yours in material respects. See "Certain Relationships and
Related Party Transactions."
PROVISIONS OF THE SHAREHOLDERS AGREEMENT IMPOSE SIGNIFICANT OPERATING AND
FINANCIAL RESTRICTIONS ON OUR BUSINESS.
Under the shareholders agreement referred to above, specified actions
require the approval of representatives of CSFB Private Equity, until such time
as we consummate a public common stock offering for at least $100 million in
gross proceeds to us. Such actions include certain acquisitions by us, the
selection of a chief executive officer, certain debt restructurings and any
liquidation or dissolution of us. You should consider that we and our
stockholders may be unable to agree with CSFB Private Equity on the
implementation of such fundamental transactions and other matters. This sort of
disagreement may materially and adversely affect us. In addition, directors
designated by Heartland could block actions even if other directors deem them
advisable.
RISKS RELATED TO THE EXCHANGE NOTES
WE MAY NOT BE ABLE TO MANAGE OUR BUSINESS AS WE MIGHT OTHERWISE DO SO DUE TO
OUR HIGH DEGREE OF LEVERAGE.
We have debt that is substantial in relation to our stockholders' equity
and we expect to incur further debt in the future to finance acquisitions. As
of June 30, 2002, we had approximately $830.4 million of outstanding debt
(without giving effect to the purchase of $78.2 million aggregate principal
amount of our outstanding 4.5% convertible subordinated debentures due 2003 in
August 2002) and approximately $671.4 million of stockholders' equity. The
degree to which we are leveraged will have important consequences, including
the following:
o our ability to obtain additional financing in the future for working
capital, capital expenditures, acquisitions, business development
efforts or general corporate purposes may be impaired;
17
o a substantial portion of our cash flow from operations will be
dedicated to the payment of interest and principal on our indebtedness,
thereby reducing the funds available to us for other purposes,
including our obligations to pay rent in respect of our significant
operating leases;
o our operations are restricted by our debt instruments, which contain
material financial and operating covenants, and those restrictions will
limit, among other things, our ability to borrow money in the future
for working capital, capital expenditures, acquisitions, rent expense
or other purposes;
o indebtedness under our credit facility and the financing cost
associated with our accounts receivable facility are at variable rates
of interest, which makes us vulnerable to increases in interest rates;
o our leverage may place us at a competitive disadvantage as compared
with our less leveraged competitors;
o our leverage will make us more vulnerable in the event of a downturn in
general economic conditions or in any of our businesses; and
o our flexibility in planning for, or reacting to, changes in our
business and the industry in which we operate may be limited.
Our ability to service our debt and other obligations will depend on our
future operating performance, which will be affected by prevailing economic
conditions and financial, business and other factors, many of which are beyond
our control. See "Description of Other Indebtedness and Our Preferred Stock"
included in this prospectus and "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Liquidity and Capital Resources"
included in our Quarterly Reports on Form 10-Q incorporated by reference in
this prospectus.
RESTRICTIONS IN OUR CREDIT FACILITY AND UNDER THE INDENTURE GOVERNING THE
EXCHANGE NOTES LIMIT OUR ABILITY TO TAKE CERTAIN ACTIONS.
Our credit facility and the indenture governing the exchange notes will
contain covenants that restrict our ability to:
o pay dividends or redeem or repurchase capital stock;
o incur additional indebtedness and grant liens;
o make acquisitions and joint venture investments;
o sell assets; and
o make capital expenditures.
Our credit facility also requires us to comply with financial covenants
relating to, among other things, interest coverage and leverage. In addition,
our accounts receivable facility contains covenants similar to those in our
credit facility and include requirements regarding the purchase and sale of
receivables. We cannot assure you, however, that we will be able to satisfy
these covenants in the future or that we will be able to pursue our new
business strategies within the constraints of these covenants. If we cannot
comply with these covenants, we will be in default and unable to access
required liquidity from our revolving credit and accounts receivable facilities
and unable to make payments in respect of the notes. In addition, our accounts
receivable facility contains concentration limits with respect to the
percentage of receivables we can sell from a particular customer. The
concentration limits are based on the credit ratings of such particular
customer. While we may implement credit hedging strategies to offset this risk,
if one or more of our customers were to have its credit ratings downgraded and
consequently the amount of receivables of such customer that we could sell were
to decrease, our business could be materially adversely affected.
Our ability to comply with our covenants may be affected by events beyond
our control, including prevailing economic, financial and industry conditions.
The breach of our covenants could result in an
18
event of default under our credit facility or under the indenture governing the
exchange notes, which could cause an event of default under our accounts
receivable facility and our equipment lease financing. Such breach would permit
the lenders to declare all amounts borrowed thereunder to be due and payable,
together with accrued interest, and the commitments of the lenders to make
further extensions of credit under our credit facility could be terminated. In
addition, such breach may cause a termination of our accounts receivable
facility and of our various sale-leaseback facilities. If we were unable to
secure a waiver from our lenders or repay our credit facility indebtedness, our
secured lenders could proceed against their collateral and our lessors could
prevent us from using our valuable facilities and equipment that are under
lease. We do not presently expect that alternative sources of financing will be
available to us under these circumstances or available on attractive terms.
YOUR RIGHT TO RECEIVE PAYMENT ON THE EXCHANGE NOTES IS JUNIOR TO THE RIGHT OF
THE HOLDERS OF ALL OF OUR EXISTING SENIOR INDEBTEDNESS AND POSSIBLY TO ALL OF
OUR FUTURE BORROWINGS.
The exchange notes are general unsecured obligations, junior in right of
payment to all of our existing senior indebtedness, including indebtedness
under our credit facility, and all of our future borrowings, except any future
indebtedness that expressly provides that it ranks equally with, or is
subordinated in right of payment to, the notes. As a result, upon any
distribution to our creditors in a bankruptcy, liquidation, reorganization or
similar proceeding relating to us or our property, the holders of our senior
indebtedness will be entitled to be paid in full in cash before any payment may
be made with respect to the notes. In addition, all payments on the exchange
notes will be blocked in the event of a payment default on senior indebtedness
and may be blocked for up to 179 of 360 consecutive days in the event of
certain non-payment defaults on designated senior indebtedness.
In the event that we are declared bankrupt, become insolvent or are
liquidated, reorganized or involved in a similar proceeding, holders of the
exchange notes will participate with trade creditors and all other holders of
our subordinated indebtedness in the assets remaining after we have paid all of
the senior indebtedness. The indenture governing the exchange notes requires
that amounts otherwise payable to holders of the exchange notes in a bankruptcy
or similar proceeding be paid to holders of any remaining senior indebtedness
instead. In any of these cases, our assets may be insufficient to pay all of
our creditors, and holders of the exchange notes are likely to receive less,
proportionally, if any, than holders of our senior indebtedness, including the
lenders under our credit facility. We may be permitted to incur substantial
additional indebtedness, including senior indebtedness, in the future, under
the terms of the indenture governing the exchange notes.
YOUR RIGHT TO ENFORCE REMEDIES IS LIMITED BY THE RIGHTS OF SECURED CREDITORS,
AND CLAIMS OF HOLDERS OF EXCHANGE NOTES WILL EFFECTIVELY RANK JUNIOR TO CLAIMS
OF SECURED CREDITORS AND CLAIMS OF CREDITORS OF OUR FOREIGN SUBSIDIARIES.
The exchange notes will not be secured by any of our assets. Our
obligations under our credit facility are secured by substantially all of our
owned assets and those of our subsidiary guarantors and a pledge of the capital
stock of each guarantor and two-thirds of the capital stock of our first tier
foreign subsidiaries. If we become insolvent or are liquidated, or if payment
under our credit facility is accelerated, the lenders under our credit facility
would be entitled to exercise the remedies available to a secured lender under
applicable law. Therefore, our bank lenders or other secured creditors will
have a claim on our assets before holders of the exchange notes.
In addition, only our subsidiaries that also guarantee our obligations
under the credit facility guarantee the exchange notes. This includes all of
our domestic subsidiaries other than our receivables subsidiary and our special
purpose subsidiary that owns a minority investment in Saturn. However, we have
significant non-U.S. assets and operations. For the year ended December 31,
2001, after giving effect to the TriMas divestiture, our non-U.S. subsidiaries
had sales of approximately $265 million and total net operating assets of
approximately $259 million.
19
WE MAY BE PREVENTED FROM FINANCING, OR MAY NOT HAVE THE ABILITY TO RAISE FUNDS
NECESSARY TO FINANCE, THE CHANGE OF CONTROL OFFER REQUIRED BY THE INDENTURE
GOVERNING THE EXCHANGE NOTES.
Upon certain change of control events, each holder of outstanding exchange
notes may require us to purchase all or a portion of our exchange notes at a
purchase price equal to 101% of the principal amount thereof, plus accrued and
unpaid interest, if any, to the date of purchase. Our ability to purchase the
exchange notes upon a change of control event may be prohibited by the terms of
our credit facility or future credit facilities. Future agreements may contain
a similar provision. Certain change of control events will constitute events of
default under our credit facility and termination events under our accounts
receivable facility and, absent a consent or waiver, we would be required to
repay all amounts owed by us under our credit facility and wind down our
accounts receivable facility. We cannot assure you that we would be able to
repay amounts outstanding under our credit facility or replace our accounts
receivable facility. The source of funds for any purchase of notes would be our
available cash or cash generated from other sources, including borrowings,
sales of assets, sales of equity or funds provided by an existing or new
controlling person. We cannot assure you that any of these sources will be
available. Any requirement to offer to purchase any outstanding exchange notes
may result in us having to refinance our outstanding debt or obtain necessary
consents under our other debt agreements to repurchase the exchange notes,
which we may not be able to do. In such case, our failure to purchase exchange
notes following a change of control would constitute an event of default under
the indenture governing the exchange notes which would, in turn, constitute a
default under our credit facility. In addition, even if we were able to
refinance such debt, such financing may be on terms unfavorable to us.
FEDERAL AND STATE STATUTES ALLOW COURTS, UNDER SPECIFIC CIRCUMSTANCES, TO VOID
GUARANTEES AND REQUIRE HOLDERS OF EXCHANGE NOTES TO RETURN PAYMENTS RECEIVED
FROM GUARANTORS.
Creditors of any business are protected by fraudulent conveyance laws
which differ among various jurisdictions, and these laws may apply to the
issuance of the guarantees by our subsidiaries. A guarantee may be voided by a
court, or subordinated to the claims of other creditors, if
o that guarantee was incurred by a subsidiary with actual intent to
hinder, delay or defraud any present or future creditor of the
subsidiary, or
o that subsidiary did not receive fair consideration, or reasonably
equivalent value, for issuing its guarantee, and the subsidiary
-- was insolvent or was rendered insolvent by reason of issuing the
guarantee,
-- was engaged or about to engage in a business or transaction for
which the remaining assets of the subsidiary constituted
unreasonably small capital, or
-- intended to incur, or believed that it would incur, debts beyond
its ability to pay as they matured.
We cannot be certain as to the standard that a court would use to
determine whether the guarantor subsidiaries were solvent upon issuance of the
guarantee or, regardless of the actual standard applied by the court, that the
issuance of the guarantee of the exchange notes would not be voided. If a
guarantee of a subsidiary was voided as a fraudulent conveyance or held
unenforceable for any other reason, holders of the exchange notes would be
solely our creditors and creditors of our other subsidiaries that have
guaranteed the exchange notes. The exchange notes then would be effectively
subordinated to all obligations of that subsidiary. Since the Issuer is a
holding company, if all guarantees were voided, that would result in the holder
of exchange notes having claims that would not be paid prior to substantially
all of the other debt and liabilities of the consolidated group of entities. To
the extent that the claims of the holders of the exchange notes against any
subsidiary were subordinated in favor of other creditors of such subsidiary,
such other creditors would be entitled to be paid in full before any payment
could be made on the notes. If one or more of the guarantees are voided or
subordinated, we cannot assure you that after providing for all prior claims,
there would be sufficient assets remaining to satisfy the claims of holders of
the exchange notes.
20
Based upon financial and other information, we believe that the exchange
notes and the guarantees are being incurred for proper purposes and in good
faith and that we are and each subsidiary is solvent and will continue to be
solvent after this offering is completed, will have sufficient capital for
carrying on its business after such issuance and will be able to pay its debts
as they mature. We cannot assure you, however, that a court reviewing these
matters would agree with us. A legal challenge to a guarantee on fraudulent
conveyance grounds may focus on the benefits, if any, realized by the
subsidiary as a result of our issuance of the exchange notes.
YOU CANNOT BE SURE AN ACTIVE TRADING MARKET FOR THE EXCHANGE NOTES WILL
DEVELOP.
There has previously been only a limited secondary market, and no public
market, for the original notes. The exchange notes are an exchange issue of
securities, have no established trading market, and may not be widely
distributed. We do not intend to list the exchange notes on any national
securities exchange or the Nasdaq stock market or to seek the admission thereof
to trading on any automated quotation system. No assurance can be given that an
active public or other market will develop for the exchange notes or as to the
liquidity of or the trading market for the exchange notes. If a trading market
does not develop or is not maintained, holders of the exchange notes may
experience difficulty in reselling the exchange notes or may be unable to sell
them at all. If a market for the exchange notes develops, any such market may
be discontinued at any time. If a public trading market develops for the
exchange notes, future trading prices of the exchange notes will depend on many
factors, including, among other things, prevailing interest rates, our results
of operations and the market for similar securities, and the price at which the
holders of exchange notes will be able to sell such exchange notes is not
assured and the exchange notes could trade at a premium or discount to their
purchase price or face value. Depending on prevailing interest rates, the
market for similar securities and other factors, including our financial
condition, the exchange notes may trade at a discount from their principal
amount.
YOUR ORIGINAL NOTES WILL BE SUBJECT TO RESTRICTIONS ON TRANSFER AND THE TRADING
MARKET FOR YOUR ORIGINAL NOTES MAY BE LIMITED IF YOU DO NOT TENDER.
We did not register the original notes, nor do we intend to do so
following the exchange offer. Original notes that are not tendered will
therefore continue to be subject to the existing transfer restrictions and may
be transferred only in limited circumstances under the securities laws. If you
do not exchange your original notes, you will lose your right to have your
original notes registered under the federal securities laws. As a result, if
you hold original notes after the exchange offer, you may be unable to sell
your original notes.
IF YOU DO NOT PROPERLY TENDER YOUR ORIGINAL NOTES, WE MAY NOT ACCEPT YOUR
ORIGINAL NOTES AND THE TRADING MARKET FOR THEM MAY BE LIMITED.
We will issue new notes under this exchange offer only after a timely
receipt of your original notes, a properly completed and duly executed letter
of transmittal and all other required documents. Therefore, if you want to
tender your original notes, please allow sufficient time to ensure timely
delivery. If we do not receive your original notes, letter of transmittal and
other required documents by the expiration date of the exchange offer, we will
not accept your original notes for exchange. We are under no duty to give
notification of defects or irregularities with respect to the tenders of
original notes for exchange. If there are defects or irregularities with
respect to your tender of original notes, we will not accept your original
notes for exchange.
YOU MAY PARTICIPATE IN THE EXCHANGE OFFER ONLY IF YOU MEET THE FOLLOWING
CONDITIONS.
Based on interpretations by the Commission staff, as set forth in
no-action letters the Commission issued to third parties, we believe that you
may offer for resale, resell and otherwise transfer the exchange notes without
compliance with the registration and prospectus delivery provisions of the
Securities Act, subject to certain limitations. These limitations include the
following:
21
o you are not our "affiliate" within the meaning of Rule 405 under the
Securities Act;
o you acquire your exchange notes in the ordinary course of your
business; and
o you have no arrangement with any person to participate in the
distribution of such exchange notes.
However, we have not submitted a no-action letter to the Commission
regarding this exchange offer and we cannot assure you that the Commission
would make a similar determination with respect to the exchange offer as in
such other circumstances. If you are our affiliate, engage in or intend to
engage in or have any arrangement or understanding with respect to a
distribution of the exchange notes that you or any person will acquire pursuant
to the exchange offer, you may not rely on the applicable interpretations of
the staff of the Commission; you must also comply with the registration and
prospectus delivery requirements of the Securities Act in connection with any
resale transaction.
RESALES OF THE EXCHANGE NOTES MAY BE SUBJECT TO FURTHER RESTRICTIONS IN SOME
JURISDICTIONS.
Each broker-dealer that receives exchange notes for its own account
pursuant to the exchange offer must acknowledge that it will deliver a
prospectus meeting the requirements under the Securities Act in connection with
any resale of such exchange notes. We have agreed to use our best efforts to
make this prospectus available to any participating broker-dealer for use in
connection with any such resale. See "Plan of Distribution" below. However to
comply with the securities laws of certain jurisdictions, if applicable, you
may not offer or sell the exchange notes unless someone has registered or
qualified them for sale in such jurisdictions or an exemption from registration
or qualification is available.
22
USE OF PROCEEDS
We will receive no cash proceeds from the exchange offer. We intend the
exchange offer to satisfy some of our obligations under the registration rights
agreements for the notes. We will issue exchange notes in exchange for original
notes in the same principal amount, and for the same terms and form as the
original notes, except that there will be no registration rights or liquidated
damages relating to the exchange notes. The original notes that holders
surrender in exchange for the exchange notes will be retired and canceled and
cannot be reissued. Accordingly, we will not incur any new debt by issuing the
exchange notes.
23
CAPITALIZATION
The following table sets forth our unaudited cash and cash investments and
capitalization as of June 30, 2002. You should read this table in conjunction
with our financial statements and the notes to those financial statements
included in our Quarterly Report on Form 10-Q incorporated by reference in this
prospectus and the unaudited pro forma financial statements included elsewhere
in this prospectus. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations" included in our Quarterly Report on Form
10-Q for the period ended June 30, 2002 incorporated by reference in this
prospectus and "Unaudited Pro Forma Financial Information."
AS OF JUNE 30, 2002
--------------------
(IN MILLIONS)
Cash and cash investments ............................................ $ 10.8
=========
Long-term debt (including current portion):
Credit facility (1) ................................................. $ 400.0
Original notes ...................................................... 250.0
4.5% subordinated debentures (2) .................................... 157.9
Other (3) ........................................................... 22.5
---------
Total debt ........................................................ 830.4
---------
Redeemable preferred stock, 545,154 shares issued and outstanding (4) 58.7
Redeemable restricted common stock (5) ............................... 32.6
Less: Restricted stock awards (5) .................................... ( 4.7)
---------
Total redeemable stock ............................................ 86.6
Total shareholders' equity ........................................... 671.4
---------
Total capitalization .............................................. $ 1,588.4
=========
- ----------
(1) In connection with the original notes offering, we amended and restated
our credit facility to replace our original tranche A, B and C term loans
with a new $400 million tranche D term loan payable in semi-annual
installments of $0.5 million with the remaining outstanding balance due
December 31, 2009. In addition to the term loan, the credit facility also
includes a revolving credit facility with a total principal amount
commitment of $250 million. The senior revolving credit facility matures
on May 28, 2007 and the senior term loan facility matures on December 31,
2009. The obligations under the credit facility are collateralized by
substantially all of our assets and are guaranteed by substantially all
of our domestic subsidiaries. In addition, our receivables facility
provides us with up to $225 million of availability, of which no amount
was utilized at June 30, 2002. See "Description of Other Indebtedness and
Our Preferred Stock" in this prospectus and "Management's Discussion and
Analysis of Financial Condition and Results of Operations-- Liquidity and
Capital Resources" contained in our Quarterly Report on Form 10-Q for the
period ended June 30, 2002 incorporated by reference in this prospectus.
(2) Our subordinated debentures ($176.7 million principal amount at June 30,
2002) were convertible into common stock prior to the November 2000
acquisition, but have since become convertible into an amount of cash
that is equivalent to the cash consideration paid in the November 2000
acquisition to our former common stockholders. Since they are convertible
at a conversion price of $31.00 for the amount of the consideration paid
for a share of common stock in the acquisition (approximately $16.90), we
do not expect them to be converted into cash prior to maturity. As a
result of our adoption of purchase accounting, the subordinated
debentures are recorded at fair value, which was approximately 80% of
their principal amount, less accumulated accretion of the discount. We
applied approximately $127.5 million of proceeds from the TriMas
divestiture to the repurchase of subordinated debentures by June 30,
2002. On August 21, 2002, we completed an offer to purchase up to, and
subsequently accepted for purchase, $78.2 million of our subordinated
debentures. See "Description of Other Indebtedness and Our Preferred
Stock."
24
(3) Other debt includes industrial revenue bonds, foreign debt and capital
lease obligations.
(4) These shares of redeemable preferred stock are not mandatorily redeemable
prior to the maturity of the exchange notes, but constitute redeemable
capital stock in accordance with generally accepted accounting principles
since they contain mandatory redemption provisions. As such, the
preferred stock is required to be excluded from shareholders' equity. Of
such shares, $36.1 million in liquidation preference of Series A
preferred stock was issued in the recapitalization and is mandatorily
redeemable in December 2012 and $18.5 million in liquidation preference
of Series B preferred stock was issued for the GMTI acquisition and is
mandatorily redeemable in June 2013. For accounting purposes, the Series
A preferred stock is valued at a discount to reflect the value of the
common stock for which such preferred stock was exchanged in the November
2000 acquisition. In the event of certain equity offerings or a change of
control we may be required to offer to purchase the preferred stock from
the holders thereof. See "Description of Other Indebtedness and Our
Preferred Stock."
(5) Since we have the obligation to pay cash in respect of these restricted
stock awards at the option of the restricted stockholder, the awards have
been excluded from shareholders' equity, as some or all of these shares
outstanding may represent temporary equity. These obligations arose in
January 2002 and will arise again in January 2003 and January 2004. On
January 14, 2002, holders of awards representing approximately $14.3
million elected to receive cash, of which approximately $8.3 million was
paid in July 2002. Pursuant to the stock purchase agreement related to
the TriMas divestiture, TriMas is obligated to reimburse us for all cash
actually paid to former and present TriMas employees and 42.01% of the
cash actually paid to former and present corporate employees not
separately identifiable as TriMas employees. This obligation extends to
the January 14, 2002 extended payment and our future obligations in
January 2003 and January 2004. The receivable for these amounts from
TriMas is included in our accounts receivable on our pro forma balance
sheet. For a discussion of our obligations to fund cash in respect of our
restricted stock awards, see "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Liquidity and Capital
Resources" included in our Quarterly Report on Form 10-Q for the period
ended June 30, 2002 incorporated by reference in this prospectus and
"Certain Relationships and Related Party Transactions--TriMas Stock
Purchase Agreement" in this prospectus.
25
UNAUDITED PRO FORMA FINANCIAL INFORMATION
The following unaudited pro forma condensed consolidated financial
information has been derived from our audited and unaudited historical
financial statements included in the Annual Report on Form 10-K and the
Quarterly Report on Form 10-Q for the period ended June 30, 2002 incorporated
by reference in this prospectus, adjusted to give pro forma effect to the
TriMas divestiture and the issuance of and application of proceeds from the
original notes.
The unaudited pro forma condensed consolidated statements of operations
for the year ended December 31, 2001 and the six months ended June 30, 2002
give pro forma effect to the TriMas divestiture and the issuance of the
original notes as if each had occurred on January 1, 2001. On November 28,
2000, Metaldyne was acquired by an investor group led by Heartland Industrial
Partners, L.P. and Credit Suisse First Boston Equity Partners, L.P. We did not
recognize any gain or loss as a result of the TriMas divestiture due to the
continuing contractual control of TriMas by Heartland.
The unaudited pro forma condensed consolidated statements of operations
are presented for informational purposes only and do not purport to represent
what our results of operations would actually have been had the referenced
TriMas divestiture or the issuance of the original notes occurred at such time
or to project our results of operations for any future period or date.
The pro forma adjustments are based upon available information and various
assumptions that we believe are reasonable. The pro forma adjustments and
certain assumptions are described in the accompanying notes. Other information
included under this heading has been presented to provide additional analysis.
The unaudited pro forma condensed consolidated statements of operations
should be read in conjunction with the "Management's Discussion and Analysis of
Financial Condition and Results of Operations" section and our historical
financial statements and the related notes to such financial statements
contained in our Annual Report on Form 10-K and Quarterly Report on Form 10-Q
for the period ended June 30, 2002 incorporated by reference in this
prospectus.
26
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2001
(IN MILLIONS, EXCEPT PER SHARE DATA)
TRIMAS DIVESTITURE
-------------------------------------
METALDYNE TRIMAS TRIMAS OFFERING METALDYNE
HISTORICAL HISTORICAL ADJUSTMENTS ADJUSTMENTS PRO FORMA
-------------- ----------------- ------------------- --------------- ---------------
Net sales ................................. $ 2,127.8 $ 732.4 8.0 (1) -- $ 1,403.4
Cost of sales ............................. (1,729.6) (537.4) (8.0)(1) -- (1,200.2)
--------- -------- ----- -- ---------
Gross profit ............................. 398.2 195.0 -- -- 203.2
Selling, general and administrative
expenses ................................. (257.2) (124.2) (1.6)(3) -- (134.6)
Legacy restricted stock award expense ..... (7.9) (3.2) -- -- (4.7)
--------- -------- ----- -- ---------
Operating profit (loss) ................... 133.1 67.6 (1.6) -- 63.9
Other income (expense), net ...............
Interest expense ......................... (148.2) (73.1) (11.1)(4) (8.0)(5) (94.2)
Equity and other income (loss) from
affiliates ............................. (8.9) -- 0.3 (6) -- (8.6)
Other, net ............................... (23.9) (4.0) 4.9 (7),(8) 0.3 (9) (14.7)
--------- -------- ----- ---- ---------
Total other income (expense), net ........ (181.0) (77.1) (5.9) (7.7) (117.5)
Income (loss) before taxes ................ (47.9) (9.5) (7.5) (7.7) (53.6)
Income taxes .............................. 4.6 (1.9) 3.0 (10) 2.9 (10) 12.4
--------- -------- ----- ---- ---------
Net income (loss) ........................ (43.3) (11.4) (4.5) (4.8) (41.2)
--------- -------- ----- ---- ---------
Preferred stock dividends ................. 5.9 -- -- -- 5.9
--------- -------- ----- ---- ---------
Income (loss) attributable to common
stock .................................... $ (49.2) $(11.4) $ (4.5) $ (4.8) $ (47.1)
========= ======== =========== ========= =========
Weighted average shares outstanding ....... 42,570 42,570
Basic earnings per share .................. $ (1.16) $ (1.10)
Total shares used for diluted earnings
per share ................................ 42,570 42,570
Diluted earnings per share ................ $ (1.16) $ (1.10)
See notes to Unaudited Pro Forma Condensed Consolidated Statements of
Operations.
27
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 2002
(IN MILLIONS, EXCEPT PER SHARE DATA)
TRIMAS
PERIOD
METALDYNE ENDED JUNE 6, TRIMAS OFFERING METALDYNE
HISTORICAL 2002 ADJUSTMENTS ADJUSTMENTS PRO FORMA
-------------- --------------- ----------------------- ----------------- ----------
Net sales ................................... $1,090.3 $328.2 -- -- $762.1
Cost of sales ............................... (872.5) (229.2) 0.6 (2) -- (642.7)
-------- ------ ---- ---- ------
Gross profit ............................... 217.8 99.0 0.6 -- 119.4
Selling, general and administrative
expenses ................................... (125.7) (53.5) (0.8)(3) -- (73.0)
Legacy restricted stock ..................... (3.1) (1.4) -- -- (1.7)
-------- ------ ------
Operating profit ............................ 89.0 44.1 (0.2) -- 44.7
Other income (expense), net
Interest expense ........................... (56.6) (29.3) (5.7)(4) (6.6)(5) (39.6)
Equity and other income (loss) from
affiliates ............................... 2.3 -- 5.2 (6) -- 7.5
Loss on interest rate arrangements ......... (7.6) -- -- (7.6)
Other, net ................................. (12.3) (3.2) 1.6 (7),(8) 0.1 (9) (7.4)
-------- ------ ---- ---- ------
Total other income (expense), net .......... (74.2) (32.5) 1.1 (6.5) (47.1)
Income (loss) before taxes .................. 14.8 11.6 0.9 (6.5) (2.4)
Income taxes ................................ 14.2 (4.2) (0.3)(10) 2.3 (10) 20.6
-------- ------ ---- ---- ------
Income (loss) before extraordinary item..... 29.0 7.4 0.6 (4.2) 18.2
Extraordinary loss on early retirement of
debt ....................................... (34.3)
-------
Net income (loss) .......................... (5.3)
Preferred stock dividends ................... 3.4
-------
Income (loss) attributable to common
stock ...................................... $ (8.7)
========
Weighted average shares outstanding ......... 42,650
Basic earnings per share .................... $ (0.20)
Total shares used for diluted earnings per
share ...................................... 44,410
Diluted earnings per share .................. $ (0.19)
See notes to Unaudited Pro Forma Condensed Consolidated Statements of
Operations.
28
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
The Unaudited Pro Forma Condensed Consolidated Statements of Operations for the
year ended December 31, 2001 and the six months ended June 30, 2002 include
adjustments necessary to reflect the estimated effect of the TriMas divestiture
and the assumed use of proceeds from the original notes offering as if they had
each occurred on January 1, 2001.
(1) Represents the reclass of freight revenue, $8.0 million for the fiscal
year ended December 31, 2001 included in net sales in the separate
financial statements of TriMas from net sales to cost of sales. As
Metaldyne has historically included these amounts in cost of sales on a
consolidated basis, this adjustment eliminates the impact in the separate
financial statements of TriMas.
(2) Represents the adjustment to TriMas historical financial statements to
reflect certain capital leases entered into in early 2002 as operating
leases, consistent with Metaldyne's accounting for sale-leaseback
transactions. For accounting purposes, Metaldyne's guarantee on certain
sale-leaseback transactions required TriMas to record operating leases at
Metaldyne as capital leases in TriMas' separate financial statements. As
Metaldyne has historically accounted for these leases as operating leases
on a consolidated basis, this adjustment eliminates the impact of the
capital lease accounting in the separate financial statements of TriMas.
(3) Represents the pro forma increase in selling, general and administrative
expenses resulting from lower management fees charged to TriMas under the
terms of a corporate services agreement described elsewhere herein.
FISCAL YEAR SIX MONTHS
ENDED ENDED
DECEMBER 31, JUNE 30,
2001 2002
-------------- -----------
Historical TriMas management fee (a) ......... $ 7.3 $ 3.8
Corporate costs retained by TriMas (b) ....... (3.2) (1.7)
Corporate Services Agreement (c) ............. (2.5) (1.3)
------ ------
Pro forma adjustment ......................... $ 1.6 $ 0.8
====== ======
----------
(a) Adjustment to eliminate the historical fee charged to TriMas for
corporate support and administrative services through the period ended
June 6, 2002.
(b) Historical direct costs of TriMas related to corporate staff and other
expenses recorded by Metaldyne and allocated to TriMas through the
management fee through the period ended June 6, 2002. Going forward
TriMas will incur these costs in addition to the Corporate Services
Agreement described below.
(c) Under the terms of a corporate services agreement, TriMas has agreed
to pay Metaldyne an annual services fee of $2.5 million for human
resources, MIS, treasury services, internal audit, tax, legal services
and other general corporate services, less amounts directly assumed by
TriMas.
(4) Represents the adjustment to reduce Metaldyne's historical interest
expense for debt repayments from the proceeds of the TriMas divestiture
compared with the historical interest expense allocated to TriMas. The
pro forma interest savings are calculated using interest rates in effect
during the pro forma periods noted (varied from 8.75% to 5.75% for
Tranche A and from 9.5% to 6.5% for Tranche B and C).
29
EFFECT OF DEBT REPAYMENT ON INTEREST EXPENSE
--------------------------------------------
DEBT
REPAYMENT FISCAL YEAR SIX MONTHS
FROM TRIMAS ENDED ENDED
DIVESTITURE DECEMBER 31, JUNE 30,
PROCEEDS 2001 2002
------------- -------------- -----------
Historical Metaldyne consolidated interest
expense ...................................... $148.2 $ 56.6
------ ------
Impact of use of proceeds from TriMas
divestiture:
Tranche A term loan ............................ $ (200.3) (15.1) (5.1)
Tranche B term loan ............................ (213.1) (17.7) (6.0)
Tranche C term loan ............................ (82.6) (6.9) (2.4)
Subordinated debentures (including accretion of
bond discount) ............................... (205.0) (21.9) (9.9)
Revolving credit facility interest (a) ......... (0.4) (0.2)
------ ------
Subtotal of interest decrease ................ (62.0) (23.6)
Interest expense allocated to TriMas historical
financial statements ......................... 73.1 29.3
------ ------
Pro forma adjustment ......................... $ 11.1 $ 5.7
====== ======
----------
(a) Reflects the impact of reduced commitment fees as a result of the
reduced commitments under the Company's revolving credit facility.
(5) Represents the adjustment to increase pro forma interest expense in Note
4 for interest on the notes offered hereby, offset by further debt
repayments from the proceeds of this offering (see "Use of Proceeds").
EFFECT OF DEBT REPAYMENT ON INTEREST EXPENSE
--------------------------------------------
DEBT
REPAYMENT FISCAL YEAR SIX MONTHS
FROM TRIMAS ENDED ENDED
DIVESTITURE DECEMBER 31, JUNE 30,
PROCEEDS 2001 2002
------------- -------------- -----------
Historical Metaldyne consolidated interest
expense ................................... $148.2 $ 56.6
Impact of debt repayment from the proceeds of
the TriMas divestiture (Note 4) ........... (62.0) (23.6)
------ ------
Pro forma interest expense after TriMas
divestiture (Note 4) ...................... 86.2 33.0
Impact of the offering:
Notes offered hereby ........................ $ 250.0 27.5 13.8
Tranche A term loan ......................... (95.9) (7.3) (2.7)
Tranche B term loan ......................... (105.7) (8.8) (3.3)
Tranche C term loan ......................... (41.0) (3.4) (1.2)
------ ------
Pro forma adjustment ..................... 8.0 6.6
------ ------
Pro forma interest expense ................ $ 94.2 $ 39.6
====== ======
(6) Represents the adjustment to reflect Metaldyne's 34% share of TriMas' pro
forma net income on the equity method of accounting.
30
FISCAL YEAR SIX MONTHS
ENDED ENDED
DECEMBER 31, JUNE 30,
2001 2002
-------------- ------------
TriMas pro forma net income (a) ...................... $ 1.0 $ 15.2
Metaldyne's ownership interest (b) ................... 34% 34%
----- ------
Pro forma adjustment to equity and other income (loss)
from affiliates .................................... $ 0.3 $ 5.2
===== ======
----------
(a) Represents TriMas historical net income adjusted for its pro forma
capital structure and standalone headquarters costs.
(b) Represents Metaldyne's remaining ownership percentage in TriMas after
the TriMas divestiture.
(7) Represents the adjustment to reflect the decrease in other expense for
the reduction in debt fee amortization due to the repayment of debt by
$2.2 million and $0.9 million for the fiscal year ended December 31, 2001
and the six months ended June 30, 2002, respectively.
(8) Represents the adjustment to reflect a decreased loss on the sale of
receivables arising from the application of $50 million of proceeds from
the TriMas divestiture to the reduction of accounts receivable facility
as provided for by the Metaldyne credit agreement. The $50 million
reduction reduces financing costs by $2.7 million and $0.7 million for
the fiscal year ended December 31, 2001 and the six months ended June 30,
2002, respectively.
(9) Adjustment to reflect the net increase in debt fee amortization related
to the offering and the repayment of debt.
(10) To reflect the estimated tax effect of the above adjustments at our
marginal tax rate of 38%, with the exception of the adjustment shown in
Note 6, which is recorded on an after-tax basis.
31
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
METALDYNE SHAREHOLDERS AGREEMENT
Heartland, CFSB Private Equity, Masco Corporation, Richard Manoogian,
their various affiliates and certain other stockholders of Metaldyne
Corporation are parties to a shareholders agreement regarding their ownership
of our common stock. References to a shareholder below refer only to those that
are party to the shareholders agreement. References to Heartland and CSFB
Private Equity refer to all of their respective affiliated entities
collectively, unless otherwise noted. Owners of an aggregate of approximately
94% of our outstanding common stock are party to the shareholders agreement.
Election of Directors. The shareholders agreement provides that the
parties will vote their shares of common stock in order to cause:
(1) an amendment to our bylaws to provide that the authorized number of
directors on our board of directors shall be as recommended by
Heartland in its sole discretion; and
(2) the election to the board of directors of:
o such number of directors as shall constitute a majority of the
board of directors as designated by Heartland;
o one director designated by Masco; and
o one director designated by CSFB Private Equity after consultation
with Heartland.
Masco's ability to designate one director to the board of directors will
terminate when it ceases to own a majority of the shares of common stock held
by it as of the closing of the recapitalization subject to certain exceptions.
CSFB Private Equity's ability to designate one director to the board of
directors will terminate when it ceases to own a majority of the shares of
common stock held by it as of the closing of the November 2000 acquisition.
Transfers of Common Stock. Prior to the date we have consummated a public
offering of our common stock of at least $100 million, or a qualifying public
equity offering, the shareholders agreement restricts transfers of common stock
except for transfers: (1) to a permitted transferee of a stockholder, (2)
pursuant to the "right of first offer" provision discussed below, (3) pursuant
to the "tag-along" provision discussed below, (4) pursuant to the "drag-along"
provision discussed below and (5) pursuant to an effective registration
statement or pursuant to Rule 144 under the Securities Act.
Right of First Offer. The shareholders agreement provides that prior to a
qualifying public equity offering no stockholder party to the agreement may
transfer any of its shares other than to a permitted transferee of such
stockholder or pursuant to the "tag-along" and "drag-along" provisions unless
such stockholder shall offer such shares to us. We shall have the option for 15
business days to purchase such shares. If we decline to purchase the shares,
then Heartland shall have the right to purchase such shares for an additional
10 business day period. Any shares not purchased by us or Heartland can be sold
by such stockholder party to the agreement at a price not less than 90% of the
price offered to us or Heartland.
Tag-Along Rights. The shareholders agreement grants to the stockholders
party to the agreement, subject to certain exceptions, in connection with a
proposed transfer of common stock by Heartland or its affiliates, the right to
require the proposed transferee to purchase a proportionate percentage of the
shares owned by the other stockholders at the same price and upon the same
economic terms as are being offered to Heartland. These rights terminate upon a
qualifying public equity offering.
Drag-Along Rights. The shareholders agreement provides that when Heartland
and its affiliates enter into a transaction resulting in a substantial change
of control of us, Heartland has the right to require the other stockholders to
sell a proportionate percentage of shares of common stock in such transaction
as Heartland is selling and to otherwise vote in favor of the transactions
effecting such substantial change of control. These rights terminate upon a
qualifying public equity offering.
32
Information. Pursuant to the shareholders agreement, each stockholder
party to the agreement is entitled to receive our quarterly and annual
financial statements. In addition, such stockholders who maintain 25% of their
original equity investment in us will be entitled to receive prior to a
qualifying public equity offering certain monthly financial information and
certain other information as they may reasonably request and will have the
opportunity to meet with our senior management on an annual basis and certain
stockholders will be able to meet quarterly with our senior management.
Observer Rights. Our shareholders who are also investors, or HIP
co-investors, in one of Heartland's funds and have invested at least $40
million in our common stock or own at least 10% of our outstanding common stock
have the right to attend all meetings of the board of directors, including
committees thereof, solely in a non-voting observer capacity. These rights
terminate upon a qualifying public equity offering.
Preemptive Rights. Subject to certain exceptions, the shareholders
agreement provides that if we issue, sell or grant rights to acquire for cash
any shares of common stock or options, warrants or similar instruments or any
other security convertible or exchangeable therefor, or equity interests, or
any equity security linked to or offered or sold in connection with any of our
equity interests, then we will be obligated to offer certain stockholders or
Heartland the right to purchase at the sale price and on the same terms and
conditions of the sale, such amount of shares of common stock or such other
equity security as would be necessary for such stockholders or Heartland to
maintain its then current beneficial ownership interest in us. These rights
terminate upon a initial public offering by us.
Affiliate Transactions. Subject to certain exceptions, the shareholders
agreement provides that Heartland and its affiliates will not enter into
transactions with us or our subsidiaries involving consideration in excess of
$1 million without the approval of Masco Corporation and the HIP co-investors.
Registration Rights. The shareholders agreement provides the stockholders
party to the agreement with unlimited "piggy-back" rights each time we file a
registration statement except for registrations relating to (1) shares
underlying management options and (2) an initial public offering consisting of
primary shares. In addition, on the earlier of (1) five years after the closing
of the recapitalization or (2) an initial public offering of our equity
interests, Heartland, CSFB Private Equity, Masco Corporation and Richard
Manoogian have the ability to demand the registration of their shares, subject
to various holdback and other agreements. The shareholders agreement grants two
demand registrations to Masco Corporation, one demand registration to Richard
Manoogian, three demand registrations to CSFB Private Equity and an unlimited
number of demands to Heartland.
Approval and Consultation Rights. The shareholders agreement provides that
prior to a qualifying public equity offering we will consult with CSFB Private
Equity with respect to any issues that in our good faith judgment are material
to our business and operations. In addition, prior to a qualifying public
equity offering, CSFB Private Equity will have the right to approve:
o certain acquisitions by us;
o the selection of a chief executive officer;
o certain debt restructurings; and
o any liquidation or dissolution of us.
MONITORING AGREEMENT
We and Heartland are parties to a monitoring agreement pursuant to which
Heartland is engaged to provide consulting services to us with respect to
financial and operational matters. Heartland received a fee of $4 million for
such services in 2001, plus reimbursement of expenses. Commencing with 2002,
Heartland is entitled to receive a fee for such services equal to the greater
of (1) $4 million or (2) 0.25% of our total assets. In addition to providing
ongoing consulting services, Heartland has also agreed to assist in
acquisitions, divestitures and financings, for which Heartland will receive a
fee
33
equal to 1% of the value of such transaction. The monitoring agreement also
provides that Heartland will be reimbursed for its reasonable out-of-pocket
expenses.
CORPORATE SERVICES AGREEMENT
Under a corporate services agreement, Masco Corporation provides us use of
its data processing equipment and services, certain research and development
services, corporate administrative staff and other support services in return
for payment of an annual fee. The fee for such services is to be mutually
agreed to by us and Masco and was $415,000 for 2001 and will not exceed
$500,000 for 2002. This agreement also provides for various license rights and
confidential treatment of information which may arise from Masco Corporation's
performance of research and development services on our behalf.
CORPORATE OPPORTUNITIES AGREEMENT
Masco Corporation and we are parties to a corporate opportunities
agreement which materially restricts the ability of either party to acquire or
otherwise make an investment in a business if the other party has an investment
in such business, except that Masco Corporation is unrestricted from investing
in any company engaged in home improvement or building products or service
businesses. The agreement terminates on the earlier of November 28, 2002 or
nine months after corporate services are no longer required to be provided
under the corporate services agreement.
TRIMAS STOCK PURCHASE AGREEMENT
The following is a summary of certain terms of the stock purchase
agreement among Heartland, TriMas and us relating to the TriMas divestiture.
The TriMas divestiture closed on June 6, 2002.
Consideration
Pursuant to the stock purchase agreement, Heartland and other investors
acquired approximately 66% of TriMas' fully diluted common stock by making a
cash investment in TriMas of $265 million. As a result of this investment and
the other related transactions, we received $840 million in cash, retirement of
debt owed by TriMas' subsidiaries to us and our other subsidiaries or owed
directly by TriMas under the our credit agreement and the repurchase of the
balance of TriMas originated receivables previously sold under our receivables
facility. In addition, we retained shares of TriMas common stock valued at $120
million and received a warrant to purchase shares of common stock valued at $15
million.
Employee Matters
Pursuant to the stock purchase agreement, each outstanding option to
purchase our common stock which had not vested as of June 6, 2002 and which is
held by transferred employees was canceled on June 6, 2002. Each option held by
some former employees which vested on or prior to June 6, 2002 was replaced by
options to purchase common stock of TriMas, with appropriate adjustments.
TriMas will promptly reimburse us upon our written demand for (i) cash
actually paid in redemption of certain restricted shares held by certain
employees under restricted stock awards, and (ii) 42.01% of the amount of cash
actually paid to certain other employees by us in redemption of restricted
stock awards held by such employees. TriMas will also have certain other
obligations to reimburse us for the allocated portion of its current and former
employee related benefit responsibilities.
Indemnification
Subject to certain limited exceptions, we, on the one hand, and TriMas, on
the other hand, retained the liabilities associated with our respective
businesses. Accordingly, TriMas will indemnify us and hold us harmless from all
liabilities associated with TriMas and its subsidiaries and their respective
operations and assets, whenever conducted, and we will indemnify and hold
harmless Heartland and
34
TriMas from all liabilities associated with us and our subsidiaries (excluding
TriMas and the other acquired TriMas entities) and their respective operations
and assets, whenever conducted. In addition, we and TriMas have each agreed to
indemnify one another for their allocated share of (57.99% in our case and
42.01% in the case of TriMas) of liabilities not readily associated with either
business, or otherwise addressed including certain costs related to the
November 2000 acquisition. There are also indemnification provisions relating
to certain other matters intended to effectuate other provisions of the
agreement. These indemnification provisions will survive indefinitely and are
subject to a $50,000 deductible.
TRIMAS SHAREHOLDERS AGREEMENT
Heartland, we and other investors are parties to a shareholders agreement
regarding ownership of TriMas common stock. References to Heartland refer to
all of its affiliated entities collectively, unless otherwise noted. The
agreement contains certain other covenants for the benefit of the shareholders
parties thereto.
Election of Directors. The TriMas shareholders agreement provides that the
parties will vote their shares of common stock in order to cause (1) the
election to the board of directors of such number of directors as shall
constitute a majority of the board of directors as designated by Heartland; and
(2) the election to the board of directors of up to two directors designated by
us.
Transfers of Common Stock. Prior to the date TriMas consummates a
qualifying public equity offering, the TriMas shareholders agreement restricts
transfers of common stock except for certain transfers, including (1) to the
permitted transferee of a stockholder, (2) pursuant to the "right of first
offer" provision discussed below, (3) pursuant to the "tag-along" provision
discussed below, (4) pursuant to the "drag-along" provision discussed below and
(5) pursuant to an effective registration statement or pursuant to Rule 144
under the Securities Act.
Right of First Offer. The TriMas shareholders agreement provides that,
prior to a TriMas qualifying public equity offering, no stockholder party to
the agreement may transfer any of its shares other than to a permitted
transferee of such stockholder or pursuant to the "tag-along" and "drag-along"
provisions unless such stockholder shall offer such shares to us. If TriMas
declines to purchase the shares, then Heartland shall have the right to
purchase such shares. Any shares not purchased by us or Heartland can be sold
by such stockholder party to the agreement at a price not less than 90% of the
price offered to us or Heartland.
Tag-Along Rights. The TriMas shareholders agreement grants to the
stockholders party to the agreement, subject to certain exceptions, in
connection with a proposed transfer of TriMas common stock by Heartland or its
affiliates, the right to require the proposed transferee to purchase a
proportionate percentage of the shares owned by the other stockholders at the
same price and upon the same economic terms as are being offered to Heartland.
These rights terminate upon a TriMas qualifying public equity offering.
Drag-Along Rights. The TriMas shareholders agreement provides that when
Heartland and its affiliates enter into a transaction resulting in a
substantial change of control of TriMas, Heartland has the right to require the
other stockholders to sell a proportionate percentage of shares of common stock
in such transaction as Heartland is selling and to otherwise vote in favor of
the transactions effecting such substantial change of control. These rights
terminate upon a TriMas qualifying public equity offering.
Registration Rights. The TriMas shareholders agreement provides the
stockholders party to the agreement with unlimited "piggy-back" rights each
time we file a registration statement except for registrations relating to (1)
shares underlying management options and (2) an initial public offering
consisting of primary shares. In addition, following an initial public offering
of the Issuer, Heartland and we have the ability to demand the registration of
their shares, subject to various hold back, priority and other agreements. The
TriMas shareholders agreement grants three demand registrations to us and an
unlimited number of demands to Heartland.
35
Information. Pursuant to the TriMas shareholders agreement, we are
entitled to receive certain periodic, quarterly and annual financial
statements.
Preemptive Rights. Subject to certain exceptions, the TriMas shareholders
agreement provides that if TriMas issues, sells or grants rights to acquire for
cash any shares of common stock or options, warrants or similar instruments or
any other security convertible or exchangeable therefor, or equity interests,
or any equity security linked to or offered or sold in connection with any of
TriMas' equity interests, then TriMas will be obligated to offer us and certain
other stockholders the right to purchase at the sale price such amount of
shares of common stock or such other equity interests as would be necessary for
us and such other stockholders to maintain our then current beneficial
ownership interest in TriMas. These rights terminate upon an initial public
offering and we may not have the necessary capital to pursue these rights.
Affiliate Transactions. Subject to certain exceptions, the TriMas
shareholders agreement provides that Heartland and its affiliates will not
enter into transactions with TriMas or any of its subsidiaries involving
consideration in excess of $1 million without certain approvals.
36
THE EXCHANGE OFFER
PURPOSE AND EFFECT OF THE EXCHANGE OFFER
Exchange Offer Registration Statement. We issued the original notes on
June 20, 2002. The initial purchasers have advised us that they subsequently
resold the outstanding notes to "qualified institutional buyers" in reliance on
Rule 144A under the Securities Act and to certain persons in offshore
transactions in reliance on Regulation S under the Securities Act. As a
condition to the offering of the outstanding notes, we entered into a
registration rights agreement dated June 20, 2002, pursuant to which we agreed,
for the benefit of all holders of the outstanding notes, at our own expense to
use our reasonable best efforts:
(1) to file the registration statement of which this prospectus is a part
with the Commission;
(2) to cause the registration statement to be declared effective under the
Securities Act and promptly thereafter commence the exchange offer;
(3) to keep the registration statement effective until the closing of the
exchange offer; and
(4) to issue, on or prior to 60 days after the date on which the exchange
offer registration statement was declared effective by the Commission,
exchange notes in exchange for all outstanding notes tendered prior
thereto.
Further, we agreed to keep the exchange offer open for acceptance for not
less than the minimum period required under applicable Federal and state
securities laws. For each outstanding note validly tendered pursuant to the
exchange offer and not withdrawn, the holder of the outstanding note will
receive an exchange note having a principal amount equal to that of the
tendered outstanding note. Interest on each exchange note will accrue from the
last date on which interest was paid on the tendered outstanding note in
exchange therefor or, if no interest was paid on such outstanding note, from
the issue date.
Transferability. We issued the outstanding notes on June 20, 2002 in a
transaction exempt from the registration requirements of the Securities Act and
applicable state securities laws. Accordingly, the outstanding notes may not be
offered or sold in the United States unless registered or pursuant to an
applicable exemption under the Securities Act and applicable state securities
laws. Based on no-action letters issued by the staff of the Commission with
respect to similar transactions, we believe that the exchange notes issued
pursuant to the exchange offer in exchange for outstanding notes may be offered
for resale, resold and otherwise transferred by holders of notes who are not
our affiliates without further compliance with the registration and prospectus
delivery requirements of the Securities Act, provided that:
(1) any exchange notes to be received by the holder were acquired in the
ordinary course of the holder's business;
(2) at the time of the commencement of the exchange offer the holder has
no arrangement or understanding with any person to participate in the
distribution (within the meaning of the Securities Act) of the
exchange notes in violation of the provisions of the Securities Act;
(3) the holder is not an "affiliate" of the Issuer or any guarantor, as
defined in Rule 405 under the Securities Act; and
(4) if the holder is a broker-dealer that will receive exchange notes for
its own account in exchange for the outstanding notes that were
acquired as a result of market-making or other trading activities,
then such holder will deliver a prospectus in connection with any
resale of the exchange notes.
However, we have not sought a no-action letter with respect to the
exchange offer and we cannot assure you that the staff of the Commission would
make a similar determination with respect to the exchange offer. Any holder who
tenders his outstanding notes in the exchange offer with any intention of
participating in a distribution of exchange notes (1) cannot rely on the
interpretation by the staff of
37
the Commission, (2) will not be able to validly tender outstanding notes in the
exchange offer and (3) must comply with the registration and prospectus
delivery requirements of the Securities Act in connection with any secondary
resale transactions.
The letter of transmittal accompanying this prospectus states that by so
acknowledging and by delivering a prospectus, a broker-dealer will not be
deemed to admit that it is acting in the capacity of an "underwriter" within
the meaning of Section 2(11) of the Securities Act. This prospectus, as it may
be amended or supplemented from time to time, may be used by a broker-dealer in
connection with resales of exchange notes received in exchange for outstanding
notes where the outstanding notes were acquired by such broker-dealer as a
result of market-making activities or other trading activities. Pursuant to the
registration rights agreement, we agreed to make this prospectus available to
any such broker-dealer for use in connection with any such resale.
TERMS OF THE EXCHANGE OFFER
Upon satisfaction or waiver of all of the conditions of the exchange
offer, we will accept any and all outstanding notes properly tendered and not
withdrawn prior to the expiration date and will issue the exchange notes
promptly after acceptance of the outstanding notes. See "--Conditions to the
Exchange Offer" and "Procedures for Tendering Outstanding Notes." We will issue
$1,000 principal amount of exchange notes in exchange for each $1,000 principal
amount of outstanding notes accepted in the exchange offer. As of the date of
this prospectus, $250,000,000 aggregate principal amount of the notes is
outstanding. Holders may tender some or all of their outstanding notes pursuant
to the exchange offer. However, outstanding notes may be tendered only in
integral multiples of $1,000.
The exchange notes are identical to the outstanding notes except for the
elimination of certain transfer restrictions, registration rights, restrictions
on holding notes in certificated form and liquidated damages provisions. The
exchange notes will evidence the same debt as the outstanding notes and will be
issued pursuant to, and entitled to the benefits of, the indenture pursuant to
which the outstanding notes were issued and will be deemed one issue of notes,
together with the outstanding notes.
This prospectus, together with the letter of transmittal, is being sent to
all registered holders and to others believed to have beneficial interests in
the outstanding notes. Holders of outstanding notes do not have any appraisal
or dissenters' rights under the indenture in connection with the exchange
offer. We intend to conduct the exchange offer in accordance with the
applicable requirements of the Securities Act, the Exchange Act and the rules
and regulations of the Commission promulgated thereunder.
For purposes of the exchange offer, we will be deemed to have accepted
validly tendered outstanding notes when, and as if, we have given oral or
written notice thereof to the exchange agent. The exchange agent will act as
our agent for the purpose of distributing the exchange notes from us to the
tendering holders. If we do not accept any tendered outstanding notes because
of an invalid tender, the occurrence of certain other events set forth in this
prospectus or otherwise, we will return the unaccepted outstanding notes,
without expense, to the tendering holder thereof as promptly as practicable
after the expiration date.
Holders who tender outstanding notes in the exchange offer will not be
required to pay brokerage commissions or fees or, except as set forth below
under "--Transfer Taxes," transfer taxes with respect to the exchange of
outstanding notes pursuant to the exchange offer. We will pay all charges and
expenses, other than certain applicable taxes, in connection with the exchange
offer. See "--Fees and Expenses."
EXPIRATION DATE; EXTENSIONS; AMENDMENTS
The term "expiration date" shall mean 9:00 a.m., New York City time, on
November 20, 2002, unless we, in our sole discretion, extend the exchange
offer, in which case the term "expiration date" shall mean the latest date and
time to which the exchange offer is extended. In order to extend the exchange
offer, we will notify the exchange agent by oral or written notice and each
registered holder
38
by means of press release or other public announcement of any extension, in
each case, prior to 9:00 a.m., New York City time, on the expiration date. We
reserve the right, in our sole discretion, (1) to delay accepting any
outstanding notes, (2) to extend the exchange offer, (3) to terminate the
exchange offer if the conditions set forth below under "--Conditions" shall not
have been satisfied, or (4) to amend the terms of the exchange offer in any
manner. We will notify the exchange agent of any delay, extension, termination
or amendment by oral or written notice. We will additionally notify each
registered holder of any amendment. We will give to the exchange agent written
confirmation of any oral notice.
EXCHANGE DATE
As soon as practicable after the close of the exchange offer we will
accept for exchange all outstanding notes properly tendered and not validly
withdrawn prior to 9:00 a.m., New York City time, on the expiration date in
accordance with the terms of this prospectus and the letters of transmittal.
CONDITIONS TO THE EXCHANGE OFFER
Notwithstanding any other provisions of the exchange offer, and subject to
our obligations under the registration rights agreement, we shall not be
required to accept any outstanding notes for exchange or issue exchange notes
in exchange for any outstanding notes and may terminate or amend the exchange
offer if, at any time before the acceptance of such exchange notes for
exchange, any of the following events shall occur:
(1) any injunction, order or decree shall have been issued by any court or
any governmental agency that would prohibit, prevent or otherwise
materially impair our ability to proceed with the exchange offer;
(2) any change, or any development involving a prospective change, in our
business or financial affairs or any of our subsidiaries has occurred
which, in our sole judgment, might materially impair our ability to
proceed with the exchange offer or materially impair the contemplated
benefits of the exchange offer to us;
(3) any law, statute, rule or regulation is proposed, adopted or enacted
which, in our sole judgment, might materially impair our ability to
proceed with the exchange offer or materially impair the contemplated
benefits of the exchange offer to us;
(4) any governmental approval has not been obtained, which approval we
shall, in our sole discretion, deem necessary for the consummation of
the exchange offer as contemplated hereby; or
(5) the exchange offer will violate any applicable law or any applicable
interpretation of the staff of the Commission.
The foregoing conditions are for our sole benefit and may be asserted by
us regardless of the circumstances giving rise to any such condition or may be
waived by us in whole or in part at any time and from time to time in our sole
discretion. Our failure at any time to exercise any of the foregoing rights
shall not be deemed a waiver of any such right and such right shall be deemed
an ongoing right which may be asserted at any time and from time to time.
In addition, we will not accept for exchange any outstanding notes
tendered, and no exchange notes will be issued in exchange for any such
outstanding notes if at such time any stop order shall be threatened by the
Commission or be in effect with respect to the registration statement of which
this prospectus is a part or the qualification of the indenture under the Trust
Indenture Act of 1939, as amended.
The exchange offer is not conditioned on any minimum aggregate principal
amount of outstanding notes being tendered for exchange.
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CONSEQUENCES OF FAILURE TO EXCHANGE
Any outstanding notes not tendered pursuant to the exchange offer will
remain outstanding and continue to accrue interest. The outstanding notes will
remain "restricted securities" within the meaning of the Securities Act.
Accordingly, prior to the date that is one year after the later of the issue
date and the last date on which we or any of our affiliates was the owner of
the outstanding notes, the outstanding notes may be resold only (1) inside the
United States to a person whom the seller reasonably believes is a qualified
institutional buyer (as defined in Rule 144A under the Securities Act) in a
transaction meeting the requirements of Rule 144A, (2) outside the United
States in an offshore transaction in accordance with Rule 904 under the
Securities Act, (3) pursuant to an exemption from registration under the
Securities Act provided by Rule 144 thereunder (if available) or (4) pursuant
to an effective registration statement under the Securities Act, in each of
cases (1) through (4) in accordance with any applicable securities laws of any
state of the United States. As a result, the liquidity of the market for
non-tendered outstanding notes could be adversely affected upon completion of
the exchange offer. The foregoing restrictions on resale will no longer apply
after the first anniversary of the issue date of the outstanding note or the
purchase of the outstanding notes from us or an affiliate.
FEES AND EXPENSES
We will not make any payments to brokers, dealers or others soliciting
acceptances of the exchange offer. The principal solicitation is being made by
mail; however, additional solicitations may be made in person or by telephone
by our officers and employees.
Expenses incurred in connection with the exchange offer will be paid by
us. Such expenses include, among others, the fees and expenses of the trustee
and the exchange agent, accounting and legal fees, printing costs and other
miscellaneous fees and expenses.
ACCOUNTING TREATMENT
We will not recognize any gain or loss for accounting purposes upon the
consummation of the exchange offer. We will amortize the expenses of the
exchange offer as additional interest expense over the term of the exchange
notes.
PROCEDURES FOR TENDERING OUTSTANDING NOTES
The tender of outstanding notes pursuant to any of the procedures set
forth in this prospectus and in the letter of transmittal will constitute a
binding agreement between the tendering holder and us in accordance with the
terms and subject to the conditions set forth in this prospectus and in the
letter of transmittal. The tender of outstanding notes will constitute an
agreement to deliver good and marketable title to all tendered outstanding
notes prior to the expiration date free and clear of all liens, charges,
claims, encumbrances, interests and restrictions of any kind.
Except as provided in "--Guaranteed Delivery Procedures," unless the
outstanding notes being tendered are deposited by you with the exchange agent
prior to the expiration date and are accompanied by a properly completed and
duly executed letter of transmittal, we may, at our option, reject the tender.
Issuance of exchange notes will be made only against deposit of tendered
outstanding notes and delivery of all other required documents. Notwithstanding
the foregoing, DTC participants tendering through its Automated Tender Offer
Program ("ATOP") will be deemed to have made valid delivery where the exchange
agent receives an agent's message prior to the expiration date.
Accordingly, to properly tender outstanding notes, the following
procedures must be followed:
Notes held through a Custodian. Each beneficial owner holding outstanding
notes through a DTC participant must instruct the DTC participant to cause its
outstanding notes to be tendered in accordance with the procedures set forth in
this prospectus.
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Notes held through DTC. Pursuant to an authorization given by DTC to the
DTC participants, each DTC participant holding outstanding notes through DTC
must (1) electronically transmit its acceptance through ATOP, and DTC will then
edit and verify the acceptance, execute a book-entry delivery to the exchange
agent's account at DTC and send an agent's message to the exchange agent for
its acceptance, or (2) comply with the guaranteed delivery procedures set forth
below and in a notice of guaranteed delivery. See "--Guaranteed Delivery
Procedures--Notes held through DTC."
The exchange agent will (promptly after the date of this prospectus)
establish accounts at DTC for purposes of the exchange offer with respect to
outstanding notes held through DTC. Any financial institution that is a DTC
participant may make book-entry delivery of interests in outstanding notes into
the exchange agent's account through ATOP. However, although delivery of
interests in the outstanding notes may be effected through book-entry transfer
into the exchange agent's account through ATOP, an agent's message in
connection with such book-entry transfer, and any other required documents,
must be, in any case, transmitted to and received by the exchange agent at its
address set forth under "--Exchange Agent," or the guaranteed delivery
procedures set forth below must be complied with, in each case, prior to the
expiration date. Delivery of documents to DTC does not constitute delivery to
the exchange agent. The confirmation of a book-entry transfer into the exchange
agent's account at DTC as described above is referred to herein as a
"Book-Entry Confirmation."
The term "agent's message" means a message transmitted by DTC to, and
received by, the exchange agent and forming a part of the book-entry
confirmation, which states that DTC has received an express acknowledgment from
each DTC participant tendering through ATOP that such DTC participants have
received a letter of transmittal and agree to be bound by the terms of the
letter of transmittal and that we may enforce such agreement against such DTC
participants.
Cede & Co., as the holder of the global note, will tender a portion of the
global note equal to the aggregate principal amount due at the stated maturity
for which instructions to tender are given by DTC participants.
By tendering, each holder and each DTC participant will represent to us
that, among other things, (1) it is not our affiliate, (2) it is not a
broker-dealer tendering outstanding notes acquired directly from us for its own
account, (3) it is acquiring the exchange notes in its ordinary course of
business and (4) it is not engaged in, and does not intend to engage in, and
has no arrangement or understanding with any person to participate in, a
distribution of the exchange notes.
We will not accept any alternative, conditional, irregular or contingent
tenders (unless waived by us). By executing a letter of transmittal or
transmitting an acceptance through ATOP, as the case may be, each tendering
holder waives any right to receive any notice of the acceptance for purchase of
its outstanding notes.
We will resolve all questions as to the validity, form, eligibility
(including time of receipt) and acceptance of tendered outstanding notes, and
such determination will be final and binding. We reserve the absolute right to
reject any or all tenders that are not in proper form or the acceptance of
which may, in the opinion of our counsel, be unlawful. We also reserve the
absolute right to waive any condition to the exchange offer and any
irregularities or conditions of tender as to particular outstanding notes. Our
interpretation of the terms and conditions of the exchange offer (including the
instructions in the letter of transmittal) will be final and binding. Unless
waived, any irregularities in connection with tenders must be cured within such
time as we shall determine. We, along with the exchange agent, shall be under
no duty to give notification of defects in such tenders and shall not incur
liabilities for failure to give such notification. Tenders of outstanding notes
will not be deemed to have been made until such irregularities have been cured
or waived. Any outstanding notes received by the exchange agent that are not
properly tendered and as to which the irregularities have not been cured or
waived will be returned by the exchange agent to the tendering holder, unless
otherwise provided in the letter of transmittal, as soon as practicable
following the expiration date.
LETTERS OF TRANSMITTAL AND OUTSTANDING NOTES MUST BE SENT ONLY TO THE
EXCHANGE AGENT. DO NOT SEND LETTERS OF TRANSMITTAL OR OUTSTANDING NOTES TO US
OR DTC.
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The method of delivery of outstanding notes, letters of transmittal, any
required signature guaranties and all other required documents, including
delivery through DTC and any acceptance through ATOP, is at the election and
risk of the persons tendering and delivering acceptances or letters of
transmittal and, except as otherwise provided in the applicable letter of
transmittal, delivery will be deemed made only when actually received by the
exchange agent. If delivery is by mail, it is suggested that the holder use
properly insured, registered mail with return receipt requested, and that the
mailing be made sufficiently in advance of the expiration date to permit
delivery to the exchange agent prior to the expiration date.
GUARANTEED DELIVERY PROCEDURES
Notes held through DTC. DTC participants holding outstanding notes through
DTC who wish to cause their outstanding notes to be tendered, but who cannot
transmit their acceptances through ATOP prior to the expiration date, may cause
a tender to be effected if:
(1) guaranteed delivery is made by or through a firm or other entity
identified in Rule 17Ad-15 under the Exchange Act, including:
o a bank;
o a broker, dealer, municipal securities dealer, municipal securities
broker, government securities dealer or government securities broker;
o a credit union;
o a national securities exchange, registered securities association or
clearing agency; or
o a savings institution that is a participant in a Securities Transfer
Association recognized program;
(2) prior to the expiration date, the exchange agent receives from any of
the above institutions a properly completed and duly executed notice of
guaranteed delivery (by mail, hand delivery, facsimile transmission or
overnight courier) substantially in the form provided with this prospectus; and
(3) book-entry confirmation and an agent's message in connection therewith
are received by the exchange agent within three NYSE trading days after the
date of the execution of the notice of guaranteed delivery.
Notes held by Holders. Holders who wish to tender their outstanding notes
but (1) whose outstanding notes are not immediately available and will not be
available for tendering prior to the expiration date, or (2) who cannot deliver
their outstanding notes, the letter of transmittal or any other required
documents to the exchange agent prior to the expiration date, may effect a
tender if:
o the tender is made by or through any of the above-listed institutions;
o prior to the expiration date, the exchange agent receives from any
above-listed institution a properly completed and duly executed notice
of guaranteed delivery, whether by mail, hand delivery, facsimile
transmission or overnight courier, substantially in the form provided
with this prospectus; and
o a properly completed and executed letter of transmittal, as well as the
certificate(s) representing all tendered outstanding notes in proper
form for transfer, and all other documents required by the letter of
transmittal, are received by the exchange agent within three NYSE
trading days after the date of the execution of the notice of
guaranteed delivery.
WITHDRAWAL RIGHTS
You may withdraw tenders of outstanding notes, or any portion of your
outstanding notes, in integral multiples of $1,000 principal amount due at the
stated maturity, at any time prior to 9:00 a.m., New York City time, on the
expiration date. Any outstanding notes properly withdrawn will be deemed to be
not validly tendered for purposes of the exchange offer.
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Notes held through DTC. DTC participants holding outstanding notes who
have transmitted their acceptances through ATOP may, prior to 9:00 a.m., New
York City time, on the expiration date, withdraw the instruction given thereby
by delivering to the exchange agent, at its address set forth under "--Exchange
Agent," a written, telegraphic or facsimile notice of withdrawal of such
instruction. Such notice of withdrawal must contain the name and number of the
DTC participant, the principal amount due at the stated maturity of outstanding
notes to which such withdrawal relates and the signature of the DTC
participant. Receipt of such written notice of withdrawal by the exchange agent
effectuates a withdrawal.
Notes held by Holders. Holders may withdraw their tender of outstanding
notes, prior to 9:00 a.m., New York City time, on the expiration date, by
delivering to the exchange agent, at its address set forth under "--Exchange
Agent," a written, telegraphic or facsimile notice of withdrawal. Any such
notice of withdrawal must (1) specify the name of the person who tendered the
outstanding notes to be withdrawn, (2) contain a description of the outstanding
notes to be withdrawn and identify the certificate number or numbers shown on
the particular certificates evidencing such outstanding notes and the aggregate
principal amount due at the stated maturity represented by such outstanding
notes and (3) be signed by the holder of such outstanding notes in the same
manner as the original signature on the letter of transmittal by which such
outstanding notes were tendered (including any required signature guaranties),
or be accompanied by (x) documents of transfer in a form acceptable to us, in
our sole discretion, and (y) a properly completed irrevocable proxy that
authorized such person to effect such revocation on behalf of such holder. If
the outstanding notes to be withdrawn have been delivered or otherwise
identified to the exchange agent, a signed notice of withdrawal is effective
immediately upon written, telegraphic or facsimile notice of withdrawal even if
physical release is not yet effected.
All signatures on a notice of withdrawal must be guaranteed by a
recognized participant in the Securities Transfer Agents Medallion Program, the
New York Stock Exchange Medallion Signature Program or the Stock Exchange
Medallion Program; provided, however, that signatures on the notice of
withdrawal need not be guaranteed if the outstanding notes being withdrawn are
held for the account of any of the institutions listed above under
"--Guaranteed Delivery Procedures."
A withdrawal of an instruction or a withdrawal of a tender must be
executed by a DTC participant or a holder of outstanding notes, as the case may
be, in the same manner as the person's name appears on its transmission through
ATOP or letter of transmittal, as the case may be, to which such withdrawal
relates. If a notice of withdrawal is signed by a trustee, partner, executor,
administrator, guardian, attorney-in-fact, agent, officer of a corporation or
other person acting in a fiduciary or representative capacity, such person must
so indicate when signing and must submit with the revocation appropriate
evidence of authority to execute the notice of withdrawal. A DTC participant or
a holder may withdraw an instruction or a tender, as the case may be, only if
such withdrawal complies with the provisions of this prospectus.
A withdrawal of a tender of outstanding notes by a DTC participant or a
holder, as the case may be, may be rescinded only by a new transmission of an
acceptance through ATOP or execution and delivery of a new letter of
transmittal, as the case may be, in accordance with the procedures described
herein.
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EXCHANGE AGENT
The Bank of New York has been appointed as exchange agent for the exchange
offer. Questions, requests for assistance and requests for additional copies of
this prospectus or of the letter of transmittal should be directed to the
exchange agent addressed as follows:
By Registered or Certified Mail:
The Bank of New York
Corporate Trust Operations Reorganization Unit
15 Broad Street, 16th Floor
New York, NY 10007
By Hand Delivery to 4:30 p.m.:
The Bank of New York
Corporate Trust Operations Reorganization Unit
15 Broad Street, 16th Floor
New York, NY 10007
By Overnight Courier and by Hand Delivery After 4:30 p.m. of Expiration Date:
The Bank of New York
Corporate Trust Operations Reorganization Unit
15 Broad Street, 16th Floor
New York, NY 10007
Facsimile: (212) 235-2261
Telephone: (212) 235-2363
Attention: Customer Service
The exchange agent also acts as trustee under the indenture.
TRANSFER TAXES
Holders of outstanding notes who tender their outstanding notes for
exchange notes will not be obligated to pay any transfer taxes in connection
therewith, except that holders who instruct us to register exchange notes in
the name of, or request that outstanding notes not tendered or not accepted in
the exchange offer be returned to, a person other than the registered tendering
holder will be responsible for the payment of any applicable transfer tax
thereon.
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DESCRIPTION OF OTHER INDEBTEDNESS AND OUR PREFERRED STOCK
CREDIT FACILITY
GENERAL
Metaldyne and Metaldyne Company LLC are party to a credit facility with
JPMorgan Chase Bank, as administrative agent and collateral agent, Credit
Suisse First Boston, as syndication agent, Comerica Bank, as documentation
agent, First Union National Bank, as documentation agent, National City Bank,
as documentation agent, Bank One, NA, as documentation agent, J.P. Morgan
Securities Inc. and Credit Suisse First Boston, as joint bookrunners and joint
lead arrangers, and the other lenders party thereto. In connection with the
TriMas divestiture, the credit facility was amended to reduce revolving credit
facility commitments to $250 million, permit the TriMas divestiture and
establish the use of proceeds therefrom and adjust financial covenants to
reflect the TriMas divestiture. On June 20, 2002 we amended and restated our
credit facility to permit us to reduce our receivables facility balances by
approximately $37.8 million and our original tranche A, B and C term loans with
the proceeds from the original notes issuance and a new $400 million tranche D
term loan that matures in December 2009 and bears interest at a lower rate and
provides us with certain additional covenant flexibility.
The credit facility presently consists of a senior revolving credit
facility and the tranche D senior term loan facility. The revolving credit
facility is comprised of a total principal amount commitment of $250 million.
The tranche D facility is comprised of loans in a total principal amount of
$400 million as of September 3, 2002. Up to approximately $150 million of our
revolving credit facility is available for permitted acquisitions and we are
required to reserve $100 million of our revolving credit facility availability
equal to the outstanding principal amount of our 4.5% subordinated debentures
for retirement of such remaining debentures. The amendment and restatement
allowed us to use a portion of the proceeds from the original notes issuance to
reduce our receivables facility balances so that our debt balances are
correspondingly higher. The amendment and restatement also allowed us to
terminate our subordinated loan agreement with Masco Corporation pursuant to
which Masco had agreed to purchase up to $100 million of subordinated notes
from us. We were also released from our obligation to use the proceeds of the
notes to meet our obligations under our 4.5% convertible subordinated
debentures due 2003.
The revolving credit facility matures on May 28, 2007 and the tranche D
facility matures on December 31, 2009.
The obligations under the credit facility are secured and are
unconditionally and irrevocably guaranteed jointly and severally by us and each
of our existing and subsequently acquired or organized domestic subsidiaries
other than MTSPC, Inc. and Saturn Holdings (the holder of the equity interest
in Saturn), pursuant to the terms of a separate guarantee agreement.
Although no foreign subsidiaries are currently borrowers under the credit
facility, such entities may borrow under the facility in the future.
SECURITY INTERESTS
Our borrowings under the credit facility are secured by a first priority
perfected security interest in:
o the capital stock of Metaldyne Company LLC and all of the capital stock
held by Metaldyne, Metaldyne Company LLC or any domestic subsidiary of
Metaldyne and of each existing and subsequently acquired or organized
subsidiary of Metaldyne (which pledge, in the case of any foreign
subsidiary, shall be limited to 65% of the capital stock of such
foreign subsidiary to the extent the pledge of any greater percentage
would result in adverse tax consequences to Metaldyne or Metaldyne
Company LLC); and
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o all tangible and intangible assets of Metaldyne, Metaldyne Company LLC
and each existing or subsequently acquired or organized domestic
subsidiary of Metaldyne, other than MTSPC, Inc. and Saturn Holdings,
with certain exceptions as set forth in the credit facility.
INTEREST RATES AND FEES
Borrowings under the credit facility will bear interest, at our option, at
either:
o a base rate used by JPMorgan Chase Bank, plus an applicable margin; or
o a eurocurrency rate on deposits for one, two, three or nine month
periods (or nine or twelve month periods if, at the time of the
borrowing, all lenders agree to make such a duration available), plus
the applicable margin.
The applicable margin on loans is subject to change depending on our leverage
ratio. As of September 3, 2002, the applicable margin on our revolving loans
which are base rate loans was 2.75% and on eurocurrency loans was 3.75% and the
applicable margin on tranche D loans which are base rate loans was 1.75% and on
eurocurrency loans was 2.75%.
We also pay the lenders a commitment fee on the unused commitments under
the credit facility equal to 0.75% per annum if less than 50% of the revolving
facility commitments are outstanding and 0.50% per annum is to be paid if 50%
or more of the revolving facility commitments are outstanding, in each case,
payable quarterly in arrears. The commitment fee is subject to reduction
depending on our leverage ratio.
MANDATORY AND OPTIONAL REPAYMENT
Subject to exceptions for reinvestment of proceeds and other exceptions
and materiality thresholds, we are required to prepay outstanding loans under
the credit facility with excess cash flow, the net proceeds of certain asset
dispositions, casualty and condemnation recovery events and incurrences of
permitted debt.
We may voluntarily prepay loans under the credit facility without
prepayment premiums, in whole or in part, subject to minimum prepayments.
COVENANTS
The credit facility contains negative and affirmative covenants and
requirements affecting us and our subsidiaries. The credit facility contains
the following negative covenants and restrictions, among others: restrictions
on debt, liens, mergers, investments, loans, advances, guarantee obligations,
acquisitions, asset dispositions, sale-leaseback transactions, hedging
agreements, dividends and other restricted junior payments, stock repurchases,
transactions with affiliates, restrictive agreements, amendments to charter,
by-laws and other material documents. The credit facility also requires us and
our subsidiaries to meet certain financial covenants and ratios computed
quarterly.
The credit facility contains the following affirmative covenants, among
others: mandatory reporting of financial and other information to the
administrative agent, notice to the administrative agent upon the occurrence of
certain events of default and other events, written notice of change of any
information affecting the identity of the record owner or the location of
collateral, preservation of existence and intellectual property, payment of
obligations, maintenance of properties and insurance, notice of casualty and
condemnation, access to properties and books by the lenders, compliance with
laws, use of proceeds and letters of credit, additional subsidiaries and
interest rate protection agreements.
EVENTS OF DEFAULT
The credit facility specifies certain customary events of default,
including, among others, non-payment of principal, interest or fees, violation
of covenants, cross-defaults and cross-accelerations, inaccuracy of
representations and warranties in any material respect, bankruptcy and
insolvency events, change of control, failure to maintain security interests,
specified ERISA
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events, one or more judgments for the payment of money in an aggregate amount
in excess of $15.0 million, the guarantees shall cease to be in full force and
effect or the subordination provisions of any of our subordinated debt are
found to be invalid.
SUBORDINATED DEBENTURES
As of September 9, 2002, we have $100 million principal amount of 4.5%
convertible subordinated debentures due December 15, 2003 outstanding. Each
$1,000 principal amount of convertible debentures was convertible prior to the
November 2000 acquisition into shares of our common stock at a conversion price
of $31.00 a share. As a result of the November 2000 acquisition, the debentures
are convertible into the right to receive the merger consideration paid to
common stockholders in the November 2000 acquisition at a conversion price of
$31.00 per the consideration payable with respect to a share of common stock
and, accordingly, are not expected to be converted.
Interest at a rate of 4.5% is paid semi-annually on the convertible
debentures on June 15 and December 15 to record holders of the convertible
debentures on the preceding June 1 or December 1, respectively. The debentures
mature on December 15, 2003. The debentures can be redeemed by us at any time,
in whole or in part, upon not less than thirty days' nor more than sixty days'
notice at a redemption price of 100.50% of the principal amount outstanding if
such redemption is prior to December 15, 2002; and at 100.00% of the principal
outstanding amount if such redemption is after December 15, 2002.
The debentures are subordinated in right or payment to the prior
indefeasible payment and satisfaction in full of all of our existing and future
senior indebtedness and contains certain anti-layering language with respect to
certain subordinated debt financings. The debentures contain customary events
of default for a debt security of such type and do not contain any negative
covenants.
OTHER DEBT
As of June 30, 2002, we had approximately $22.5 million of other debt
consisting primarily of industrial revenue bonds and government loans.
SERIES A PREFERRED STOCK
In connection with the November 2000 acquisition, we issued 361,001 shares
of Series A Preferred Stock to Masco Corporation having an aggregate initial
liquidation preference of $36.1 million. The holders of Series A Preferred
Stock are entitled to receive, when, as and if declared by our board of
directors, out of legally available funds, cumulative dividends on each share
of Series A Preferred Stock for each quarterly dividend period at a rate of 13%
per annum for periods ending on or prior to December 31, 2005 and 15% per annum
for periods after December 31, 2005, plus, in either case, 2% per annum for any
period for which there are any accrued and unpaid dividends. Accrued and unpaid
dividends on the Series A Preferred Stock accrue additional dividends,
compounded quarterly, at the then applicable quarterly dividend rate.
All then outstanding shares of Series A Preferred Stock are mandatorily
redeemable by us, out of legally available funds, on December 31, 2012 at a
redemption price of 100% of their liquidation preference, equal to $100 for
each share of Series A Preferred Stock. Additionally, at any time after
December 31, 2005, or at any time before such date using the net proceeds from
issuances of shares of our capital stock, we may redeem the Series A Preferred
Stock, in whole or in part, out of legally available funds, at our option by a
resolution of our board of directors, at a redemption price of 101% of their
liquidation preference. Immediately prior to authorizing or making any such
redemption, by resolution of our board of directors, to the extent that funds
are legally available therefor, we are required to declare a dividend on the
Series A Preferred Stock payable on the redemption date in an amount equal to
any accrued and unpaid dividends (including additional dividends) on the Series
A Preferred Stock as of such date and, if we do not have sufficient legally
available funds to declare and
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pay all dividends (including additional dividends) accrued at the time of such
redemption, any remaining accrued and unpaid dividends (including additional
dividends) are to be added to the redemption price.
If a change in control, as defined in our certificate of incorporation,
occurs at any time, each holder of Series A Preferred Stock has the right to
require us to purchase such holder's Series A Preferred Stock, in whole or in
part, out of legally available funds, at a cash purchase price of 101% of their
liquidation preference, plus accrued and unpaid dividends to the purchase date.
Additionally, in the event of an equity offering triggering event, which is
defined in our certificate of incorporation and includes certain excess
proceeds from certain equity offerings and an initial public offering, each
holder of Series A Preferred Stock has the right to require us to purchase such
holder's Series A Preferred Stock, in whole or in part, out of legally
available funds, at a cash purchase price of 101% of their liquidation
preference, plus accrued and unpaid dividends to the purchase date, subject to
certain limitations set forth in our certificate of incorporation.
In the event of any liquidation, dissolution or winding up of our affairs,
whether voluntary or otherwise, after payment or provision for payment of our
debts and other liabilities, the holders of Series A Preferred Stock are
entitled to receive, out of our remaining assets, $100 in cash for each share
of Series A Preferred Stock they hold, plus an amount equal to all dividends
(including additional dividends) accrued and unpaid on each share up to the
date fixed for distribution, before any distribution is made to the holders of
our common stock or any other stock ranking (as to any such distribution)
junior to the Series A Preferred Stock. With regard to rights to receive
dividends, mandatory redemption payments and distributions upon liquidation,
dissolution or winding up of our affairs, the Series A Preferred Stock ranks
prior to all our other capital stock outstanding at the time it was issued.
Except as required by law or otherwise as set forth in our certificate of
incorporation, the holders of Series A Preferred Stock do not have any voting
rights or power to vote on any question or in any proceeding or to be
represented at, or to receive notice of, any stockholders meeting. The holders
of Series A Preferred Stock are entitled to one vote per share regarding
matters on which they are entitled to vote. The Series A Preferred Stock is not
convertible and has no preemptive rights.
In case at any time (i) the equivalent of six or more full quarterly
dividends on the Series A Preferred Stock out of any eight consecutive
quarterly dividend periods are in arrears or (ii) we fail to make a mandatory
redemption of shares of Series A Preferred Stock or (iii) we fail to comply in
any material respect with the provisions in our certificate of incorporation
relating to a change in control or an equity offering triggering event, the
exclusive remedy for such matters, until cured, is that the number of members
of our board of directors is automatically be increased by one and the holders
of a majority of the outstanding shares of Series A Preferred Stock are
entitled, as a class, to the exclusion of the holders of all other classes or
series of our capital stock, to elect one director to fill the directorship so
created.
Our certificate of incorporation provides that, so long as any shares of
the Series A Preferred Stock are outstanding, unless the vote or consent of the
holders of a greater number of shares is then required by law, except as
otherwise provided in our certificate of incorporation, the consent of the
holders of a majority of all of the outstanding shares of Series A Preferred
Stock is required for us to take certain actions which could adversely affect
holder of Series A Preferred Stock, including to allow any of our subsidiaries
to issue any preferred stock (other than to us or another one of our
subsidiaries) or to sell, lease or convey all or substantially all of our
assets or merge or consolidate with or into any other entity if as a result of
such transaction the Series A Preferred Stock would be cashed out for less than
100% (or, if the transaction would constitute a change of control, 101%) of
their liquidation preference, plus any accrued and unpaid dividends.
SERIES B PREFERRED STOCK
In connection with the acquisition of GMTI, we issued 184,153 shares of
Series B Preferred Stock to representatives for the original sellers of GMTI
having an aggregate initial liquidation preference of $18,415,300.
48
The holders of Series B Preferred Stock are entitled to receive, when, as
and if declared by our board of directors, out of legally available funds,
cumulative dividends on each share of Series B Preferred Stock for each
semi-annual dividend period equal to their liquidation preference, in effect as
of the end of the immediately preceding semi-annual dividend period, of such
share multiplied by a rate equal to 5.75% (or the equivalent of 11.5% per
annum). Any accrued dividends not paid at the end of any semi-annual dividend
period is added to the liquidation preference of the Series B Preferred Shares
and dividends thereafter accrue on such amount so as to achieve semi-annual
compounding.
All then outstanding shares of Series B Preferred Stock are mandatorily
redeemable by us, out of legally available funds, on June 15, 2013 at a
redemption price of 100% of their then liquidation preference, equal to $100
for each share of Series B Preferred Stock plus all amounts added at the end of
any semi-annual dividend period as provided in the immediately preceding
paragraph. Additionally, at any time, we may redeem the Series B Preferred
Stock, in whole or in part, out of legally available funds, at our option by a
resolution of our board of directors, at a redemption price of 100% of their
then liquidation preference. Immediately prior to authorizing or making any
such redemption, by resolution of our board of directors, to the extent that
funds are legally available therefor, we are required to declare a dividend on
the Series B Preferred Stock payable on the redemption date in an amount equal
to any accrued and unpaid dividends on the Series A Preferred Stock as of such
date and, if we do not have sufficient legally available funds to declare and
pay all dividends accrued at the time of such redemption, any remaining accrued
and unpaid dividends are to be added to the redemption price.
If a preferred stock change in control, as defined in the certificate of
designations governing the Series B Preferred Stock, occurs at any time, each
holder of Series B Preferred Stock has the right to require us to purchase such
holder's Series B Preferred Stock, in whole or in part, out of legally
available funds, at a cash purchase price of 100% of their then liquidation
preference, plus accrued and unpaid dividends to the purchase date.
Additionally, in the event of a preferred stock equity offering triggering
event, which is defined in the certificate of designations governing the Series
B Preferred Stock in a manner similar to that in the Series A preferred stock,
each holder of Series B Preferred Stock has the right to require us to purchase
such holder's Series B Preferred Stock, in whole or in part, out of legally
available funds, at a cash purchase price of 100% of their liquidation
preference, plus accrued and unpaid dividends to the purchase date, but only to
the extent of any preferred stock exceeds proceeds, as defined in the
certificate of designations governing the Series B Preferred Stock, received by
us from a preferred stock equity offering triggering event.
In the event of any liquidation, dissolution or winding up of our affairs,
whether voluntary or otherwise, after payment or provision for payment of our
debts and other liabilities, the holders of Series B Preferred Stock are
entitled to receive, out of our remaining assets, an amount equal to $100, plus
all amounts added at the end of any semi-annual dividend period for each share
of Series B Preferred Stock they hold, plus all dividends accrued and unpaid on
such share up to the date fixed for distribution, before any distribution is
made to the holders of our common stock or any other stock ranking (as to any
such distribution) junior to the Series B Preferred Stock. With regard to
rights to receive dividends, mandatory redemption payments and distributions
upon liquidation, dissolution or winding up of our affairs, the Series B
Preferred Stock ranks junior to all Series A Preferred Stock outstanding at the
time of issuance of the Series B Preferred Stock and prior to all our other
capital stock outstanding at the time it was issued.
Except as required by law or otherwise as set forth in the certificate of
designations governing the Series B Preferred Stock, the holders of Series B
Preferred Stock do not have any voting rights or power to vote on any question
or in any proceeding or to be represented at, or to receive notice of, any
stockholders meeting. The holders of Series B Preferred Stock are entitled to
one vote per share regarding matters on which they are entitled to vote. The
Series B Preferred Stock is not convertible and has no preemptive rights.
In case at any time (i) we fail to make a mandatory redemption of shares
of Series B Preferred Stock or (ii) we fail to comply in any material respect
with the provisions in the certificate of
49
designations governing the Series B Preferred Stock relating to a preferred
stock change in control or a preferred stock equity offering triggering event,
the remedy for such matters, until cured, is that the number of members of our
board of directors is automatically increased by one and the holders of a
majority of the outstanding shares of Series B Preferred Stock are entitled, as
a class, to the exclusion of the holders of all other classes or series of our
capital stock, to elect one director to fill the directorship so created.
The certificate of designations governing the Series B Preferred Stock
provides that, so long as any shares of the Series B Preferred Stock are
outstanding, unless the vote or consent of the holders of a greater number of
shares is then required by law, except as otherwise provided in our certificate
of incorporation, the consent of the holders of a majority of all of the
outstanding shares of Series B Preferred Stock is required for us to take
certain actions which could adversely affect holders of Series B Preferred
Stock, including to allow for the issuance of senior stock or to sell, lease or
convey all or substantially all of our assets or merge or consolidate with or
into any other entity if as a result of such transaction the Series B Preferred
Stock would be cashed out for less than 100% of their then liquidation
preference, plus any accrued and unpaid dividends.
50
DESCRIPTION OF NOTES
You can find the definitions of certain terms used in this description
under the subheading "Certain Definitions." In this description, the word
"Metaldyne" refers only to Metaldyne Corporation and not to any of its
subsidiaries.
Metaldyne issued the notes under an indenture among itself, the Guarantors
and The Bank of New York, as trustee, in a private transaction that was not
subject to the registration requirements of the Securities Act. See "Notice to
Investors." The terms of the notes include those stated in the indenture and
those made part of the indenture by reference to the Trust Indenture Act of
1939, as amended.
The following description is a summary of the material provisions of the
indenture and the registration rights agreement. It does not restate those
agreements in their entirety. We urge you to read the indenture and the
registration rights agreement because they, and not this description, define
your rights as holders of the notes. Copies of the indenture and the
registration rights agreement will be available as set forth below under
"--Additional Information." Certain defined terms used in this description but
not defined below under "--Certain Definitions" have the meanings assigned to
them in the indenture.
The registered Holder of a note will be treated as the owner of it for all
purposes. Only registered Holders will have rights under the indenture.
BRIEF DESCRIPTION OF THE NOTES AND THE GUARANTEES
The Notes
The notes:
o are general unsecured obligations of Metaldyne;
o are subordinated in right of payment to all existing and future Senior
Debt of Metaldyne, including under the Credit Agreement;
o are pari passu in right of payment with all existing and future
unsecured senior subordinated Indebtedness of Metaldyne; and
o are unconditionally guaranteed by the Guarantors.
The Guarantees
The notes are guaranteed by all of Metaldyne's Domestic Subsidiaries that
guarantee Metaldyne's Obligations under or are direct borrowers under the
Credit Agreement.
Each guarantee of the notes:
o is a general unsecured obligation of the Guarantor;
o is subordinated in right of payment to all existing and future Senior
Debt of that Guarantor;
o is pari passu in right of payment with all existing and future senior
subordinated Indebtedness of that Guarantor; and
o is senior in right of payment with all existing and future Indebtedness
of that Guarantor that is expressly subordinated in right of payment to
the notes.
Metaldyne and the Guarantors have total Senior Debt of approximately $418
million. As indicated above and as discussed in detail below under the caption
"--Subordination," payments on the notes and under these guarantees will be
subordinated to the payment of Senior Debt. The indenture will permit us and
the Guarantors to incur additional Senior Debt.
Not all of our subsidiaries guarantee the notes. In the event of a
bankruptcy, liquidation or reorganization of any of these Non-Guarantor
Subsidiaries, the Non-Guarantor Subsidiaries will pay the holders of their debt
and their trade creditors before they will be able to distribute any of their
51
assets to us. Disregarding our receivables subsidiary, the Non-Guarantor
Subsidiaries generated approximately 19% of our consolidated net sales for the
year ended December 31, 2001. See "Risk Factors--Your right to receive payment
on the notes is junior to the right of the holders of all of our existing
senior indebtedness and possibly to all of our future borrowings."
As of the date of the indenture, all of our Domestic Subsidiaries (other
than our receivables subsidiary) are "Restricted Subsidiaries." However, under
the circumstances described below under the subheading "--Certain
Covenants--Designation of Restricted and Unrestricted Subsidiaries," we will be
permitted to designate certain of our subsidiaries as "Unrestricted
Subsidiaries." Our Unrestricted Subsidiaries will not be subject to many of the
restrictive covenants in the indenture. Our Unrestricted Subsidiaries will not
guarantee the notes.
PRINCIPAL, MATURITY AND INTEREST
Metaldyne issued $250,000,000 in aggregate principal amount of notes in
the offering. The indenture provides that Metaldyne may issue additional notes
thereunder from time to time after this offering. Any offering of additional
notes is subject to the covenant described below under the caption "--Certain
Covenants--Incurrence of Indebtedness and Issuance of Preferred Stock." The
notes and any additional notes subsequently issued under the indenture may be
treated as a single class for all purposes under the indenture, including,
without limitation, waivers, amendments, redemptions and offers to purchase.
Metaldyne will issue notes in denominations of $1,000 and integral multiples of
$1,000. The notes will mature on June 15, 2012.
Interest on the notes will accrue at the rate of 11% per annum and will be
payable semi-annually in arrears on June 15 and December 15, commencing on
December 15, 2002. Metaldyne will make each interest payment to the Holders of
record on the immediately preceding June 1 and December 1.
Interest on the notes will accrue from the date of original issuance or,
if interest has already been paid, from the date it was most recently paid.
Interest will be computed on the basis of a 360-day year comprised of twelve
30-day months.
METHODS OF RECEIVING PAYMENTS ON THE NOTES
All payments on notes will be made at the office or agency of the paying
agent and registrar within the City and State of New York unless Metaldyne
elects to make interest payments by check mailed to the Holders at their
address set forth in the register of Holders. If a Holder has given wire
transfer instructions to Metaldyne, Metaldyne will pay all principal, interest
and premium and Liquidated Damages, if any, on that Holder's notes in
accordance with those instructions.
PAYING AGENT AND REGISTRAR FOR THE NOTES
The trustee will initially act as paying agent and registrar. Metaldyne
may change the paying agent or registrar without prior notice to the Holders of
the notes, and Metaldyne or any of its Subsidiaries may act as paying agent or
registrar.
TRANSFER AND EXCHANGE
A Holder may transfer or exchange notes in accordance with the indenture.
The registrar and the trustee may require a Holder, among other things, to
furnish appropriate endorsements and transfer documents in connection with a
transfer of notes. Holders will be required to pay all taxes due on transfer.
Metaldyne is not required to transfer or exchange any note selected for
redemption. Also, Metaldyne is not required to transfer or exchange any note
for a period of 15 days before a selection of notes to be redeemed.
SUBSIDIARY GUARANTEES
The notes are guaranteed by each of Metaldyne's current and future
Domestic Subsidiaries that are guarantors or borrowers in respect of the Credit
Agreement. These Subsidiary Guarantees are
52
joint and several obligations of the Guarantors. Each Subsidiary Guarantee is
subordinated to the prior payment in full of all Senior Debt of that Guarantor.
The obligations of each Guarantor under its Subsidiary Guarantee are limited as
necessary to prevent that Subsidiary Guarantee from constituting a fraudulent
conveyance under applicable law. See "Risk Factors--Federal and state statutes
allow courts, under specific circumstances, to void guarantees and require
noteholders to return payments received from guarantors."
A Guarantor may not sell or otherwise dispose of all or substantially all
of its assets to, or consolidate with or merge with or into (whether or not
such Guarantor is the surviving Person), another Person, other than Metaldyne
or another Guarantor, unless:
(1) immediately after giving effect to that transaction, no Default or
Event of Default exists; and
(2) except when a release of a Subsidiary Guarantee is obtained under the
provisions below, if, immediately after giving effect to such
transaction, the Person acquiring the property in any such sale or
disposition or the Person formed by or surviving any such
consolidation or merger is a Domestic Subsidiary, such Person assumes
all the obligations of that Guarantor under the indenture, its
Subsidiary Guarantee and the registration rights agreement pursuant to
a supplemental indenture satisfactory to the trustee.
Notwithstanding the foregoing, the Subsidiary Guarantee of a Guarantor
will be released:
(1) in connection with any sale or other disposition of all or
substantially all of the assets of that Guarantor (including by way of
merger or consolidation) to a Person that is not (either before or
after giving effect to such transaction) a Restricted Subsidiary of
Metaldyne, if the sale or other disposition is not in violation with
the applicable provisions of the indenture;
(2) in connection with any sale or other disposition of all or a majority
of the Capital Stock of a Guarantor to a Person that is not Metaldyne
or a Restricted Subsidiary of Metaldyne, if the sale is not in
violation with the applicable provisions of the indenture; or
(3) if Metaldyne designates any Restricted Subsidiary that is a Guarantor
as an Unrestricted Subsidiary in accordance with the applicable
provisions of the indenture.
See "--Repurchase at the Option of Holders--Asset Sales."
SUBORDINATION
The payment of principal, interest and premium and Liquidated Damages, if
any, on the notes will be subordinated to the prior payment in full of all
Senior Debt of Metaldyne, including Senior Debt incurred after the date of the
indenture.
The holders of Senior Debt will be entitled to receive payment in full of
all Obligations due in respect of Senior Debt (including interest after the
commencement of any bankruptcy proceeding at the rate specified in the
applicable Senior Debt) before the Holders of notes will be entitled to receive
any payment with respect to the notes (except that Holders of notes may receive
and retain Permitted Junior Securities and payments made from the trust
described under "--Legal Defeasance and Covenant Defeasance"), in the event of
any distribution to creditors of Metaldyne:
(1) in a liquidation or dissolution of Metaldyne;
(2) in a bankruptcy, reorganization, insolvency, receivership or similar
proceeding relating to Metaldyne or its property;
(3) in an assignment for the benefit of creditors; or
(4) in any marshaling of Metaldyne's assets and liabilities.
Metaldyne also may not make any payment in respect of the notes (except in
Permitted Junior Securities or from the trust described under "--Legal
Defeasance and Covenant Defeasance") if:
(1) a payment default on Designated Senior Debt occurs and is continuing;
or
53
(2) any other default occurs and is continuing on any series of Designated
Senior Debt that permits holders of that series of Designated Senior
Debt to accelerate its maturity and the trustee receives a notice of
such default (a "Payment Blockage Notice") from Metaldyne or the
holders of any Designated Senior Debt.
Payments on the notes may and will be resumed:
(1) in the case of a payment default, upon the date on which such default
is cured or waived; and
(2) in the case of a nonpayment default, upon the earlier of the date on
which such nonpayment default is cured or waived or 179 days after the
date on which the applicable Payment Blockage Notice is received,
unless the maturity of any Designated Senior Debt has been
accelerated.
No new Payment Blockage Notice may be delivered unless and until:
(1) 360 days have elapsed since the delivery of the immediately prior
Payment Blockage Notice; and
(2) all scheduled payments of principal, interest and premium and
Liquidated Damages, if any, on the notes that have come due have been
paid in full in cash.
No nonpayment default that existed or was continuing on the date of
delivery of any Payment Blockage Notice to the trustee will be, or be made, the
basis for a subsequent Payment Blockage Notice unless such default has been
cured or waived for a period of not less than 90 days.
If the trustee or any Holder of the notes receives a payment in respect of
the notes (except in Permitted Junior Securities or from the trust described
under "--Legal Defeasance and Covenant Defeasance") when:
(1) the payment is prohibited by these subordination provisions; and
(2) the trustee or the Holder has actual knowledge that the payment is
prohibited;
the trustee or the Holder, as the case may be, will hold the payment in trust
for the benefit of the holders of Senior Debt. Upon the proper written request
of the holders of Senior Debt, the trustee or the Holder, as the case may be,
will deliver the amounts in trust to the holders of Senior Debt or their proper
representative.
Metaldyne must promptly notify holders of Senior Debt if payment of the
notes is accelerated because of an Event of Default.
As a result of the subordination provisions described above, in the event
of a bankruptcy, liquidation or reorganization of Metaldyne, Holders of notes
may recover less ratably than creditors of Metaldyne who are holders of Senior
Debt. See "Risk Factors--Your right to receive payment on the notes is junior
to the right of the holders of all of our existing senior indebtedness and
possibly to all of our future borrowings."
OPTIONAL REDEMPTION
The notes will not be subject to any redemption at the option of Metaldyne
except as set forth in the following paragraphs.
The notes may be redeemed, in whole part or in part, at any time prior to
June 15, 2007 at the option of Metaldyne upon not less than 30 nor more than 60
days' prior notice mailed by first-class mail to each Holder's registered
address, at a redemption price equal to, as determined by the Reference
Treasury Dealer, the sum of the present values of the Remaining Scheduled
Payments discounted to the redemption date on a semi-annual basis (assuming a
360-day year consisting of twelve 30-day months) at the Adjusted Treasury Rate,
plus accrued and unpaid interest and Liquidated Damages, if any, to the
applicable date of redemption.
54
At any time prior to June 15, 2005, Metaldyne may on any one or more
occasions redeem up to 35% of the aggregate principal amount of notes issued
under the indenture at a redemption price of 111% of the principal amount, plus
accrued and unpaid interest and Liquidated Damages, if any, to the redemption
date, with the net cash proceeds of one or more Equity Offerings; provided
that:
(1) at least 65% of the aggregate principal amount of notes issued under
the indenture remains outstanding immediately after the occurrence of
such redemption (excluding notes held by Metaldyne and its
Subsidiaries); and
(2) the redemption occurs within 120 days of the date of the closing of
such Equity Offering.
After June 15, 2007, Metaldyne may redeem all or a part of the notes upon
not less than 30 nor more than 60 days' notice, at the redemption prices
(expressed as percentages of principal amount) set forth below plus accrued and
unpaid interest and Liquidated Damages, if any, on the notes redeemed, to the
applicable redemption date, if redeemed during the twelve-month period
beginning on June 15 of the years indicated below:
YEAR PERCENTAGE
---- -------------
2007 ......................... 105.500%
2008 ......................... 103.667%
2009 ......................... 101.833%
2010 and thereafter .......... 100.000%
MANDATORY REDEMPTION
Metaldyne is not required to make mandatory redemption or sinking fund
payments with respect to the notes.
REPURCHASE AT THE OPTION OF HOLDERS
Change of Control
If a Change of Control occurs, each Holder of notes will have the right to
require Metaldyne to repurchase all or any part (equal to $1,000 or an integral
multiple of $1,000) of that Holder's notes pursuant to a Change of Control
Offer on the terms set forth in the indenture. In the Change of Control Offer,
Metaldyne will offer a Change of Control Payment in cash equal to 101% of the
aggregate principal amount of notes repurchased plus accrued and unpaid
interest and Liquidated Damages, if any, on the notes repurchased, to the date
of purchase. Within 15 days following any Change of Control, Metaldyne will
mail a notice to each Holder describing the transaction or transactions that
constitute the Change of Control and offering to repurchase notes on the Change
of Control Payment Date specified in the notice, which date will be no earlier
than 30 days and no later than 60 days from the date such notice is mailed,
pursuant to the procedures required by the indenture and described in such
notice. Metaldyne will comply with the requirements of Rule 14e-1 under the
Exchange Act and any other securities laws and regulations thereunder to the
extent those laws and regulations are applicable in connection with the
repurchase of the notes as a result of a Change of Control. To the extent that
the provisions of any securities laws or regulations conflict with the Change
of Control provisions of the indenture, Metaldyne will comply with the
applicable securities laws and regulations and will not be deemed to have
breached its obligations under the Change of Control provisions of the
indenture by virtue of such conflict.
On the Change of Control Payment Date, Metaldyne will, to the extent
lawful:
(1) accept for payment all notes or portions of notes properly tendered
pursuant to the Change of Control Offer;
(2) deposit with the paying agent an amount equal to the Change of Control
Payment in respect of all notes or portions of notes properly
tendered; and
55
(3) deliver or cause to be delivered to the trustee the notes properly
accepted together with an officers' certificate stating the aggregate
principal amount of notes or portions of notes being purchased by
Metaldyne.
The paying agent will promptly mail to each Holder of notes properly
tendered the Change of Control Payment for such notes, and the trustee will
promptly authenticate and mail (or cause to be transferred by book entry) to
each Holder a new note equal in principal amount to any unpurchased portion of
the notes surrendered, if any; provided that each new note will be in a
principal amount of $1,000 or an integral multiple of $1,000.
Prior to complying with any of the provisions of this "Change of Control"
covenant, but in any event within 90 days following a Change of Control,
Metaldyne will either repay all outstanding Senior Debt or obtain the requisite
consents, if any, under all agreements governing outstanding Senior Debt to
permit the repurchase of notes required by this covenant. Metaldyne will
publicly announce the results of the Change of Control Offer on or as soon as
practicable after the Change of Control Payment Date.
The provisions described above that require Metaldyne to make a Change of
Control Offer following a Change of Control will be applicable whether or not
any other provisions of the indenture are applicable. Except as described above
with respect to a Change of Control, the indenture does not contain provisions
that permit the Holders of the notes to require that Metaldyne repurchase or
redeem the notes in the event of a takeover, recapitalization or similar
transaction.
Metaldyne will not be required to make a Change of Control Offer upon a
Change of Control if a third party makes the Change of Control Offer in the
manner, at the times and otherwise in compliance with the requirements set
forth in the indenture applicable to a Change of Control Offer made by
Metaldyne and purchases all notes properly tendered and not withdrawn under the
Change of Control Offer. Alternatively, Metaldyne may assign all or part of its
obligations to purchase all notes validly tendered and not properly withdrawn
under a Change of Control Offer to a third party. In the event of such an
assignment, Metaldyne shall be released from its obligations to purchase the
notes as to which the assignment relates subject to the third party purchasing
such notes. A Change of Control Offer may be made in advance of a Change of
Control, and conditioned upon such Change of Control if a definitive agreement
is in place for the Change of Control at the time of making of the Change of
Control Offer. Notes repurchased by Metaldyne pursuant to a Change of Control
Offer will have the status of notes issued but not outstanding or will be
retired and canceled, at the option of Metaldyne. Notes purchased by a third
party upon assignment will have the status of note issued and outstanding.
The Credit Agreement provides that certain change of control events with
respect to Metaldyne constitute an event of default thereunder. In the event
that at the time of such Change of Control the terms of the Credit Agreement
restrict or prohibit the repurchase of notes pursuant to this covenant, then
prior to the mailing of the Change of Control Offer but in any event within 30
days following any Change of Control, Metaldyne would need to (i) repay in full
all Indebtedness under the Credit Agreement or (ii) obtain the requisite
consent under the Credit Facilities to permit the repurchase of the notes as
provided for in this covenant.
Future Indebtedness of Metaldyne and the Restricted Subsidiaries may
contain prohibitions of certain events that would constitute a Change of
Control or require such Indebtedness to be repurchased upon a Change of
Control. A Change of Control would also constitute a termination event in
respect of our receivables facility. Moreover, the exercise by the Holders of
notes of their right to require Metaldyne to repurchase the notes could cause a
default under such Indebtedness, even if the Change of Control itself does not,
due to the financial effect of such repurchase. Finally, Metaldyne's ability to
pay cash to the Holders of notes upon a repurchase may be limited by
Metaldyne's then existing financial resources. There can be no assurance that
sufficient funds will be available when necessary to make any required
repurchases. See "Risk Factors--We may be prevented from financing, or may be
unable to raise funds necessary to finance, the change of control offer
required by the indenture."
56
The definition of Change of Control includes a phrase relating to the
direct or indirect sale, lease, transfer, conveyance or other disposition of
"all or substantially all" of the properties or assets of Metaldyne and its
Subsidiaries taken as a whole. Although there is a limited body of case law
interpreting the phrase "substantially all," there is no precise established
definition of the phrase under applicable law. Accordingly, the ability of a
Holder of notes to require Metaldyne to repurchase its notes as a result of a
sale, lease, transfer, conveyance or other disposition of less than all of the
assets of Metaldyne and its Subsidiaries taken as a whole to another Person or
group may be uncertain.
Asset Sales
Metaldyne will not, and will not permit any of the Restricted Subsidiaries
to, consummate an Asset Sale unless:
(1) Metaldyne (or the Restricted Subsidiary, as the case may be) receives
consideration at the time of the Asset Sale at least equal to the fair
market value of the assets or Equity Interests issued or sold or
otherwise disposed of;
(2) the fair market value is determined by Metaldyne's Board of Directors
and evidenced by a resolution of the Board of Directors set forth in
an officers' certificate delivered to the trustee; and
(3) either (a) at least 75% of the consideration received in the Asset
Sale by Metaldyne or such Restricted Subsidiary is in the form of cash
or (b) the aggregate non-cash consideration for all Asset Sales not
meeting the criteria set forth in the preceding clause (a) does not
exceed a fair market value in excess of $20.0 million. For purposes of
this provision, each of the following will be deemed to be cash:
(a) any liabilities, as shown on Metaldyne's or such Restricted
Subsidiary's most recent consolidated balance sheet, of Metaldyne
or any Restricted Subsidiary (other than contingent liabilities
and liabilities that are by their terms subordinated to the notes
or any Subsidiary Guarantee) that are assumed by the transferee
of any such assets pursuant to a customary novation agreement
that releases Metaldyne or such Restricted Subsidiary from
further liability; and
(b) any securities, notes or other obligations received by Metaldyne
or any such Restricted Subsidiary from such transferee to the
extent within 60 days, subject to ordinary settlement periods,
they are converted by Metaldyne or such Restricted Subsidiary
into cash.
Within 365 days after the receipt of any Net Proceeds from an Asset Sale,
Metaldyne may apply those Net Proceeds at its option:
(1) to permanently repay Indebtedness (other than Indebtedness that is by
its terms subordinated to, or pari passu with, the notes or any
Subsidiary Guarantee) of Metaldyne or any Restricted Subsidiary,
including any Obligations under a Credit Facility and, if the
Indebtedness repaid is revolving credit Indebtedness, to
correspondingly reduce commitments with respect thereto or to reduce
receivables advances and reduce commitments in respect of a Receivables
Facility;
(2) to acquire assets of, or a majority of the Voting Stock of, any person
owning assets used or usable in a business of Metaldyne and the
Restricted Subsidiaries; or
(3) to make a capital expenditure.
Pending the final application of any Net Proceeds, Metaldyne may
temporarily reduce revolving credit borrowings or otherwise invest or use the
Net Proceeds in any manner that is not prohibited by the indenture.
Any Net Proceeds from Asset Sales that are not applied or invested as
provided in the preceding paragraph (other than Net Proceeds from the sale of
the common stock of TriMas after the date of
57
the indenture) will constitute "Excess Proceeds." When the aggregate amount of
Excess Proceeds exceeds $25.0 million, Metaldyne will make an Asset Sale Offer
to all Holders of notes and all holders of other Indebtedness that is pari
passu with the notes containing provisions similar to those set forth in the
indenture with respect to offers to purchase or redeem with the proceeds of
sales of assets to purchase the maximum principal amount of notes and such
other pari passu Indebtedness that may be purchased out of the Excess Proceeds.
The offer price in any Asset Sale Offer will be equal to 100% of principal
amount plus accrued and unpaid interest and Liquidated Damages, if any, to the
date of purchase, and will be payable in cash. If any Excess Proceeds remain
after consummation of an Asset Sale Offer, Metaldyne may use those Excess
Proceeds for any purpose not otherwise prohibited by the indenture. If the
aggregate principal amount of notes and other pari passu Indebtedness tendered
into such Asset Sale Offer exceeds the amount of Excess Proceeds, the trustee
will select the notes and such other pari passu Indebtedness to be purchased on
a pro rata basis. Upon completion of each Asset Sale Offer, the amount of
Excess Proceeds will be reset at zero.
Metaldyne will comply with the requirements of Rule 14e-1 under the
Exchange Act and any other securities laws and regulations thereunder to the
extent those laws and regulations are applicable in connection with each
repurchase of notes pursuant to an Asset Sale Offer. To the extent that the
provisions of any securities laws or regulations conflict with the Asset Sale
provisions of the indenture, Metaldyne will comply with the applicable
securities laws and regulations and will not be deemed to have breached its
obligations under the Asset Sale provisions of the indenture by virtue of such
conflict.
The agreements governing Metaldyne's outstanding Senior Debt currently
prohibit Metaldyne from purchasing any notes, and also provides that certain
change of control or asset sale events with respect to Metaldyne would
constitute a default under these agreements. Any future credit agreements or
other agreements relating to Senior Debt to which Metaldyne becomes a party may
contain similar restrictions and provisions. In the event a Change of Control
or Asset Sale occurs at a time when Metaldyne is prohibited from purchasing
notes, Metaldyne could seek the consent of its senior lenders to the purchase
of notes or could attempt to refinance the borrowings that contain such
prohibition. If Metaldyne does not obtain such a consent or repay such
borrowings, Metaldyne will remain prohibited from purchasing notes. In such
case, Metaldyne's failure to purchase tendered notes would constitute an Event
of Default under the indenture which would, in turn, constitute a default under
such Senior Debt. In such circumstances, the subordination provisions in the
indenture would likely restrict payments to the Holders of notes.
Selection and Notice
If less than all of the notes are to be redeemed at any time, the trustee
will select notes for redemption as follows:
(1) if the notes are listed on any national securities exchange, in
compliance with the requirements of the principal national securities
exchange on which the notes are listed; or
(2) if the notes are not listed on any national securities exchange, on a
pro rata basis, by lot or by such method as the trustee deems fair and
appropriate.
No notes of $1,000 or less can be redeemed in part. Notices of redemption
will be mailed by first class mail at least 30 but not more than 60 days before
the redemption date to each Holder of notes to be redeemed at its registered
address, except that redemption notices may be mailed more than 60 days prior
to a redemption date if the notice is issued in connection with a defeasance of
the notes or a satisfaction and discharge of the indenture. Notices of
redemption may not be conditional.
If any note is to be redeemed in part only, the notice of redemption that
relates to that note will state the portion of the principal amount of that
note that is to be redeemed. A new note in principal amount equal to the
unredeemed portion of the original note will be issued in the name of the
Holder of notes upon cancellation of the original note. Notes called for
redemption become due on the date fixed for redemption. On and after the
redemption date, interest ceases to accrue on notes or portions of them called
for redemption.
58
CERTAIN COVENANTS
Restricted Payments
Metaldyne will not, and will not permit any of the Restricted Subsidiaries
to, directly or indirectly:
(1) declare or pay any dividend or make any other payment or distribution
on account of Metaldyne's Equity Interests (including, without
limitation, any payment in connection with any merger or consolidation
involving Metaldyne or any of its Restricted Subsidiaries) or to the
direct or indirect holders of Metaldyne's Equity Interests in their
capacity as such (other than dividends or distributions payable in
Equity Interests (other than Disqualified Stock) of Metaldyne or to
Metaldyne or a Restricted Subsidiary of Metaldyne);
(2) purchase, redeem or otherwise acquire or retire for value (including,
without limitation, in connection with any merger or consolidation
involving Metaldyne) any Equity Interests of Metaldyne;
(3) purchase, redeem, defease or otherwise acquire or retire for value any
Indebtedness that is subordinated to the notes or the Subsidiary
Guarantees, except a purchase, redemption, defeasance or other
acquisition or retirement for value in anticipation of satisfying a
sinking fund obligation, principal installment or final maturity, in
each case due within one year of the date of such acquisition or
retirement; or
(4) make any Restricted Investment
(all such payments and other actions set forth in these clauses (1) through (4)
above being collectively referred to as "Restricted Payments"), unless, at the
time of and after giving effect to such Restricted Payment:
(1) no Default or Event of Default has occurred and is continuing or would
occur as a consequence of such Restricted Payment;
(2) Metaldyne would, after giving pro forma effect thereto as if such
Restricted Payment had been made at the beginning of the applicable
four-quarter period, have been permitted to incur at least $1.00 of
additional Indebtedness pursuant to the Fixed Charge Coverage Ratio
test set forth in the first paragraph of the covenant described below
under the caption "--Incurrence of Indebtedness and Issuance of
Preferred Stock"; and
(3) such Restricted Payment, together with the aggregate amount of all
other Restricted Payments made by Metaldyne and the Restricted
Subsidiaries after the date of the indenture (excluding Restricted
Payments permitted by clauses (2), (3), (4), (8), (9) and, to the
extent reducing Consolidated Net Income, (10) of the next succeeding
paragraph), is less than the sum, without duplication, of:
(a) 50% of the Consolidated Net Income of Metaldyne for the period
(taken as one accounting period) from June 30, 2002 to the end of
Metaldyne's most recently ended fiscal quarter for which internal
financial statements are available at the time of such Restricted
Payment (or, if such Consolidated Net Income for such period is a
deficit, less 100% of such deficit), plus
(b) 100% of the aggregate net proceeds received by Metaldyne since
the date of the indenture, including the fair market value of
property other than cash (determined in good faith by the Board
of Directors), as a contribution to its common equity capital or
from the issue or sale of Equity Interests of Metaldyne (other
than Disqualified Stock) or from the issue or sale of convertible
or exchangeable Disqualified Stock or convertible or exchangeable
debt securities of Metaldyne that have been converted into or
exchanged for such Equity Interests (other than Equity Interests
(or Disqualified Stock or debt securities) sold to a Subsidiary
of Metaldyne), provided, that (1) any such net proceeds received,
directly or indirectly, by Metaldyne from an employee stock
59
ownership plan financed by loans from Metaldyne or a Subsidiary
of Metaldyne shall be included only to the extent such loans have
been repaid with cash on or prior to the date of determination
and (2) any net proceeds received in a form other than cash
(other than on conversion or in exchange for a security issued
for cash to the extent of the cash received) from a person that
is an Affiliate of Metaldyne prior to such receipt shall be
excluded from this clause (3)(b); plus
(c) the amount by which Indebtedness of Metaldyne or any Restricted
Subsidiary is reduced on Metaldyne's balance sheet upon the
conversion or exchange (other than by a Restricted Subsidiary)
subsequent to the date of the indenture of any Indebtedness of
Metaldyne or any Restricted Subsidiary into Capital Stock (other
than Redeemable Stock) of Metaldyne (less the amount of any cash
or other property (other than such Capital Stock) distributed by
Metaldyne or any Restricted Subsidiary upon such conversion or
exchange); plus
(d) to the extent that any Restricted Investment that was made after
the date of the indenture is sold for cash or otherwise
liquidated or repaid for cash, the lesser of (i) the cash return
of capital with respect to such Restricted Investment (less the
cost of disposition, if any) and (ii) the initial amount of such
Restricted Investment; plus
(e) to the extent that any Unrestricted Subsidiary of Metaldyne is
redesignated as a Restricted Subsidiary after the date of the
indenture, the lesser of (i) the fair market value of Metaldyne's
Investment in such Subsidiary as of the date of such
redesignation or (ii) such fair market value as of the date on
which such Subsidiary was originally designated as an
Unrestricted Subsidiary.
So long as no Default has occurred and is continuing or would be caused
thereby (except as to clauses (1) through (4), (6), (9), (10), (11) and (12)
below), the preceding provisions will not prohibit:
(1) the payment of any dividend within 60 days after the date of
declaration of the dividend, if at the date of declaration the
dividend payment would have complied with the provisions of the
indenture;
(2) the redemption, repurchase, retirement, defeasance or other
acquisition of any subordinated Indebtedness of Metaldyne or any
Guarantor or of any Equity Interests of Metaldyne in exchange for, or
out of the net cash proceeds of the substantially concurrent sale
(other than to a Restricted Subsidiary) of, Equity Interests (other
than Disqualified Stock) of Metaldyne or a substantially concurrent
capital contribution to Metaldyne; provided that the amount of any
such net cash proceeds that are utilized for any such redemption,
repurchase, retirement, defeasance or other acquisition will be
excluded from clause (3)(b) of the preceding paragraph;
(3) the defeasance, redemption, repurchase or other acquisition of
subordinated Indebtedness of Metaldyne or any Guarantor in exchange
for, or with the net cash proceeds from, an incurrence of Permitted
Refinancing Indebtedness or other Indebtedness Incurred under the
first paragraph of the covenant "Incurrence of Indebtedness and
Issuance of Preferred Stock";
(4) the defeasance, redemption, repurchase or other acquisition of
subordinated Indebtedness from Net Proceeds to the extent not
prohibited under "--Asset Sales," provided, that such purchase or
redemption shall be excluded from the calculation of the amount
available for Restricted Payments pursuant to the preceding paragraph;
(5) the defeasance, redemption, repurchase or other acquisition of
subordinated Indebtedness or Disqualified Stock of Metaldyne or any
Guarantor following a Change of Control after Metaldyne shall have
complied with the provisions under "--Change of Control," including
payment of the applicable Change of Control Payment;
60
(6) the repurchase, redemption or other acquisition or retirement for
value of any Equity Interests of Metaldyne held by any member of
Metaldyne's (or any of its Subsidiaries') management pursuant to any
management equity subscription agreement, stock option agreement or
other equity incentive agreement or plan or held by any former owners
of a business acquired by Metaldyne or former employees of Metaldyne
or any of its Subsidiaries and, in either case, acquired in connection
with a sale of a business to Metaldyne; provided that the aggregate
price paid for all such repurchased, redeemed, acquired or retired
Equity Interests may not exceed $7.5 million in any twelve-month
period plus any unutilized portion of such amount in any prior fiscal
year;
(7) any Investment made by the exchange for, or out of the proceeds of, a
capital contribution in respect of or the substantially concurrent
sale of, Capital Stock (other than Disqualified Stock) of Metaldyne to
the extent the net cash proceeds thereof are received by Metaldyne,
provided, that the amount of such capital contribution or proceeds
used to make such Investment shall be excluded from the calculation of
the amount available for Restricted Payments pursuant to the preceding
paragraph;
(8) other Restricted Payments in an aggregate amount not to exceed $30.0
million;
(9) payments required or contemplated by the terms of the Recapitalization
Agreement and related documentation as in effect on the date of
issuance of the notes, including in respect of restricted stock awards
of Metaldyne;
(10) the repurchase, redemption or other acquisition or retirement of
Existing Preferred Stock; provided, that the aggregate amount of such
payments under this clause (10) shall not exceed $15.0 million since
the date of the indenture;
(11) Restricted Investments in an aggregate amount not to exceed the net
cash proceeds received by the Company and its Restricted Subsidiaries
(calculated on an after-tax basis) from the sale of common stock of
TriMas owned by the Company and its Restricted Subsidiaries after the
date of the indenture (after giving effect to the consummation of the
transactions contemplated by the Stock Purchase Agreement); and
(12) the payment of the Saturn Proceeds under the Recapitalization
Agreement.
The amount of all Restricted Payments (other than cash) will be the fair
market value on the date of the Restricted Payment of the asset(s) or
securities proposed to be transferred or issued by Metaldyne or such Restricted
Subsidiary, as the case may be, pursuant to the Restricted Payment. The fair
market value of any assets or securities that are required to be valued by this
covenant will be determined by the Board of Directors acting in good faith
whose resolution with respect thereto will be conclusive. Any payments
hereunder shall be calculated net of amounts for which Metaldyne or any
Restricted Subsidiary is reimbursed under the Stock Purchase Agreement.
Incurrence of Indebtedness and Issuance of Preferred Stock
Metaldyne will not, and will not permit any of the Restricted Subsidiaries
to, directly or indirectly, create, incur, issue, assume, guarantee or
otherwise become directly or indirectly liable, contingently or otherwise, with
respect to (collectively, "incur") any Indebtedness (including Acquired Debt),
and Metaldyne will not issue any Disqualified Stock and will not permit any
Restricted Subsidiary that is not a Guarantor to issue any shares of preferred
stock; provided, however, that Metaldyne may incur Indebtedness (including
Acquired Debt) or issue Disqualified Stock, and the Restricted Subsidiaries may
incur Indebtedness or Restricted Subsidiaries that are not Guarantors may issue
preferred stock, if the Fixed Charge Coverage Ratio for Metaldyne's most
recently ended four full fiscal quarters for which financial statements are
available immediately preceding the date on which such additional Indebtedness
is incurred or such Disqualified Stock or preferred stock is issued would have
been at least 2.25 to 1.0, determined on a pro forma basis (including a pro
forma application of the net proceeds therefrom), as if the additional
Indebtedness had been incurred or the preferred stock or Disqualified Stock had
been issued, as the case may be, at the beginning of such four-quarter period.
61
The first paragraph of this covenant will not prohibit the incurrence of
any of the following items of Indebtedness (collectively, "Permitted Debt"):
(1) (a) the incurrence by Metaldyne and any Restricted Subsidiary of
Indebtedness and letters of credit under the revolving facility
component of the Credit Facilities in an aggregate principal
amount at any one time outstanding under this clause (1)(a) (with
letters of credit being deemed to have a principal amount equal
to the maximum potential liability of Metaldyne and its
Subsidiaries thereunder) not to exceed $250.0 million; and
(b) the incurrence by Metaldyne and any Restricted Subsidiary of
Indebtedness under the term loan components of the Credit
Facilities in an aggregate principal amount at any one time
outstanding under this clause (1)(b) not to exceed the amount
outstanding on the date of issuance of the notes (it being
understood that the $400.0 million replacement term loans
anticipated on the issuance date are permitted), after giving
effect to the actual use of proceeds from the issuance of the
notes, less the aggregate amount of all Net Proceeds of Asset
Sales applied by Metaldyne or any of the Restricted Subsidiaries
to repay the principal of any term Indebtedness under a Credit
Facility since the date of the indenture; and
(c) the incurrence of Indebtedness of Metaldyne or any Restricted
Subsidiary under one or more receivables financing facilities
pursuant to which Metaldyne or any Restricted Subsidiary pledges
or otherwise borrows against its Receivables in an aggregate
principal amount which, when taken together with all other
Indebtedness Incurred pursuant to this clause (c) and then
outstanding, does not exceed 85% of the consolidated book value
of the Receivables of Metaldyne and the Restricted Subsidiaries
(to the extent such Receivables or any other Receivables of
Metaldyne or such Restricted Subsidiary, as the case may be, are
not then being financed pursuant to a Qualified Receivables
Transaction or as a basis for Indebtedness Incurred pursuant to
clause (10) of this paragraph);
(2) the incurrence by Metaldyne and the Restricted Subsidiaries of the
Existing Indebtedness;
(3) the incurrence by Metaldyne and the Guarantors of Indebtedness
represented by the notes and the related Subsidiary Guarantees to be
issued on the date of the indenture and the exchange notes and the
related Subsidiary Guarantees to be issued pursuant to the
registration rights agreement;
(4) the incurrence by Metaldyne or any of its Subsidiaries of Indebtedness
represented by Capital Lease Obligations, mortgage financings or
purchase money obligations, in each case, incurred for the purpose of
financing all or any part of the purchase price or cost of
construction or improvement of property, plant or equipment used in
the business of Metaldyne or such Restricted Subsidiary ("Capital
Spending") and incurred no later than 270 days after the date of such
acquisition or the date of completion of such construction or
improvement, provided, that the principal amount of any Indebtedness
incurred pursuant to this clause (4) (other than Permitted Refinancing
Indebtedness) at any time during a single fiscal year shall not exceed
30% of the total Capital Spending of Metaldyne and the Restricted
Subsidiaries made during the period of the most recently completed
four consecutive fiscal quarters prior to the date of such incurrence;
(5) the incurrence by Metaldyne or any of the Restricted Subsidiaries of
Permitted Refinancing Indebtedness in exchange for, or the net
proceeds of which are used to refund, refinance or replace
Indebtedness (other than intercompany Indebtedness) that was permitted
by the indenture to be incurred under the first paragraph of this
covenant or clauses (2), (3), (4), (5), (8), (9) or (15) of this
paragraph;
(6) the incurrence by Metaldyne or any of the Restricted Subsidiaries of
intercompany Indebtedness between or among Metaldyne and any of the
Restricted Subsidiaries; provided, however, that:
62
(a) if Metaldyne or any Guarantor is the obligor on such
Indebtedness, such Indebtedness must be (i) unsecured and (ii) if
the obligee is neither Metaldyne nor a Guarantor, expressly
subordinated to the prior payment in full in cash of all
Obligations with respect to the notes (in the case of Metaldyne)
(or the Subsidiary Guarantee, in the case of a Guarantor); and
(b) (i) any subsequent issuance or transfer of Equity Interests that
results in any such Indebtedness being held by a Person other
than Metaldyne or a Restricted Subsidiary of Metaldyne and (ii)
any sale or other transfer of any such Indebtedness to a Person
that is not either Metaldyne or a Restricted Subsidiary of
Metaldyne will be deemed, in each case, to constitute an
incurrence of such Indebtedness by Metaldyne or such Restricted
Subsidiary, as the case may be, that was not permitted by this
clause (6);
(7) the incurrence by Metaldyne or any of the Restricted Subsidiaries of
Hedging Obligations that are incurred for the purpose of hedging (i)
interest rate risk or the impact of interest rate fluctuations on
Metaldyne or any of the Restricted Subsidiaries and (ii) in the case
of currency or commodity protection agreements, against currency
exchange rate or commodity price fluctuations in the ordinary course
of Metaldyne and the Restricted Subsidiaries' respective businesses
and, in the case of both (i) and (ii), not for purposes of
speculation;
(8) the guarantee by Metaldyne or any of the Guarantors of Indebtedness of
Metaldyne or a Restricted Subsidiary that was permitted to be incurred
by another provision of this covenant;
(9) the accrual of interest, the accretion or amortization of original
issue discount, the payment of interest on any Indebtedness in the
form of additional Indebtedness with the same terms, and the payment
of dividends on Disqualified Stock in the form of additional shares of
similar Disqualified Stock will not be deemed to be an incurrence of
Indebtedness or an issuance of Disqualified Stock for purposes of this
covenant; provided, in each such case, that the amount thereof is
included in Fixed Charges of Metaldyne as accrued;
(10) Indebtedness of Foreign Subsidiaries incurred for working capital
purposes if, at the time of incurrence of such Indebtedness, and after
giving effect thereto, the aggregate principal amount of all
Indebtedness of the Foreign Subsidiaries incurred pursuant to this
clause (10) and then outstanding does not exceed the amount equal to
the sum of (x) 80% of the consolidated book value of the accounts
receivable of the Foreign Subsidiaries and (y) 60% of the consolidated
book value of the inventories of the Foreign Subsidiaries;
(11) Indebtedness incurred in respect of (a) workers' compensation claims,
self-insurance obligations, bankers' acceptances, performance, surety
and similar bonds and completion guarantees provided by Metaldyne or a
Restricted Subsidiary in the ordinary course of business, (b) in
respect of performance bonds or similar obligations of Metaldyne or
any of the Restricted Subsidiaries for or in connection with pledges,
deposits or payments made or given in the ordinary course of business
and not for money borrowed in connection with or to secure statutory,
regulatory or similar obligations, including obligations under health,
safety or environmental obligations, and (c) arising from guarantees
to suppliers, lessors, licensees, contractors, franchises or customers
of obligations incurred in the ordinary course of business and not for
money borrowed;
(12) Indebtedness arising from agreements of Metaldyne or a Restricted
Subsidiary providing for indemnification, adjustment of purchase price
or similar obligations, in each case, incurred or assumed in
connection with the disposition of any business, assets or Capital
Stock of a Restricted Subsidiary, provided, that the maximum aggregate
liability in respect of all such Indebtedness shall at no time exceed
the gross proceeds actually received by Metaldyne and the Restricted
Subsidiaries in connection with such disposition;
63
(13) Indebtedness arising from the honoring by a bank or other financial
institution of a check, draft or similar instrument (except in the
case of daylight overdrafts) drawn against insufficient funds in the
ordinary course of business, provided, however, that such Indebtedness
is extinguished within five Business Days of incurrence;
(14) the incurrence by a Receivables Subsidiary of Indebtedness in a
Qualified Receivables Transaction that is without recourse to
Metaldyne or to any other Subsidiary of Metaldyne or their assets
(other than such Receivables Subsidiary and its assets and, as to
Metaldyne or any Subsidiary of Metaldyne, other than pursuant to
representations, warranties, covenants and indemnities customary for
such transactions) and is not guaranteed by any such Person;
(15) the issuance and sale of preferred stock (a) by a Foreign Subsidiary
in lieu of the issuance of non-voting common stock if (i) the laws of
the jurisdiction of incorporation of such Subsidiary precludes the
issuance of non-voting common stock and (ii) the preferential rights
afforded to the holders of such preferred stock are limited to those
customarily provided for in such jurisdiction in respect of the
issuance of non-voting stock, (b) by a Restricted Subsidiary which is
a joint venture with a third party which is not an Affiliate of the
Company or a Restricted Subsidiary, and (c) by a Restricted Subsidiary
pursuant to obligations with respect to the issuance or sale of
Preferred Stock which exist at the time such Person becomes a
Restricted Subsidiary and which were not created in connection with or
in contemplation of such Person becoming a Restricted Subsidiary; and
(16) the incurrence by Metaldyne or any of the Restricted Subsidiaries of
additional Indebtedness in an aggregate principal amount (or accreted
value, as applicable) at any time outstanding, including all Permitted
Refinancing Indebtedness, incurred to refund, refinance or replace any
Indebtedness incurred pursuant to this clause (16), not to exceed
$35.0 million.
For purposes of determining compliance with this "Incurrence of
Indebtedness and Issuance of Preferred Stock" covenant, in the event that an
item of proposed Indebtedness meets the criteria of more than one of the
categories of Permitted Debt described in clauses (1) through (16) above, or is
entitled to be incurred pursuant to the first paragraph of this covenant,
Metaldyne will be permitted to classify such item of Indebtedness on the date
of its incurrence, or later reclassify all or a portion of such item of
Indebtedness, in any manner that complies with this covenant. Indebtedness
under Credit Facilities outstanding on the date on which notes are first issued
and authenticated under the indenture will be deemed to have been incurred on
such date in reliance on the exception provided by clauses (1) and (2) of the
definition of Permitted Debt.
For purposes of determining compliance with any U.S. dollar-denominated
restriction on the incurrence of Indebtedness, the U.S. dollar-equivalent
principal amount of Indebtedness denominated in a foreign currency shall be
calculated based on the relevant currency exchange rate in effect on the date
such Indebtedness was incurred, in the case of term Indebtedness, or first
committed, in the case of revolving credit Indebtedness; provided, that if such
Indebtedness is incurred to Refinance other Indebtedness denominated in a
foreign currency, and such Refinancing would cause the applicable U.S.
dollar-denominated restriction to be exceeded if calculated at the relevant
currency exchange rate in effect on the date of such Refinancing, such U.S.
dollar-denominated restriction shall be deemed not to have been exceeded so
long as the principal amount of such Refinancing Indebtedness does not exceed
the principal amount of such Indebtedness being Refinanced. Notwithstanding any
other provision of this covenant, the maximum amount of Indebtedness that
Metaldyne may incur pursuant to this covenant shall not be deemed to be
exceeded solely as a result of fluctuations in the exchange rate of currencies.
The principal amount of any Indebtedness incurred to Refinance other
Indebtedness, if incurred in a different currency from the Indebtedness being
Refinanced, shall be calculated based on the currency exchange rate applicable
to the currencies in which such Refinancing Indebtedness is denominated that is
in effect on the date of such Refinancing.
Anti-Layering
Metaldyne will not incur, create, issue, assume, guarantee or otherwise
become liable for any Indebtedness that is subordinate or junior in right of
payment to any Senior Debt of Metaldyne and
64
senior in any respect in right of payment to the notes. No Guarantor will
incur, create, issue, assume, guarantee or otherwise become liable for any
Indebtedness that is subordinate or junior in right of payment to the Senior
Debt of such Guarantor and senior in any respect in right of payment to such
Guarantor's Subsidiary Guarantee. The foregoing shall not affect the
Subordinated Debentures outstanding on the date of the indenture.
Liens
Metaldyne will not and will not permit any of the Restricted Subsidiaries
to, directly or indirectly, create, incur, assume or otherwise cause or suffer
to exist or become effective any Lien of any kind securing Indebtedness (other
than Permitted Liens) upon any of their property or assets, now owned or
hereafter acquired to secure any Indebtedness without making, or causing such
Subsidiary to make, effective provision for securing the notes or, in respect
of Liens on any Guarantor's property or assets, any Guarantee of such
Guarantor, (x) equally and ratably with such Indebtedness as to such property
or assets for so long as such Indebtedness will be so secured or (y) in the
event such Indebtedness is subordinated Indebtedness, prior to such
Indebtedness as to such property or assets for so long as such Indebtedness
will be so secured.
Dividend and Other Payment Restrictions Affecting Subsidiaries
Metaldyne will not, and will not permit any of the Restricted Subsidiaries
to, directly or indirectly, create or permit to exist or become effective any
consensual encumbrance or restriction on the ability of any Restricted
Subsidiary to:
(1) pay dividends or make any other distributions on its Capital Stock to
Metaldyne or any of the Restricted Subsidiaries, or with respect to
any other interest or participation in, or measured by, its profits,
or pay any indebtedness owed to Metaldyne or any of the Restricted
Subsidiaries;
(2) make loans or advances to Metaldyne or any of the Restricted
Subsidiaries; or
(3) transfer any of its properties or assets to Metaldyne or any of the
Restricted Subsidiaries.
However, the preceding restrictions will not apply to encumbrances or
restrictions existing under or by reason of:
(1) agreements governing Existing Indebtedness and Credit Facilities as in
effect on the date of the indenture and any amendments, modifications,
restatements, renewals, increases, supplements, refundings,
replacements or refinancings of those agreements, provided that the
amendments, modifications, restatements, renewals, increases,
supplements, refundings, replacement or refinancings are no more
restrictive, taken as a whole, with respect to such dividend and other
payment restrictions than those contained in those agreements on the
date of the indenture;
(2) the indenture, the notes and the Subsidiary Guarantees;
(3) applicable law;
(4) customary non-assignment provisions in leases entered into in the
ordinary course of business and consistent with past practices;
(5) purchase money obligations for property acquired in the ordinary
course of business that impose restrictions on that property of the
nature described in clause (3) of the preceding paragraph;
(6) any agreement for the sale or other disposition of a Restricted
Subsidiary that restricts distributions by that Restricted Subsidiary
pending its sale or other disposition;
(7) Permitted Refinancing Indebtedness, provided that the restrictions
contained in the agreements governing such Permitted Refinancing
Indebtedness are no more restrictive, taken as a whole, than those
contained in the agreements governing the Indebtedness being
Refinanced;
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(8) Liens securing Indebtedness otherwise permitted to be incurred under
the provisions of the covenant described above under the caption
"--Liens" that limit the right of the debtor to dispose of the assets
subject to such Liens;
(9) provisions with respect to the disposition or distribution of assets
or property in joint venture agreements, assets sale agreements, stock
sale agreements and other similar agreements entered into in the
ordinary course of business;
(10) any agreement relating to any Indebtedness or Liens incurred by a
Person (other than a Subsidiary of Metaldyne that is a Subsidiary of
Metaldyne on the date of the indenture or any Subsidiary carrying on
any of the businesses of any such Subsidiary) prior to the date on
which such Person became a Subsidiary of Metaldyne and outstanding on
such date and not incurred in anticipation of becoming a Subsidiary
and not incurred to provide all or any portion of the funds utilized
to consummate such acquisition, which encumbrance or restriction is
not applicable to any Person, or the properties or assets of any
Person, other than the Person so acquired;
(11) any encumbrance or restriction with respect to a Foreign Subsidiary
pursuant to an agreement relating to Indebtedness which is permitted
under the "Incurrence of Indebtedness and Issuance of Preferred Stock"
covenant or Liens incurred by such Foreign Subsidiary;
(12) Indebtedness or other contractual requirements of a Receivables
Subsidiary in connection with a Qualified Receivables Transaction,
provided that such restrictions apply only to such Receivables
Subsidiary; and
(13) restrictions on cash or other deposits or net worth imposed by
customers under contracts entered into in the ordinary course of
business.
Merger, Consolidation or Sale of Assets
Metaldyne may not, directly or indirectly: (1) consolidate or merge with
or into another Person (whether or not Metaldyne is the surviving corporation);
or (2) sell, assign, transfer, convey or otherwise dispose of all or
substantially all of the properties or assets of Metaldyne and the Restricted
Subsidiaries taken as a whole, in one or more related transactions, to another
Person; unless:
(1) either: (a) Metaldyne is the surviving corporation; or (b) the Person
formed by or surviving any such consolidation or merger (if other than
Metaldyne) or to which such sale, assignment, transfer, conveyance or
other disposition has been made is a corporation organized or existing
under the laws of the United States, any state of the United States or
the District of Columbia;
(2) the Person formed by or surviving any such consolidation or merger
(if other than Metaldyne) or the Person to which such sale,
assignment, transfer, conveyance or other disposition has been made
assumes all the obligations of Metaldyne under the notes, the
indenture and the registration rights agreement pursuant to agreements
reasonably satisfactory to the trustee;
(3) immediately after such transaction, no Default or Event of Default
exists; and
(4) Metaldyne or the Person formed by or surviving any such consolidation
or merger (if other than Metaldyne), or to which such sale,
assignment, transfer, conveyance or other disposition has been made
will, on the date of such transaction after giving pro forma effect
thereto and any related financing transactions as if the same had
occurred at the beginning of the applicable four-quarter period, be
permitted to incur at least $1.00 of additional Indebtedness pursuant
to the Fixed Charge Coverage Ratio test set forth in the first
paragraph of the covenant described above under the caption
"--Incurrence of Indebtedness and Issuance of Preferred Stock."
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In addition, Metaldyne may not, directly or indirectly, lease all or
substantially all of its properties or assets, in one or more related
transactions, to any other Person. This "Merger, Consolidation or Sale of
Assets" covenant will not apply to a sale, assignment, transfer, conveyance or
other disposition of assets between or among Metaldyne and any of the
Guarantors.
Notwithstanding anything in the indenture:
(a) a Restricted Subsidiary may consolidate with, merge into or convey,
lease, sell, assign, transfer or otherwise dispose of all or part of
its properties and assets to Metaldyne or a Restricted Subsidiary; and
(b) Metaldyne may merge with an Affiliate incorporated solely for the
purpose of reincorporating Metaldyne in another jurisdiction in the
United States to realize tax or other benefits.
Transactions with Affiliates
Metaldyne will not, and will not permit any of the Restricted Subsidiaries
to, make any payment to, or sell, lease, transfer or otherwise dispose of any
of its properties or assets to, or purchase any property or assets from, or
enter into or make or amend any transaction, contract, agreement,
understanding, loan, advance or guarantee with, or for the benefit of, any
Affiliate (each, an "Affiliate Transaction"), unless:
(1) the Affiliate Transaction is on terms that are not materially less
favorable, taken as a whole, to Metaldyne or the relevant Restricted
Subsidiary than those that would have been obtained at the time in a
comparable transaction by Metaldyne or such Restricted Subsidiary with
an unaffiliated Person; and
(2) Metaldyne delivers to the trustee:
(a) except when the opinion referred to in the following clause (b)
is delivered, with respect to any Affiliate Transaction or series
of related Affiliate Transactions involving aggregate
consideration in excess of $5.0 million, a resolution of the
Board of Directors set forth in an officers' certificate
certifying that such Affiliate Transaction complies with this
covenant and that such Affiliate Transaction has been approved by
a majority of the disinterested members of the Board of
Directors; and
(b) with respect to any Affiliate Transaction or series of related
Affiliate Transactions involving aggregate consideration in
excess of $25.0 million, an opinion as to the fairness to
Metaldyne of such Affiliate Transaction from a financial point of
view issued by an accounting, appraisal or investment banking
firm of national standing.
The following items will not be deemed to be Affiliate Transactions and,
therefore, will not be subject to the provisions of the prior paragraph:
(1) loans or advances to employees, indemnification agreements with and
the payment of fees and indemnities to directors, officers and
full-time employees of Metaldyne and the Restricted Subsidiaries and
employment, non-competition or confidentiality agreements entered into
with any such person in the ordinary course of business;
(2) any issuance of securities, or other payments, awards or grants in
cash, securities or otherwise pursuant to, or the funding of,
employment, compensation or indemnification arrangements, stock
options and stock ownership plans in the ordinary course of business
to or with officers, directors or employees of Metaldyne and the
Restricted Subsidiaries, or approved by the Board of Directors;
(3) transactions between or among Metaldyne and/or the Restricted
Subsidiaries;
(4) transactions with a Person that is an Affiliate of Metaldyne solely
because Metaldyne owns an Equity Interest in, or controls, such
Person;
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(5) transactions pursuant to agreements existing on the date of the
indenture, including, without limitation, the Stock Purchase
Agreement, the Shareholders Agreement, the TriMas Shareholders
Agreement and the TriMas Corporate Services Agreement, and, in each
case, any amendment or supplement thereto that, taken in its entirety,
is no less favorable to Metaldyne than such agreement as in effect on
the date of the indenture;
(6) sales of Equity Interests (other than Disqualified Stock) of Metaldyne
to Affiliates of Metaldyne or the receipt of capital contributions by
Metaldyne;
(7) payment of certain fees under the Advisory Agreement;
(8) transactions (in connection with a Qualified Receivables Transaction)
between or among Metaldyne and/or its Restricted Subsidiaries or
transactions between a Receivables Subsidiary and any Person in which
the Receivables Subsidiary has an Investment;
(9) any management, service, purchase, lease, supply or similar agreement
entered into in the ordinary course of Metaldyne's business between
Metaldyne or any Restricted Subsidiary and any Unrestricted Subsidiary
or any Affiliate, so long as Metaldyne determines in good faith (which
determination shall be conclusive) that any such agreement is on terms
no less favorable to Metaldyne or such Restricted Subsidiary than
those that could be obtained in a comparable arm's-length transaction
with an entity that is not an Affiliate; and
(10) Restricted Payments and Permitted Investments that are permitted by
the provisions of the indenture described above under the caption
"--Restricted Payments."
Additional Subsidiary Guarantees
After the Issue Date, Metaldyne will cause each Restricted Subsidiary,
other than a Subsidiary which is a Subsidiary Guarantor, that becomes a
guarantor or other obligor with respect to the obligations of Metaldyne or a
Domestic Restricted Subsidiary under the Credit Agreement to execute and
deliver to the trustee a Guarantee pursuant to which such Guarantor will
unconditionally Guarantee, on a joint and several basis, the full and prompt
payment of the principal of, premium, if any, and interest on the notes on a
senior subordinated basis.
Designation of Restricted and Unrestricted Subsidiaries
The Board of Directors may designate any Restricted Subsidiary to be an
Unrestricted Subsidiary if that designation would not cause a Default. If a
Restricted Subsidiary is designated as an Unrestricted Subsidiary, the
aggregate fair market value of all outstanding Investments owned by Metaldyne
and the Restricted Subsidiaries in the Subsidiary properly designated will be
deemed to be an Investment made as of the time of the designation and will
reduce the amount available for Restricted Payments under the first paragraph
of the covenant described above under the caption "--Restricted Payments" or
Permitted Investments, as determined by Metaldyne. That designation will only
be permitted if the Investment would be permitted at that time and if the
Restricted Subsidiary otherwise meets the definition of an Unrestricted
Subsidiary. The Board of Directors may redesignate any Unrestricted Subsidiary
to be a Restricted Subsidiary if the redesignation would not cause a Default.
Reports
Whether or not required by the rules and regulations of the SEC, so long
as any notes are outstanding, Metaldyne will furnish to the Holders of notes,
within the time periods specified in the SEC's rules and regulations:
(1) all quarterly and annual financial information that would be required
to be contained in a filing with the SEC on Forms 10-Q and 10-K if
Metaldyne were required to file such Forms, including a "Management's
Discussion and Analysis of Financial Condition and Results of
Operations" and, with respect to the annual information only, a report
on the annual financial statements by Metaldyne's certified
independent accountants; and
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(2) all current reports that would be required to be filed with the SEC on
Form 8-K if Metaldyne were required to file such reports.
In addition, whether or not required by the SEC, Metaldyne will file a
copy of all of the information and reports referred to in clauses (1) and (2)
above with the SEC for public availability within the time periods specified in
the SEC's rules and regulations (unless the SEC will not accept such a filing)
and make such information available to securities analysts and prospective
investors upon request. In addition, Metaldyne and the Guarantors have agreed
that, for so long as any notes remain outstanding, they will furnish to the
Holders and to securities analysts and prospective investors, upon their
request, the information required to be delivered pursuant to Rule 144A(d)(4)
under the Securities Act.
EVENTS OF DEFAULT AND REMEDIES
Each of the following is an Event of Default:
(1) default for 30 days in the payment when due of interest on, or
Liquidated Damages with respect to, the notes whether or not
prohibited by the subordination provisions of the indenture;
(2) default in payment when due of the principal of, or premium, if any,
on the notes whether or not prohibited by the subordination provisions
of the indenture;
(3) failure by Metaldyne or any of its Subsidiaries to comply with the
provisions described under the captions "--Repurchase at the Option of
Holders--Change of Control" or "--Certain Covenants--Merger,
Consolidation or Sale of Assets" after written notice to Metaldyne by
the Trustee or the holders of at least 25% in aggregate principal
amount of the outstanding Notes;
(4) failure by Metaldyne or any of its Subsidiaries to comply with any of
the other agreements in the indenture continued for 60 days after
written notice to Metaldyne by the Trustee or the holders of at least
25% in aggregate principal amount of the outstanding Notes;
(5) default under any mortgage, indenture or instrument under which there
may be issued or by which there may be secured or evidenced any
Indebtedness for money borrowed by Metaldyne or any of the Restricted
Subsidiaries (or the payment of which is guaranteed by Metaldyne or
any of the Restricted Subsidiaries) whether such Indebtedness or
guarantee now exists, or is created after the date of the indenture,
if that default:
(a) is caused by a failure to pay principal of such Indebtedness at
the final maturity thereof (a "Payment Default"); or
(b) results in the acceleration of such Indebtedness prior to its
express maturity,
and, in each case, the principal amount of any such Indebtedness,
together with the principal amount of any other such Indebtedness under
which there has been a Payment Default or the maturity of which has been
so accelerated, aggregates $20.0 million or more;
(6) failure by Metaldyne or any of the Restricted Subsidiaries to pay
final judgments aggregating in excess of $20.0 million (net of any
insurance proceeds available to pay such judgment), which judgments
are not paid, discharged or stayed for a period of 60 days;
(7) except as permitted by the indenture, any Subsidiary Guarantee shall
be held in any judicial proceeding to be unenforceable or invalid or
shall cease for any reason to be in full force and effect or any
Guarantor, or any Person acting on behalf of any Guarantor, shall deny
or disaffirm its obligations under its Subsidiary Guarantee; and
(8) certain events of bankruptcy or insolvency described in the indenture
with respect to Metaldyne or any of the Significant Subsidiaries
thereof.
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In the case of an Event of Default arising from certain events of
bankruptcy or insolvency, with respect to Metaldyne, all outstanding notes will
become due and payable immediately without further action or notice. If any
other Event of Default occurs and is continuing, the trustee or the Holders of
at least 25% in principal amount of the then outstanding notes may declare all
the notes to be due and payable immediately by giving notice in writing to us
and the trustee specifying the respective Event of Default (the "Acceleration
Notice") or if there are any amounts outstanding under the Credit Agreement, it
shall become immediately due and payable upon the first to occur of an
acceleration under the Credit Agreement or five business days after receipt by
us and the administrative agent under the Credit Agreement of such Acceleration
Notice (but only if such Event of Default is then continuing).
Holders of the notes may not enforce the indenture or the notes except as
provided in the indenture. Subject to certain limitations, Holders of a
majority in principal amount of the then outstanding notes may direct the
trustee in its exercise of any trust or power. The trustee may withhold from
Holders of the notes notice of any continuing Default or Event of Default if it
determines that withholding notes is in their interest, except a Default or
Event of Default relating to the payment of principal or interest or Liquidated
Damages.
The Holders of a majority in aggregate principal amount of the notes then
outstanding by notice to the trustee may on behalf of the Holders of all of the
notes waive any existing Default or Event of Default and its consequences under
the indenture except a continuing Default or Event of Default in the payment of
interest or Liquidated Damages on, or the principal of, the notes.
In the event of a declaration of acceleration of the notes because an
Event of Default described in clause (5) under "Events of Default" has occurred
and is continuing, the declaration of acceleration of the notes shall be
automatically annulled if the event of default or payment default triggering
such Event of Default pursuant to clause (5) shall be remedied or cured by
Metaldyne or a Restricted Subsidiary or waived by the holders of the relevant
Indebtedness within 60 days after the declaration of acceleration with respect
thereto and if (a) the annulment of the acceleration of the notes would not
conflict with any judgment or decree of a court of competent jurisdiction and
(b) all existing Events of Default, except nonpayment of principal, premium or
interest on the notes that became due solely because of the acceleration of the
notes, have been cured or waived.
Metaldyne is required to deliver to the trustee annually a statement
regarding compliance with the indenture. Upon becoming aware of any Default or
Event of Default, Metaldyne is required to deliver to the trustee a statement
specifying such Default or Event of Default.
NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND STOCKHOLDERS
No director, officer, employee, incorporator or stockholder of Metaldyne
or any Guarantor, as such, will have any liability for any obligations of
Metaldyne or the Guarantors under the notes, the indenture, the Subsidiary
Guarantees, or for any claim based on, in respect of, or by reason of, such
obligations or their creation. Each Holder of notes by accepting a note waives
and releases all such liability. The waiver and release are part of the
consideration for issuance of the notes. The waiver may not be effective to
waive liabilities under the federal securities laws.
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
Metaldyne may, at its option and at any time, elect to have all of its
obligations discharged with respect to the outstanding notes and all
obligations of the Guarantors discharged with respect to their Subsidiary
Guarantees ("Legal Defeasance") except for:
(1) the rights of Holders of outstanding notes to receive payments in
respect of the principal of, or interest or premium and Liquidated
Damages, if any, on such notes when such payments are due from the
trust referred to below;
(2) Metaldyne's obligations with respect to the notes concerning issuing
temporary notes, registration of notes, mutilated, destroyed, lost or
stolen notes and the maintenance of an office or agency for payment
and money for security payments held in trust;
70
(3) the rights, powers, trusts, duties and immunities of the trustee, and
Metaldyne's and the Guarantor's obligations in connection therewith;
and
(4) the Legal Defeasance provisions of the indenture.
In addition, Metaldyne may, at its option and at any time, elect to have
the obligations of Metaldyne and the Guarantors released with respect to
certain covenants that are described in the indenture ("Covenant Defeasance")
and thereafter any omission to comply with those covenants will not constitute
a Default or Event of Default with respect to the notes. In the event Covenant
Defeasance occurs, certain events (not including non-payment, bankruptcy,
receivership, rehabilitation and insolvency events) described under "--Events
of Default and Remedies" will no longer constitute an Event of Default with
respect to the notes.
In order to exercise either Legal Defeasance or Covenant Defeasance:
(1) Metaldyne must irrevocably deposit with the trustee, in trust, for the
benefit of the Holders of the notes, cash in U.S. dollars,
non-callable Government Securities, or a combination of cash in U.S.
dollars and non-callable Government Securities, in amounts as will be
sufficient, in the opinion of a nationally recognized firm of
independent public accountants, to pay the principal of, or interest
and premium and Liquidated Damages, if any, on the outstanding notes
on the stated maturity or on the applicable redemption date, as the
case may be, and Metaldyne must specify whether the notes are being
defeased to maturity or to a particular redemption date;
(2) in the case of Legal Defeasance, Metaldyne has delivered to the
trustee an opinion of counsel reasonably acceptable to the trustee
confirming that (a) Metaldyne has received from, or there has been
published by, the Internal Revenue Service a ruling or (b) since the
date of the indenture, there has been a change in the applicable
federal income tax law, in either case to the effect that, and based
thereon such opinion of counsel will confirm that, the Holders of the
outstanding notes will not recognize income, gain or loss for federal
income tax purposes as a result of such Legal 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 Legal
Defeasance had not occurred;
(3) in the case of Covenant Defeasance, Metaldyne has delivered to the
trustee an opinion of counsel reasonably acceptable to the trustee
confirming that the Holders of the outstanding notes will not
recognize income, gain or loss for federal income tax purposes as a
result of such Covenant Defeasance and will be subject to federal
income tax on the same amounts, in the same manner and at the same
times as would have been the case if such Covenant Defeasance had not
occurred;
(4) no Default or Event of Default has occurred and is continuing on the
date of such deposit (other than a Default or Event of Default
resulting from the borrowing of funds to be applied to such deposit);
(5) such Legal Defeasance or Covenant Defeasance will not result in a
breach or violation of, or constitute a default under any material
agreement or instrument (other than the indenture) to which Metaldyne
or any of its Subsidiaries is a party or by which Metaldyne or any of
its Subsidiaries is bound;
(6) Metaldyne must deliver to the trustee an officers' certificate stating
that the deposit was not made by Metaldyne with the intent of
preferring the Holders of notes over the other creditors of Metaldyne
with the intent of defeating, hindering, delaying or defrauding
creditors of Metaldyne or others; and
(7) Metaldyne must deliver to the trustee an officers' certificate and an
opinion of counsel, each stating that all conditions precedent
relating to the Legal Defeasance or the Covenant Defeasance have been
complied with.
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In the event that Metaldyne exercises its legal defeasance option or
covenant defeasance option, each of the Guarantors will be released from all of
its obligations with respect to its guarantee. Metaldyne may exercise its legal
defeasance option notwithstanding its prior exercise of the covenant defeasance
option.
AMENDMENT, SUPPLEMENT AND WAIVER
Except as provided in the next two succeeding paragraphs, the indenture or
the notes may be amended or supplemented with the consent of the Holders of at
least a majority in principal amount of the notes then outstanding (including,
without limitation, consents obtained in connection with a purchase of, or
tender offer or exchange offer for, notes), and any existing default or
compliance with any provision of the indenture or the notes may be waived with
the consent of the Holders of a majority in principal amount of the then
outstanding notes (including, without limitation, consents obtained in
connection with a purchase of, or tender offer or exchange offer for, notes).
Without the consent of each Holder affected, an amendment or waiver may
not (with respect to any notes held by a non-consenting Holder):
(1) reduce the principal amount of notes whose Holders must consent to an
amendment, supplement or waiver;
(2) reduce the principal of or change the fixed maturity of any note or
alter the provisions with respect to the redemption of the notes
(other than provisions relating to the covenants described above under
the caption "--Repurchase at the Option of Holders");
(3) reduce the rate of or change the time for payment of interest on any
note;
(4) waive a Default or Event of Default in the payment of principal of, or
interest or premium, or Liquidated Damages, if any, on the notes
(except a rescission of acceleration of the notes by the Holders of at
least a majority in aggregate principal amount of the notes and a
waiver of the payment default that resulted from such acceleration);
(5) make any note payable in money other than that stated in the notes;
(6) make any change in the provisions of the indenture relating to waivers
of past Defaults or the rights of Holders of notes to receive payments
of principal of, or interest or premium or Liquidated Damages, if any,
on the notes;
(7) waive a redemption payment with respect to any note (other than a
payment required by one of the covenants described above under the
caption "--Repurchase at the Option of Holders"); or
(8) make any change in the preceding amendment and waiver provisions.
In addition, any amendment to, or waiver of, the provisions of the
indenture relating to subordination that adversely affects the rights of the
Holders of the notes will require the consent of the Holders of at least 75% in
aggregate principal amount of notes then outstanding.
Notwithstanding the preceding, without the consent of any Holder of notes,
Metaldyne, the Guarantors and the trustee may amend or supplement the indenture
or the notes:
(1) to cure any ambiguity, defect or inconsistency;
(2) to provide for uncertificated notes in addition to or in place of
certificated notes;
(3) to provide for the assumption of Metaldyne's obligations to Holders of
notes in the case of a merger or consolidation or sale of all or
substantially all of Metaldyne's assets;
(4) to make any change that would provide any additional rights or
benefits to the Holders of notes or that does not adversely affect the
legal rights under the indenture of any such Holder; or
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(5) to comply with requirements of the SEC in order to effect or maintain
the qualification of the indenture under the Trust Indenture Act.
SATISFACTION AND DISCHARGE
The indenture will be discharged and will cease to be of further effect as
to all notes issued thereunder, when:
(1) either:
(a) all notes that have been authenticated, except lost, stolen or
destroyed notes that have been replaced or paid and notes for
whose payment money has been deposited in trust and thereafter
repaid to Metaldyne, have been delivered to the trustee for
cancellation; or
(b) all notes that have not been delivered to the trustee for
cancellation have become due and payable by reason of the
mailing of a notice of redemption or otherwise or will become
due and payable within one year and Metaldyne or any Guarantor
has irrevocably deposited or caused to be deposited with the
trustee as trust funds in trust solely for the benefit of the
Holders, cash in U.S. dollars, non-callable Government
Securities, or a combination of cash in U.S. dollars and
non-callable Government Securities, in amounts as will be
sufficient without consideration of any reinvestment of
interest, to pay and discharge the entire indebtedness on the
notes not delivered to the trustee for cancellation for
principal, premium and Liquidated Damages, if any, and accrued
interest to the date of maturity or redemption;
(2) no Default or Event of Default has occurred and is continuing on the
date of the deposit or will occur as a result of the deposit and the
deposit will not result in a breach or violation of, or constitute a
default under, any other instrument to which Metaldyne or any
Guarantor is a party or by which Metaldyne or any Guarantor is bound;
(3) Metaldyne or any Guarantor has paid or caused to be paid all sums
payable by it under the indenture; and
(4) Metaldyne has delivered irrevocable instructions to the trustee under
the indenture to apply the deposited money toward the payment of the
notes at maturity or a redemption date, as the case may be.
In addition, Metaldyne must deliver an officers' certificate and an
opinion of counsel to the trustee stating that all conditions precedent to
satisfaction and discharge have been satisfied.
CONCERNING THE TRUSTEE
If the trustee becomes a creditor of Metaldyne or any Guarantor, the
indenture limits its right to obtain payment of claims in certain cases, or to
realize on certain property received in respect of any such claim as security
or otherwise. The trustee will be permitted to engage in other transactions;
however, if it acquires any conflicting interest it must eliminate such
conflict within 90 days, apply to the SEC for permission to continue or resign.
The Holders of a majority in principal amount of the then outstanding
notes will have the right to direct the time, method and place of conducting
any proceeding for exercising any remedy available to the trustee, subject to
certain exceptions. The indenture provides that in case an Event of Default
occurs and is continuing, the trustee will be required, in the exercise of its
power, to use the degree of care of a prudent man in the conduct of his own
affairs. Subject to such provisions, the trustee will be under no obligation to
exercise any of its rights or powers under the indenture at the request of any
Holder of notes, unless such Holder has offered to the trustee security and
indemnity satisfactory to it against any loss, liability or expense.
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ADDITIONAL INFORMATION
Anyone who receives this prospectus may obtain a copy of the indenture and
registration rights agreement without charge by writing to Metaldyne
Corporation, 47659 Halyard Drive, Plymouth, Michigan 48170, Attention:
Corporate Secretary.
CERTAIN DEFINITIONS
Set forth below are certain defined terms used in the indenture. Reference
is made to the indenture for a full disclosure of all such terms, as well as
any other capitalized terms used herein for which no definition is provided.
"Acquired Debt" means, with respect to any specified Person:
(1) Indebtedness of any other Person existing at the time such other
Person is merged with or into or became a Subsidiary of such specified
Person, whether or not such Indebtedness is incurred in connection
with, or in contemplation of, such other Person merging with or into,
or becoming a Subsidiary of, such specified Person; and
(2) Indebtedness secured by a Lien encumbering any asset acquired by such
specified Person.
"Adjusted Treasury Rate" means, with respect to any redemption date, the
rate per annum equal to the semiannual equivalent yield to maturity of the
Comparable Treasury Issue, assuming a price for the Comparable Treasury Issue
(expressed as a percentage of its principal amount) equal to the Comparable
Treasury Price for such redemption date, plus 50 basis points.
"Advisory Agreement" means that certain monitoring agreement between
Metaldyne and Heartland, as in effect on the date of the indenture, or any
amendment or supplement thereto that, taken in its entirety, is no less
favorable to Metaldyne than such agreement as in effect on the date of the
indenture.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For purposes of this definition, "control,"
as used with respect to any Person, means the possession, directly or
indirectly, of the power to direct or cause the direction of the management or
policies of such Person, whether through the ownership of voting securities, by
agreement or otherwise. For purposes of this definition, the terms
"controlling," "controlled by" and "under common control with" have correlative
meanings. No Person (other than Metaldyne or any Subsidiary of Metaldyne) in
whom a Receivables Subsidiary makes an Investment in connection with a
Qualified Receivables Transaction will be deemed to be an Affiliate of
Metaldyne or any of its Subsidiaries solely by reason of such Investment.
"Asset Sale" means:
(1) the sale, lease, conveyance or other disposition of any assets or
rights, other than dispositions in the ordinary course of business;
provided that the sale, conveyance or other disposition of all or
substantially all of the assets of Metaldyne and the Restricted
Subsidiaries taken as a whole will be governed by the provisions of
the indenture described above under the caption "--Repurchase at the
Option of Holders--Change of Control" and/or the provisions described
above under the caption "--Certain Covenants--Merger, Consolidation or
Sale of Assets" and not by the provisions of the Asset Sale covenant;
and
(2) the issuance of Equity Interests in any of the Restricted Subsidiaries
or the sale of Equity Interests in any of the Restricted Subsidiaries.
Notwithstanding the preceding, none of the following items will be deemed
to be an Asset Sale:
(1) any single transaction or series of related transactions that involves
assets having a fair market value of less than $2.5 million;
(2) a transfer of assets between or among Metaldyne and the Restricted
Subsidiaries;
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(3) an issuance of Equity Interests by a Subsidiary to Metaldyne or to
another Restricted Subsidiary or any issuance of directors' qualifying
shares;
(4) the sale or other disposition of cash or Cash Equivalents;
(5) sales of accounts receivable and related assets of the type specified
in the definition of "Qualified Receivables Transaction" to a
Receivables Subsidiary or sales of accounts receivable by any Foreign
Subsidiary in the ordinary course for financing purposes;
(6) the surrender or waiver of contract rights or the settlement, release
or surrender of contract, tort or other claims of any kind;
(7) the grant in the ordinary course of business of licenses of patents,
trademarks and similar intellectual property;
(8) a disposition of obsolete or worn out equipment or equipment that is
no longer useful in the conduct of the business of Metaldyne and the
Restricted Subsidiaries and that is disposed of in each case in the
ordinary course of business;
(9) a Restricted Payment or Permitted Investment that is permitted by the
covenant described above under the caption "--Certain
Covenants--Restricted Payments"; and
(10) any issuance or sale of Equity Interests of any Unrestricted
Subsidiary.
"Beneficial Owner" has the meaning assigned to such term in Rule 13d-3 and
Rule 13d-5 under the Exchange Act, except that in calculating the beneficial
ownership of any particular "person" (as that term is used in Section 13(d)(3)
of the Exchange Act), such "person" will be deemed to have beneficial ownership
of all securities that such "person" has the right to acquire by conversion or
exercise of other securities, whether such right is currently exercisable or is
exercisable only upon the occurrence of a subsequent condition. The terms
"Beneficially Owns" and "Beneficially Owned" have a corresponding meaning.
"Board of Directors" means:
(1) with respect to a corporation, the board of directors of the
corporation;
(2) with respect to a partnership, the board of directors of the general
partner of the partnership; and
(3) with respect to any other Person, the board or committee of such
Person serving a similar function.
"Capital Lease Obligation" means, at the time any determination is to be
made, the amount of the liability in respect of a capital lease that would at
that time be required to be capitalized on a balance sheet in accordance with
GAAP.
"Capital Stock" means:
(1) in the case of a corporation, corporate stock;
(2) in the case of an association or business entity, any and all shares,
interests, participations, rights or other equivalents (however
designated) of corporate stock;
(3) in the case of a partnership or limited liability company,
partnership or membership interests (whether general or limited); and
(4) any other interest or participation that confers on a Person the
right to receive a share of the profits and losses of, or
distributions of assets of, the issuing Person.
"Cash Equivalents" means:
(1) cash;
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(2) securities issued or directly and fully guaranteed or insured by the
United States, British or European Union government or any agency or
instrumentality of the United States, British or European Union
government (provided that the full faith and credit of the United
States, British or European Union is pledged in support of those
securities) having maturities of not more than six months from the
date of acquisition;
(3) certificates of deposit and eurodollar time deposits with maturities
of six months or less from the date of acquisition, bankers'
acceptances with maturities not exceeding six months and overnight
bank deposits, in each case, with any lender party to the Credit
Agreement or with any domestic, British or European Union commercial
bank having capital and surplus in excess of $150.0 million;
(4) repurchase obligations with a term of not more than 30 days for
underlying securities of the types described in clauses (2) and (3)
above entered into with any financial institution meeting the
qualifications specified in clause (3) above;
(5) commercial paper with a maturity of 365 days or less from the date of
acquisition issued by a corporation organized under the laws of any
state of the United States of America or the District of Columbia or
any foreign country recognized by the United States of America whose
debt rating, at the time as of which such investment is made, is at
least "A-1" by Standard & Poor's Corporation or at least "P-1" by
Moody's Investors Service, Inc. or rated at least an equivalent rating
category of another nationally recognized securities rating agency;
(6) any security, maturing not more than 365 days after the date of
acquisition, backed by standby or direct pay letters of credit issued
by a bank meeting the qualifications described in clause (3) above;
(7) any security, maturing not more than 365 days after 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 thereof, and rated at least "A" by Standard & Poor's
Corporation or at least "A" by Moody's Investors Service, Inc. or
rated at least an equivalent rating category of another nationally
recognized securities rating agency; and
(8) money market funds at least 95% of the assets of which constitute Cash
Equivalents of the kinds described in clauses (1) through (7) of this
definition.
"Change of Control" means the occurrence of any of the following:
(1) the direct or indirect sale, transfer, conveyance or other disposition
(other than by way of merger or consolidation), in one or a series of
related transactions, of all or substantially all of the properties or
assets of Metaldyne and the Restricted Subsidiaries, taken as a whole,
to any "person" (as that term is used in Section 13(d)(3) of the
Exchange Act) other than a Principal;
(2) the adoption of a plan relating to the liquidation or dissolution of
Metaldyne;
(3) the consummation of any transaction (including, without limitation,
any merger or consolidation) the result of which is that any "person"
(as defined above), other than the Principals or a Permitted Group,
becomes the Beneficial Owner, directly or indirectly, of more than 50%
of the Voting Stock of Metaldyne, measured by voting power rather than
number of shares; or
(4) the first day on which a majority of the members of the Board of
Directors of Metaldyne are not Continuing Directors.
"Comparable Treasury Issue" means the United States Treasury Security
selected by the Reference Treasury Dealer as having a maturity comparable to
the remaining term of the notes that would be utilized, at the time of
selection and in accordance with customary financial practice, in pricing new
issues of corporate debt securities of comparable maturity to the remaining
term of the notes.
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"Comparable Treasury Price" means with respect to any redemption date:
(1) the average of the bid and asked prices for the Comparable Treasury
Issue (expressed in each case as a percentage of its principal amount)
on the third Business Day preceding such redemption date, as set forth
in the daily statistical release (or any successor release) published
by the Federal Reserve Bank of New York and designated "Composite 3:30
p.m. Quotations for U.S. Government Securities"; or
(2) if such release (or any successor release) is not published or does
not contain such prices on such Business Day, (A) the average of the
Reference Treasury Dealer Quotations for such redemption date, after
excluding the highest and lowest of such Reference Treasury Dealer
Quotations or (B) if the trustee obtains fewer than three such
Reference Treasury Dealer Quotations, the average of all such
Quotations.
"Consolidated Assets" of any Person as of any date of determination means
the total assets of such Person as reflected on the most recently prepared
balance sheet of such Person, determined on a consolidated basis in accordance
with GAAP.
"Consolidated Cash Flow" means, with respect to any specified Person for
any period, the Consolidated Net Income of such Person for such period plus:
(1) an amount equal to any extraordinary loss plus any net loss realized
by such Person or any of its Restricted Subsidiaries in connection
with an Asset Sale, to the extent such losses were deducted in
computing such Consolidated Net Income; plus
(2) provision for taxes based on income or profits of such Person and its
Restricted Subsidiaries for such period, to the extent that such
provision for taxes was deducted in computing such Consolidated Net
Income; plus
(3) consolidated interest expense of such Person and its Restricted
Subsidiaries for such period, whether paid or accrued and whether or
not capitalized (including, without limitation, amortization of debt
issuance costs and original issue discount, non-cash interest
payments, the interest component of any deferred payment obligations,
the interest component of all payments associated with Capital Lease
Obligations, commissions, discounts and other fees and charges
incurred in respect of letter of credit or bankers' acceptance
financings, and net of the effect of all payments made or received
pursuant to Hedging Obligations), to the extent that any such expense
was deducted in computing such Consolidated Net Income; plus
(4) the loss on Qualified Receivables Transactions; plus
(5) dividends on preferred stock or accretion of discount on preferred
stock to the extent reducing Consolidated Net Income; plus
(6) depreciation, amortization (including amortization of goodwill and
other intangibles but excluding amortization of prepaid cash expenses
that were paid in a prior period) and other non-cash items (excluding
any such non-cash expense to the extent that it represents an accrual
of or reserve for cash expenses in any future period or amortization
of a prepaid cash expense that was paid in a prior period) of such
Person and its Restricted Subsidiaries for such period to the extent
that such depreciation, amortization and other non-cash items were
deducted in computing such Consolidated Net Income; minus
(7) non-cash items increasing such Consolidated Net Income for such
period, other than the accrual of revenue in the ordinary course of
business; plus
(8) non-cash gains or losses resulting from fluctuations in currency
exchange rates will be excluded; plus
(9) the disposition of any securities or the extinguishment of any
Indebtedness will be excluded;
in each case, on a consolidated basis and determined in accordance with GAAP;
provided, however, that the provision for taxes based on the income or profits
of, the consolidated depreciation and
77
amortization expense and such items of expense or income attributable to, a
Restricted Subsidiary shall be added to or subtracted from Consolidated Net
Income to compute Fixed Charge Coverage Ratio only to the extent (and in the
same proportion) that the net income of such Restricted Subsidiary was included
in calculating Consolidated Net Income.
"Consolidated Net Income" means, with respect to any specified Person for
any period, the aggregate of the Net Income of such Person and its Restricted
Subsidiaries for such period, on a consolidated basis, determined in accordance
with GAAP; provided that:
(1) the Net Income of any Person that is not a Restricted Subsidiary or
that is accounted for by the equity method of accounting will be
included only to the extent of the amount of dividends or
distributions paid in cash to the specified Person or a Restricted
Subsidiary of the Person;
(2) the Net Income of any Restricted Subsidiary will be excluded to the
extent that the declaration or payment of dividends or similar
distributions by that Restricted Subsidiary of that Net Income is not
at the date of determination permitted without any prior governmental
approval (that has not been obtained) or, directly or indirectly, by
operation of the terms of its charter or any agreement, instrument,
judgment, decree, order, statute, rule or governmental regulation
applicable to that Restricted Subsidiary or its stockholders;
provided, that if the Net Income of a Foreign Subsidiary for any
period would be excluded from the Consolidated Net Income of the
Company for such period under this clause (2) solely due to the effect
of a restriction on the payment of dividends or similar distributions
by such Foreign Subsidiary under the terms of Indebtedness of such
Foreign Subsidiary incurred in accordance with the terms of the
indenture (including if such Indebtedness incurrence is being tested),
such Net Income shall not be excluded from such Consolidated Net
Income if (x) the ratio of Consolidated Cash Flow of such Foreign
Subsidiary to the Fixed Charges of such Foreign Subsidiary, determined
at the time of the incurrence of such Indebtedness, was at least 2.0
to 1.0, and (y) the Consolidated Cash Flow of such Foreign Subsidiary
for the period under determination exceeds the Fixed Charges of such
Foreign Subsidiary for such period;
(3) the Net Income of any Person acquired in a pooling of interests
transaction for any period prior to the date of such acquisition will
be excluded; and
(4) the cumulative effect of a change in accounting principles will be
excluded.
"Continuing Directors" means, as of any date of determination, any member
of the Board of Directors of Metaldyne who:
(1) was a member of such Board of Directors on the date of the indenture;
or
(2) was nominated for election or elected to such Board of Directors with
the approval of a majority of the Continuing Directors who were
members of such Board at the time of such nomination or election or
designated as a Director under the Shareholders Agreement.
"Credit Agreement" means that certain Credit Agreement, dated as of
November 28, 2000, by and among Metaldyne, certain of its subsidiaries and The
Chase Manhattan Bank, as administrative agent and collateral agent, Credit
Suisse First Boston Corporation, as syndication agent, Comerica Bank, as
documentation agent, National City Bank, as documentation agent, Bank One,
N.A., as documentation agent, and the other lenders party thereto, as amended,
modified, renewed, refunded, replaced or refinanced from time to time.
"Credit Facilities" means, one or more debt facilities (including, without
limitation, the Credit Agreement) or commercial paper facilities, in each case
with banks or other institutional lenders providing for revolving credit loans,
term loans, receivables financing (including through the sale of receivables to
such lenders or to special purpose entities formed to borrow from such lenders
against such receivables) or letters of credit, in each case, as amended,
restated, modified, renewed, refunded, replaced or refinanced in whole or in
part from time to time.
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"Default" means any event that is, or with the passage of time or the
giving of notice or both would be, an Event of Default.
"Designated Senior Debt" means:
(1) any Indebtedness outstanding under the Credit Facilities and all
Hedging Obligations with respect thereto; and
(2) after payment in full of all Obligations under the Credit Facilities,
any other Senior Debt permitted under the indenture the principal
amount of which is $25.0 million or more and that has been designated
by Metaldyne as "Designated Senior Debt."
"Disqualified Stock" means any Capital Stock that, by its terms (or by the
terms of any security into which it is convertible, or for which it is
exchangeable, in each case at the option of the holder of the Capital Stock),
or upon the happening of any event, matures or is mandatorily redeemable,
pursuant to a sinking fund obligation or otherwise, or redeemable at the option
of the holder of the Capital Stock, in whole or in part, on or prior to the
date on which the notes mature. Notwithstanding the preceding sentence, any
Capital Stock that would constitute Disqualified Stock solely because the
holders of the Capital Stock have the right to require Metaldyne to repurchase
such Capital Stock upon the occurrence of a change of control or an asset sale
will not constitute Disqualified Stock if the terms of such Capital Stock
provide that Metaldyne may not repurchase or redeem any such Capital Stock
pursuant to such provisions unless such repurchase or redemption complies with
the covenant described above under the caption "--Certain Covenants--Restricted
Payments." Disqualified Stock shall not include the existing restricted stock
obligations of Metaldyne and the Existing Preferred Stock.
"Domestic Subsidiary" means any Restricted Subsidiary of Metaldyne that
was formed under the laws of the United States or any state of the United
States or the District of Columbia or that guarantees or otherwise provides
direct credit support for any Indebtedness of Metaldyne.
"Equity Interests" means Capital Stock and all warrants, options or other
rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock).
"Equity Offering" means a primary sale of Capital Stock of Metaldyne or,
to the extent the net cash proceeds thereof are paid to Metaldyne as a capital
contribution, Capital Stock for cash to a Person or Persons other than a
Subsidiary of Metaldyne.
"Existing Indebtedness" means the Indebtedness of Metaldyne and its
Subsidiaries (other than Indebtedness under the Credit Agreement) in existence
on the date of the indenture, until such amounts are repaid.
"Existing Preferred Stock" means the issued and outstanding series of
preferred stock of Metaldyne as of the date of the indenture.
"Fixed Charge Coverage Ratio" means with respect to any specified Person
for any period, the ratio of the Consolidated Cash Flow of such Person and its
Restricted Subsidiaries for such period to the Fixed Charges of such Person and
its Restricted Subsidiaries for such period. In the event that the specified
Person or any of its Restricted Subsidiaries incurs, repays, repurchases,
redeems, defeases or otherwise retires any Indebtedness (other than ordinary
working capital borrowings) or issues, repurchases or redeems preferred stock
subsequent to the commencement of the period for which the Fixed Charge
Coverage Ratio is being calculated and on or prior to the date on which the
event for which the calculation of the Fixed Charge Coverage Ratio is made (the
"Calculation Date"), then the Fixed Charge Coverage Ratio will be calculated
giving pro forma effect to such incurrence, repayment, repurchase, redemption,
defeasance or other retirement of Indebtedness, or such issuance, repurchase or
redemption of preferred stock, and the use of the proceeds therefrom as if the
same had occurred at the beginning of the applicable four-quarter reference
period.
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In addition, for purposes of calculating the Fixed Charge Coverage Ratio:
(1) acquisitions of a business or operations that have been made by the
specified Person or any of its Restricted Subsidiaries, including
through mergers or consolidations and including any related financing
transactions, during the four-quarter reference period or subsequent
to such reference period and on or prior to the Calculation Date will
be given pro forma effect as if they had occurred on the first day of
the four-quarter reference period and Consolidated Cash Flow for such
reference period will be calculated on a pro forma basis determined in
good faith by a responsible financial or accounting officer of
Metaldyne (and such calculations may include such pro forma
adjustments for non-recurring items that Metaldyne considers
reasonable in order to reflect the ongoing impact of any such
transaction on Metaldyne's results of operations), but without giving
effect to clause (3) of the proviso set forth in the definition of
Consolidated Net Income;
(2) the Consolidated Cash Flow attributable to discontinued operations, as
determined in accordance with GAAP, and operations or businesses
disposed of prior to the Calculation Date, will be excluded; and
(3) the Fixed Charges attributable to discontinued operations, as
determined in accordance with GAAP, and operations or businesses
disposed of prior to the Calculation Date, will be excluded, but only
to the extent that the obligations giving rise to such Fixed Charges
will not be obligations of the specified Person or any of its
Restricted Subsidiaries following the Calculation Date.
"Fixed Charges" means, with respect to any specified Person for any
period, the sum, without duplication, of:
(1) the consolidated interest expense of such Person and its Restricted
Subsidiaries for such period, whether paid or accrued, including,
without limitation, amortization of debt issuance costs and original
issue discount, non-cash interest payments, the interest component of
any deferred payment obligations, the interest component of all
payments associated with Capital Lease Obligations, commissions,
discounts and other fees and charges incurred in respect of letter of
credit or bankers' acceptance financings, and net of the effect of all
payments made or received pursuant to Hedging Obligations, to the
extent deducted in computing Consolidated Net Income; provided,
however, that with respect to any Restricted Subsidiary that is not a
Wholly-Owned Subsidiary, if the Consolidated Cash Flow of such
Restricted Subsidiary for such period is greater than or equal to such
consolidated interest expense of such Restricted Subsidiary for such
period, then such Person shall only include the consolidated interest
expense of such Restricted Subsidiary to the extent of the equity
ownership of such Person in such Restricted Subsidiary (calculated in
accordance with Section 13(d) of the Exchange Act); plus
(2) the consolidated interest of such Person and its Restricted
Subsidiaries that was capitalized during such period, to the extent
deducted in computing Consolidated Net Income; plus
(3) any interest expense on Indebtedness of another Person that is
Guaranteed by such Person or one of its Restricted Subsidiaries or
secured by a Lien on assets of such Person or one of its Restricted
Subsidiaries, whether or not such Guarantee or Lien is called upon;
plus
(4) the loss on Qualified Receivables Transactions; plus
(5) all dividends, whether paid in cash, assets or securities on any
series of preferred stock of Metaldyne or any Restricted Subsidiary,
other than dividends on Equity Interests payable solely in Equity
Interests of Metaldyne or a Guarantor (other than Disqualified Stock)
or to Metaldyne or a Restricted Subsidiary;
excluding, to the extent included in such consolidated interest expense, any of
the foregoing items of any Person acquired by Metaldyne or a Subsidiary of
Metaldyne in a pooling-of-interests transaction for any period prior to the
date of such transaction.
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"Foreign Subsidiary" means a Restricted Subsidiary that is organized under
the laws of any country other than the United States and substantially all the
assets of which are located outside the United States.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as have been approved by a significant segment of the accounting
profession, which are in effect from time to time.
"Guarantee" means a guarantee other than by endorsement of negotiable
instruments for collection in the ordinary course of business, direct or
indirect, in any manner including, without limitation, by way of a pledge of
assets or through letters of credit or reimbursement agreements in respect
thereof, of all or any part of any Indebtedness.
"Guarantors" means each of:
(1) the Domestic Subsidiaries of Metaldyne as of the date of the
indenture, other than the Receivables Subsidiary; and
(2) any other subsidiary that executes a Subsidiary Guarantee in
accordance with the provisions of the indenture;
and their respective successors and assigns.
"Heartland" means Heartland Industrial Partners, L.P., a Delaware limited
partnership, and its successors.
"Hedging Obligations" means, with respect to any specified Person, the
obligations of such Person under:
(1) interest rate swap agreements, interest rate cap agreements and
interest rate collar agreements; and
(2) other agreements or arrangements designed to protect such Person
against fluctuations in interest rates, commodity prices or currency
risks incurred in the ordinary course of business.
"Indebtedness" means, with respect to any specified Person, any
indebtedness of such Person, whether or not contingent:
(1) in respect of borrowed money;
(2) evidenced by bonds, notes, debentures or similar instruments or
letters of credit (or reimbursement agreements in respect thereof);
(3) in respect of banker's acceptances;
(4) representing Capital Lease Obligations;
(5) representing the balance deferred and unpaid of the purchase price of
any property, except any such balance that constitutes an accrued
expense or trade payable or non-competition or trade name licensing
arrangements on customary terms entered into in connection with an
acquisition; or
(6) representing any Hedging Obligations,
if and to the extent any of the preceding items (other than letters of credit
and Hedging Obligations) would appear as a liability upon a balance sheet of
the specified Person prepared in accordance with GAAP. In addition, the term
"Indebtedness" includes all Indebtedness of others secured by a Lien on any
asset of the specified Person (whether or not such Indebtedness is assumed by
the specified Person) and, to the extent not otherwise included, the Guarantee
by the specified Person of any Indebtedness of any other Person.
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The amount of any Indebtedness outstanding as of any date will be:
(1) the accreted value of the Indebtedness, in the case of any
Indebtedness issued with original issue discount; and
(2) the principal amount of the Indebtedness, together with any interest
on the Indebtedness that is more than 30 days past due, in the case of
any other Indebtedness.
"Investments" means, with respect to any Person, all direct or indirect
investments by such Person in other Persons (including Affiliates) in the forms
of loans (including Guarantees or other obligations), advances or capital
contributions (excluding commission, travel and similar advances to officers
and employees made in the ordinary course of business), purchases or other
acquisitions for consideration of Indebtedness, Equity Interests or other
securities, together with all items that are or would be classified as
investments on a balance sheet prepared in accordance with GAAP. If Metaldyne
or any Subsidiary of Metaldyne sells or otherwise disposes of any Equity
Interests of any direct or indirect Subsidiary of Metaldyne such that, after
giving effect to any such sale or disposition, such Person is no longer a
Subsidiary of Metaldyne, Metaldyne will be deemed to have made an Investment on
the date of any such sale or disposition equal to the fair market value of
Metaldyne's Investments in such Subsidiary that were not sold or disposed of in
an amount determined as provided in the final paragraph of the covenant
described above under the caption "--Certain Covenants--Restricted Payments."
The acquisition by Metaldyne or any Subsidiary of Metaldyne of a Person that
holds an Investment in a third Person will be deemed to be an Investment by
Metaldyne or such Subsidiary in such third Person in an amount equal to the
fair market value of the Investments held by the acquired Person in such third
Person in an amount determined as provided in the final paragraph of the
covenant described above under the caption "--Certain Covenants--Restricted
Payments."
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset,
whether or not filed, recorded or otherwise perfected under applicable law,
including any conditional sale or other title retention agreement, any lease in
the nature thereof, any option or other agreement to sell or give a security
interest in and, except in connection with any Qualified Receivables
Transaction, any filing of or agreement to give any financing statement under
the Uniform Commercial Code (or equivalent statutes) of any jurisdiction.
"Net Income" means, with respect to any specified Person, the net income
(loss) of such Person, determined in accordance with GAAP and before any
reduction in respect of preferred stock dividends, excluding, however:
(1) any gain or loss, together with any related provision for taxes on
such gain or loss, realized in connection with: (a) any Asset Sale; or
(b) the disposition of any securities by such Person or any of its
Restricted Subsidiaries or the extinguishment of any Indebtedness of
such Person or any of its Restricted Subsidiaries; and
(2) any extraordinary gain or loss, together with any related provision
for taxes on such extraordinary gain or loss.
"Net Proceeds" means the aggregate cash proceeds received by Metaldyne or
any of its Restricted Subsidiaries in respect of any Asset Sale (including,
without limitation, any cash received upon the sale or other disposition of any
non-cash consideration received in any Asset Sale), net of the direct costs
relating to such Asset Sale, including, without limitation, legal, accounting
and investment banking fees, and sales commissions, and any relocation expenses
incurred as a result of the Asset Sale, taxes paid or payable as a result of
the Asset Sale, in each case, after taking into account any available tax
credits or deductions and any tax sharing arrangements, and amounts required to
be applied to the repayment of Indebtedness, other than Indebtedness under a
Credit Facility, secured by a Lien on the asset or assets that were the subject
of such Asset Sale and any reserve for adjustment in respect of the sale price
of such asset or assets established in accordance with GAAP.
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"Non-Guarantor Subsidiaries" means MTSPC, Inc. and any other Receivables
Subsidiary, each non-Domestic Subsidiary and Domestic Subsidiary not required
to provide Guarantees under the Credit Agreement.
"Non-Recourse Debt" means Indebtedness:
(1) as to which neither Metaldyne nor any of the Restricted Subsidiaries
(a) provides credit support of any kind (including any undertaking,
agreement or instrument that would constitute Indebtedness), (b) is
directly or indirectly liable as a guarantor or otherwise, or (c)
constitutes the lender;
(2) no default with respect to which (including any rights that the
holders of the Indebtedness may have to take enforcement action
against an Unrestricted Subsidiary) would permit upon notice, lapse of
time or both any holder of any other Indebtedness (other than the
notes) of Metaldyne or any of the Restricted Subsidiaries to declare a
default on such other Indebtedness or cause the payment of the
Indebtedness to be accelerated or payable prior to its stated
maturity; and
(3) as to which the lenders have been notified in writing that they will
not have any recourse to the stock or assets of Metaldyne or any of
the Restricted Subsidiaries.
"Obligations" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
"Permitted Acquired Investment" means any Investment by any Person (the
"Subject Person") in another Person made prior to the time:
(1) the Subject Person became a Restricted Subsidiary,
(2) the Subject Person merged into or consolidated with a Restricted
Subsidiary, or
(3) another Restricted Subsidiary merged into or was consolidated with the
Subject Person (in a transaction in which the Subject Person became a
Restricted Subsidiary),
provided, that such Investment was not made in anticipation of any such
transaction and was outstanding prior to such transaction; provided, further,
that the book value of such Investments (excluding all Permitted Investments
(other than those referred to in clause (14) of the definition thereof)) does
not exceed 5% of the Consolidated Assets of the Subject Person immediately
prior to the Subject Person becoming a Restricted Subsidiary.
"Permitted Group" means any group of investors that is deemed to be a
"person" (as that term is used in Section 13(d)(3) of the Exchange Act) at any
time prior to an underwritten initial public offering of common stock of
Metaldyne, by virtue of the Stockholders Agreement, as the same may be amended,
modified or supplemented from time to time, provided that no single Person
(other than the Principals) Beneficially Owns (together with its Affiliates)
more of the Voting Stock of Metaldyne that is Beneficially Owned by such group
of investors than is then collectively Beneficially Owned by the Principals in
the aggregate.
"Permitted Investments" means:
(1) any Investment in Metaldyne or in a Restricted Subsidiary of
Metaldyne;
(2) any Investment in Cash Equivalents;
(3) any Investment by Metaldyne or any Subsidiary of Metaldyne in a
Person, if as a result of such Investment:
(a) such Person becomes a Restricted Subsidiary of Metaldyne; or
(b) such Person is merged, consolidated or amalgamated with or into,
or transfers or conveys substantially all of its assets to, or
is liquidated into, Metaldyne or a Restricted Subsidiary of
Metaldyne;
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(4) any Investment made as a result of the receipt of non-cash
consideration from an Asset Sale that was made pursuant to and in
compliance with the covenant described above under the caption
"--Repurchase at the Option of Holders--Asset Sales";
(5) any acquisition of assets to the extent in exchange for the issuance
of Equity Interests (other than Disqualified Stock) of Metaldyne;
(6) any Investments received in compromise of obligations of such persons
incurred in the ordinary course of trade creditors or customers that
were incurred in the ordinary course of business, including pursuant
to any plan of reorganization or similar arrangement upon the
bankruptcy or insolvency of any trade creditor or customer;
(7) Hedging Obligations;
(8) lease, utility and other similar deposits in the ordinary course of
business;
(9) Investments existing on the date of the indenture;
(10) loans or advances to employees for purposes of purchasing Capital
Stock of Metaldyne in an aggregate amount outstanding at any one time
not to exceed $7.5 million and other loans and advances to employees
of Metaldyne and its Subsidiaries in the ordinary course of business
and on terms consistent with practices in effect prior to the date of
the indenture, including travel, moving and other like advances;
(11) loans or advances to vendors or contractors of Metaldyne in the
ordinary course of business and consistent with past practices;
(12) Investments in Unrestricted Subsidiaries, partnerships or joint
ventures involving Metaldyne or its Restricted Subsidiaries, if the
amount of such Investment (after taking into account the amount of all
other Investments made pursuant to this clause (12), less any return
of capital realized or any repayment of principal received on such
Permitted Investments, or any release or other cancellation of any
Guarantee constituting such Permitted Investment, which has not at
such time been reinvested in Permitted Investments made pursuant to
this clause (12) does not exceed 2.5% of Metaldyne's Consolidated
Assets);
(13) the acquisition by a Receivables Subsidiary in connection with a
Qualified Receivables Transaction of Equity Interests of a trust or
other Person established by such Receivables Subsidiary to effect such
Qualified Receivables Transaction; and any other Investment by
Metaldyne or a Subsidiary of Metaldyne in a Receivables Subsidiary or
any Investment by a Receivables Subsidiary in any other Person in
connection with a Qualified Receivables Transaction; and
(14) Permitted Acquired Investments.
"Permitted Junior Securities" means:
(1) Equity Interests in Metaldyne or any Guarantor; or
(2) debt securities that are subordinated to all Senior Debt and any debt
securities issued in exchange for Senior Debt to substantially the
same extent as, or to a greater extent than, the notes and the
Subsidiary Guarantees are subordinated to Senior Debt under the
indenture.
"Permitted Liens" means:
(1) Liens to secure Senior Debt of Metaldyne and any Guarantor or to
secure Indebtedness of a Restricted Subsidiary that is not a
Guarantor, including, without limitation, Indebtedness and other
Obligations under Credit Facilities;
(2) Liens in favor of Metaldyne or the Guarantors;
(3) Liens on property of a Person existing at the time such Person is
merged with or into or consolidated with Metaldyne or any Subsidiary
of Metaldyne; provided that such Liens were
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in existence prior to the contemplation of such merger or
consolidation and do not extend to any assets other than those of the
Person merged into or consolidated with Metaldyne or the Subsidiary;
(4) Liens on property existing at the time of acquisition of the property
by Metaldyne or any Subsidiary of Metaldyne, provided that such Liens
were in existence prior to the contemplation of such acquisition;
(5) Liens to secure the performance of statutory obligations, surety or
appeal bonds, performance bonds or other obligations of a like nature
incurred in the ordinary course of business;
(6) Liens to secure Indebtedness (including Capital Lease Obligations)
permitted by clause (4) of the second paragraph of the covenant
entitled "--Certain Covenants--Incurrence of Indebtedness and Issuance
of Preferred Stock" covering only the assets acquired with such
Indebtedness;
(7) Liens existing on the date of the indenture;
(8) Liens for taxes, assessments or governmental charges or claims that
are not yet delinquent or that are being contested in good faith by
appropriate proceedings promptly instituted and diligently concluded,
provided that any reserve or other appropriate provision as is
required in conformity with GAAP has been made therefor;
(9) Liens on assets of Metaldyne or a Receivables Subsidiary incurred in
connection with a Qualified Receivables Transaction;
(10) Liens replacing any of the items set forth in clauses (1), (3), (4)
and (7) above, provided, that (A) the principal amount of the
Indebtedness secured by such Liens shall not be increased (except with
respect to premiums or other payments paid in connection with a
concurrent Refinancing of such Indebtedness and the expenses incurred
in connection therewith), (B) the principal amount of the Indebtedness
secured by such Liens, determined as of the date of incurrence, has a
Weighted Average Life to Maturity at least equal to the remaining
Weighted Average Life to Maturity of the Indebtedness being Refinanced
or repaid, (C) the maturity of the Indebtedness secured by such Liens
is not earlier than that of the Indebtedness to be Refinanced, (D)
such Liens have the same or a lower ranking and priority as the Liens
being replaced, and (E) such Liens shall be limited to the property or
assets encumbered by the Lien so replaced;
(11) Liens encumbering cash proceeds (or securities purchased therewith)
from Indebtedness permitted to be incurred pursuant to the "Incurrence
of Indebtedness and Issuance of Preferred Stock" covenant which are
set aside at the time of such incurrence in order to secure an escrow
arrangement pursuant to which such cash proceeds (or securities
purchased therewith) are contemplated to ultimately be released to
Metaldyne or a Restricted Subsidiary or returned to the lenders of
such Indebtedness, provided, that such Liens are automatically
released concurrently with the release of such cash proceeds (or
securities purchased therewith) from such escrow arrangement;
(12) Liens (including extensions, renewals and replacements thereof) upon
property or assets created for the purpose of securing Indebtedness
incurred to finance or Refinance the cost (including the cost of
construction) of such property or assets, provided, that (A) the
principal amount of the Indebtedness secured by such Lien does not
exceed 100% of the cost of such property or assets, (B) such Lien does
not extend to or cover any property or assets other than the property
or assets being financed or Refinanced by such Indebtedness and any
improvements thereon, and (C) the incurrence of such Indebtedness is
permitted by the "Incurrence of Indebtedness and Issuance of Preferred
Stock" covenant;
(13) Liens securing Indebtedness of Foreign Subsidiaries permitted to be
incurred under the "Incurrence of Indebtedness and Issuance of
Preferred Stock" covenant;
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(14) Liens (other than Liens securing subordinated Indebtedness) which,
when the Indebtedness relating to those Liens is added to all other
then outstanding Indebtedness of Metaldyne and its Restricted
Subsidiaries secured by Liens and not listed in clauses (1) through
(13) above or (15) through (26) below, does not exceed 5% of the
Consolidated Assets of Metaldyne;
(15) Liens incurred or deposits made in the ordinary course of business in
connection with workers' compensation, unemployment insurance and
other types of social security or similar obligations, including any
Lien securing letters of credit issued in the ordinary course of
business consistent with past practice in connection therewith, or to
secure the performance of tenders, statutory obligations, surety and
appeal bonds, bids, leases, government contracts, performance and
return-of-money bonds and other similar obligations (exclusive of
obligations for the payment of borrowed money);
(16) judgment Liens not accompanied by an Event of Default of the type
described in clause (6) under "Events of Default" arising from such
judgment;
(17) easements, rights-of-way, zoning restrictions, minor defects or
irregularities in title and other similar charges or encumbrances in
respect of real property not interfering in any material respect with
the ordinary conduct of business of Metaldyne or any of its Restricted
Subsidiaries;
(18) any interest or title of a lessor under any lease, whether or not
characterized as capital or operating; provided, that such Liens do
not extend to any property or assets which is not leased property
subject to such lease;
(19) Liens upon specific items of inventory or other goods and proceeds of
any Person securing such Person's obligations in respect of bankers'
acceptances issued or created for the account of such Person to
facilitate the purchase, shipment or storage of such inventory or
other goods;
(20) Liens securing reimbursement obligations with respect to letters of
credit which encumber documents and other property relating to such
letters of credit and products and proceeds thereof;
(21) Liens encumbering deposits made to secure obligations arising from
statutory, regulatory, contractual, or warranty requirements of
Metaldyne or any of the Restricted Subsidiaries, including rights of
offset and set-off;
(22) leases or subleases granted to others not interfering in any material
respect with the business of Metaldyne or the Restricted Subsidiaries;
(23) Liens securing Hedging Obligations;
(24) Liens in favor of customs and revenue authorities arising as a matter
of law to secure payment of custom duties in connection with
importation of goods;
(25) Liens encumbering initial deposits and margin deposits, and other
Liens incurred in the ordinary course of business and that are within
the general parameters customary in the industry; and
(26) Liens arising from filing Uniform Commercial Code financing statements
regarding leases.
"Permitted Refinancing Indebtedness" means any Indebtedness of Metaldyne
or any of its Restricted Subsidiaries issued in exchange for, or the net
proceeds of which are used to extend, refinance, renew, replace, defease or
refund other Indebtedness of Metaldyne or any of its Restricted Subsidiaries
(other than intercompany Indebtedness); provided that:
(1) the principal amount (or accreted value, if applicable) of such
Permitted Refinancing Indebtedness does not exceed the principal
amount (or accreted value, if applicable) of the Indebtedness
extended, refinanced, renewed, replaced, defeased or refunded (plus
all accrued interest on the Indebtedness and the amount of all
expenses and premiums incurred in connection therewith);
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(2) such Permitted Refinancing Indebtedness has a final maturity date
later than the final maturity date of, and has a Weighted Average Life
to Maturity equal to or greater than the Weighted Average Life to
Maturity of, the Indebtedness being extended, refinanced, renewed,
replaced, defeased or refunded;
(3) if the Indebtedness being extended, refinanced, renewed, replaced,
defeased or refunded is subordinated in right of payment to the notes,
such Permitted Refinancing Indebtedness has a final maturity date
later than the final maturity date of, and is subordinated in right of
payment to, the notes on terms at least as favorable to the Holders of
notes as those contained in the documentation governing the
Indebtedness being extended, refinanced, renewed, replaced, defeased
or refunded; and
(4) such Indebtedness is incurred either by Metaldyne, a Guarantor or by
the Restricted Subsidiary who is the obligor on the Indebtedness being
extended, refinanced, renewed, replaced, defeased or refunded.
"Person" means any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization, limited
liability company or government or other entity.
"Principals" means Heartland and any of its Affiliates.
"Qualified Receivables Transaction" means any transaction or series of
transactions entered into by Metaldyne or any of its Subsidiaries pursuant to
which Metaldyne or any of its Subsidiaries sells, conveys or otherwise
transfers to (i) a Receivables Subsidiary (in the case of a transfer by
Metaldyne or any of its Subsidiaries) and (ii) any other Person (in the case of
a transfer by a Receivables Subsidiary), or grants a security interest in, any
accounts receivable (whether now existing or arising in the future) of
Metaldyne or any of its Subsidiaries, and any assets related thereto including,
without limitation, all collateral securing such accounts receivable, all
contracts and all guarantees or other obligations in respect of such accounts
receivable, proceeds of such accounts receivable and other assets which are
customarily transferred or in respect of which security interests are
customarily granted in connection with asset securitization transactions
involving accounts receivable.
"Recapitalization Agreement" means that certain recapitalization agreement
dated August 1, 2000 between MascoTech, Inc. (now known as Metaldyne) and
Riverside Company LLC, as amended.
"Receivables" means receivables, chattel paper, instruments, documents or
intangibles evidencing or relating to the right to payment of money.
"Receivables" shall include the indebtedness and payment obligations of any
Person to Metaldyne or a Subsidiary arising from a sale of merchandise or
services by Metaldyne or such Subsidiary in the ordinary course of its
business, including any right to payment for goods sold or for services
rendered, and including the right to payment of any interest, finance charges,
returned check or late charges and other obligations of such Person with
respect thereto. Receivables shall also include (a) all of Metaldyne's or such
Subsidiary's interest in the merchandise (including returned merchandise), if
any, relating to the sale which gave rise to such Receivable, (b) all other
security interests or Liens and property subject thereto from time to time
purporting to secure payment of such Receivable, whether pursuant to the
contract related to such Receivable or otherwise, together with all financing
statements signed by an Obligor describing any collateral securing such
Receivable, and (c) all guarantees, insurance, letters of credit and other
agreements or arrangements of whatever character from time to time supporting
or securing payment of such Receivable whether pursuant to the contract related
to such Receivable or otherwise.
"Receivables Subsidiary" means a Subsidiary of Metaldyne which engages in
no activities other than in connection with the financing of accounts
receivable and which is designated by the Board of Directors of Metaldyne (as
provided below) as a Receivables Subsidiary (a) no portion of the Indebtedness
or any other Obligations (contingent or otherwise) of which (i) is guaranteed
by Metaldyne or any Subsidiary of Metaldyne (excluding guarantees of
Obligations (other than the principal of, and interest on, Indebtedness)
pursuant to representations, warranties, covenants and indemnities entered into
in the ordinary course of business in connection with a Qualified Receivables
Transaction), (ii) is recourse to or obligates Metaldyne or any Subsidiary of
Metaldyne in any way
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other than pursuant to representations, warranties, covenants and indemnities
entered into in the ordinary course of business in connection with a Qualified
Receivables Transaction or (iii) subjects any property or asset of Metaldyne or
any Subsidiary of Metaldyne (other than accounts receivable and related assets
as provided in the definition of "Qualified Receivables Transaction"), directly
or indirectly, contingently or otherwise, to the satisfaction thereof, other
than pursuant to representations, warranties, covenants, limited repurchase
obligations and indemnities entered into in the ordinary course of business in
connection with a Qualified Receivables Transaction, (b) with which neither
Metaldyne nor any Subsidiary of Metaldyne has any material contract, agreement,
arrangement or understanding other than on terms no less favorable to Metaldyne
or such Subsidiary than those that might be obtained at the time from Persons
who are not Affiliates of Metaldyne, other than fees payable in the ordinary
course of business in connection with servicing accounts receivable and (c)
with which neither Metaldyne nor any Subsidiary of Metaldyne has any obligation
to maintain or preserve such Subsidiary's financial condition or cause such
Subsidiary to achieve certain levels of operating results. Any such designation
by the Board of Directors of Metaldyne will be evidenced to the Trustee by
filing with the Trustee a certified copy of the resolution of the Board of
Directors (which resolution shall be conclusive) of Metaldyne giving effect to
such designation and an Officers' Certificate certifying that such designation
complied with the foregoing conditions.
"Reference Treasury Dealer" means Credit Suisse First Boston Corporation
and its successors; provided, however, that if Credit Suisse First Boston
Corporation shall cease to be a primary U.S. government securities dealer in
New York City (a "Primary Treasury Dealer"), Metaldyne shall substitute
therefor another primary U.S. government securities dealer to be the Primary
Treasury Dealer.
"Reference Treasury Dealer Quotations" means, with respect to any
redemption date, the average as determined by the trustee, of the bid and asked
prices of the Comparable Treasury Issue (expressed in each case as a percentage
of its principal amount) quoted in writing to the trustee by the Reference
Treasury Dealer at 9:00 a.m. on the third Business Day preceding such
redemption date.
"Refinance" means, with respect to any Indebtedness, a renewal, extension,
refinancing, replacement, amendment, restatement or refunding of such
Indebtedness, and shall include any successive Refinancing of any of the
foregoing.
"Remaining Scheduled Payments" means, with respect to each note to be
redeemed, the sum of (a) the redemption price of such note on June 15, 2007 and
(b) the remaining scheduled payments of interest thereon that would be due on
or prior to June 15, 2007 (but after the related redemption date but for such
redemption); provided, however, that, if such redemption date is not an
interest payment date on the notes, the amount of the next succeeding scheduled
interest payment on the notes to be redeemed will be reduced by the amount of
interest accrued on those notes to such redemption date.
"Restricted Investment" means an Investment other than a Permitted
Investment.
"Restricted Subsidiary" of a Person means any Subsidiary of the referent
Person that is not an Unrestricted Subsidiary.
"Senior Debt" means:
(1) all Indebtedness of Metaldyne or any Guarantor outstanding under
Credit Facilities and all Hedging Obligations with respect thereto;
(2) any other Indebtedness of Metaldyne or any Guarantor permitted to be
incurred under the terms of the indenture, unless the instrument under
which such Indebtedness is incurred expressly provides that it is on a
parity with or subordinated in right of payment to the notes or any
Subsidiary Guarantee; and
(3) all Obligations with respect to the items listed in the preceding
clauses (1) and (2).
Notwithstanding anything to the contrary in the preceding, Senior Debt
will not include:
(1) any liability for federal, state, local or other taxes owed or owing
by Metaldyne;
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(2) any intercompany Indebtedness of Metaldyne or any of its Subsidiaries
to Metaldyne or any of its Affiliates;
(3) any trade payables; or
(4) the portion of any Indebtedness that is incurred in violation of the
indenture; provided that such Indebtedness shall be deemed not to have
been incurred in violation of the indenture for purposes of this
clause (4) if such Indebtedness consists of Indebtedness under any
Credit Facility and holders of such Indebtedness or their agent or
representative (i) had no actual knowledge at the time of the
incurrence that the incurrence of such Indebtedness violated the
indenture and (ii) shall have received an officers' certificate to the
effect that the incurrence of such Indebtedness does not violate the
provisions of the indenture.
"Shareholders Agreement" means that certain shareholders agreement by and
among Heartland, Credit Suisse First Boston Equity Partners, L.P., Masco
Corporation, Richard Manoogian, their various affiliates and certain other
stockholders of the Company relating to their ownership in the Company.
"Significant Subsidiary" means any Subsidiary that would be a "significant
subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X, promulgated
pursuant to the Securities Act, as such Regulation is in effect on the date
hereof.
"Stated Maturity" means, with respect to any installment of interest or
principal on any series of Indebtedness, the date on which the payment of
interest or principal was scheduled to be paid in the original documentation
governing such Indebtedness, and will not include any contingent obligations to
repay, redeem or repurchase any such interest or principal prior to the date
originally scheduled for the payment thereof.
"Stock Purchase Agreement" means that certain stock purchase agreement,
dated May 17, 2002, by and among Metaldyne, TriMas Corporation and Heartland
under which Heartland and other investors will acquire a majority of the common
stock of Metaldyne.
"Subsidiary" means, with respect to any specified Person:
(1) any corporation, association or other business entity of which more
than 50% of the total voting power of shares of Capital Stock entitled
(without regard to the occurrence of any contingency) to vote in the
election of directors, managers or trustees of the corporation,
association or other business entity is at the time owned or
controlled, directly or indirectly, by that Person or one or more of
the other Subsidiaries of that Person (or a combination thereof); and
(2) any partnership (a) the sole general partner or the managing general
partner of which is such Person or a Subsidiary of such Person or (b)
the only general partners of which are that Person or one or more
Subsidiaries of that Person (or any combination thereof).
"TriMas" means TriMas Corporation, a Delaware corporation.
"TriMas Corporate Services Agreement" means that certain corporate
services agreement by and between Metaldyne and TriMas Corporation pursuant to
which Metaldyne and its subsidiaries will provide management information
systems, legal, tax, accounting, human resources and other support services to
TriMas.
"TriMas Shareholders Agreement" means that certain shareholders agreement
by and among TriMas, Heartland, Metaldyne Company LLC and other investors party
thereto relating to their ownership in TriMas.
"Unrestricted Subsidiary" means any Subsidiary of Metaldyne that is
designated by the Board of Directors as an Unrestricted Subsidiary pursuant to
a Board Resolution, but only to the extent that such Subsidiary is not party to
any agreement, contract, arrangement or understanding with Metaldyne or any
Restricted Subsidiary of Metaldyne unless the terms of all such agreements,
contracts, arrangements or understandings are no less favorable to Metaldyne or
such Restricted Subsidiary than those that might be obtained at the time from
Persons who are not Affiliates of Metaldyne.
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Any designation of a Subsidiary of Metaldyne as an Unrestricted Subsidiary
will be evidenced to the trustee by filing with the trustee a certified copy of
the Board Resolution giving effect to such designation and an officers'
certificate certifying that such designation complied with the preceding
conditions and was permitted by the covenant described above under the caption
"--Certain Covenants--Restricted Payments." If, at any time, any Unrestricted
Subsidiary would fail to meet the preceding requirements as an Unrestricted
Subsidiary, it will thereafter cease to be an Unrestricted Subsidiary for
purposes of the indenture and any Indebtedness of such Subsidiary will be
deemed to be incurred by a Restricted Subsidiary of Metaldyne as of such date
and, if such Indebtedness is not permitted to be incurred as of such date under
the covenant described under the caption "--Certain Covenants--Incurrence of
Indebtedness and Issuance of Preferred Stock," Metaldyne will be in default of
such covenant. The Board of Directors of Metaldyne may at any time designate
any Unrestricted Subsidiary to be a Restricted Subsidiary; provided that such
designation will be deemed to be an incurrence of Indebtedness by a Restricted
Subsidiary of Metaldyne of any outstanding Indebtedness of such Unrestricted
Subsidiary and such designation will only be permitted if (1) such Indebtedness
is permitted under the covenant described under the caption "--Certain
Covenants-- Incurrence of Indebtedness and Issuance of Preferred Stock,"
calculated on a pro forma basis as if such designation had occurred at the
beginning of the four-quarter reference period; and (2) no Default or Event of
Default would be in existence following such designation.
"Voting Stock" of any Person as of any date means the Capital Stock of
such Person that is at the time entitled to vote in the election of the Board
of Directors of such Person.
"Weighted Average Life to Maturity" means, when applied to any
Indebtedness at any date, the number of years obtained by dividing:
(1) the sum of the products obtained by multiplying (a) the amount of each
then remaining installment, sinking fund, serial maturity or other
required payments of principal, including payment at final maturity,
in respect of the Indebtedness, by (b) the number of years (calculated
to the nearest one-twelfth) that will elapse between such date and the
making of such payment; by
(2) the then outstanding principal amount of such Indebtedness.
"Wholly-Owned Subsidiary" of any specified Person means a Subsidiary of
such Person all of the outstanding Capital Stock or other ownership interests
of which (other than directors' qualifying shares) will at the time be owned by
such Person or by one or more Wholly-Owned Subsidiaries of such Person and one
or more Wholly-Owned Subsidiaries of such Person.
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CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The following summary describes the material U.S. federal income tax
consequences associated with the exchange of outstanding notes for exchange
notes and of the acquisition, beneficial ownership and disposition of the
exchange notes. Except where otherwise noted, it deals only with purchasers of
notes who purchase their notes in the original offering at the offering price
and who hold the notes as capital assets. This summary does not deal with
special classes of holders such as dealers in securities, partnerships or other
pass-through entities, financial institutions, life insurance companies,
certain expatriates, persons holding the notes as part of a straddle or hedging
or conversion transaction or persons whose functional currency is not the U.S.
dollar. Moreover, this summary is based upon the provisions of the Internal
Revenue Code of 1986, as amended (the "Code"), and regulations, rulings and
judicial decisions thereunder as now in effect, and such authorities may be
repealed, revoked or modified (possibly on a retroactive basis) so as to result
in federal income tax consequences different from those discussed below.
As used herein, a "U.S. holder" is a beneficial owner of the notes that
for U.S. federal income tax purposes is:
o a citizen or resident of the U.S.,
o a corporation (or an entity treated as a corporation) which is
organized under the laws of the U.S. or any political subdivision
thereof,
o an estate, the income of which is subject to U.S. federal income tax
without regard to its source, or
o a trust if a court within the U.S. is able to exercise primary
supervision over the administration of the trust and one or more U.S.
persons have the authority to control all substantial decisions of the
trust, or if the trust has made a valid election to be treated as a
United States person.
A Non-U.S. holder is a beneficial owner that is for U.S. federal income
tax purposes either a nonresident alien or a corporation, estate or trust that
is not a U.S. holder.
If a partnership holds the notes, the tax treatment of a partner will
generally depend upon the status of the partner and the activities of the
partnership. If you are a partner of a partnership holding the notes, you
should consult your tax advisors.
EXCHANGE OF NOTES
The exchange of notes for exchange notes pursuant to this exchange offer
will not constitute a taxable event for U.S. federal income tax purposes to
U.S. holders. Consequently, no gain or loss will be recognized by a U.S. holder
upon receipt of an exchange note. The holding period and tax basis of an
exchange note will be the same as the holding period and tax basis, immediately
before the exchange, of the note so exchanged.
U.S. HOLDERS
The following is a summary of the material U.S. federal tax consequences
that will apply to you if you are a U.S. holder of the notes. Material
consequences to Non-U.S. holders of the notes are described under "Non-U.S.
Holders" below.
PAYMENTS OF INTEREST
Payments of stated interest and additional interest, if any, on a note
will generally be taxable to a U.S. holder as ordinary income at the time it is
paid or accrued, depending on the U.S. holder's method of accounting for tax
purposes.
We intend to take the position that a repurchase at the option of holders
if a change of control occurs is remote and do not intend to treat the
possibility of a repurchase at the option of holders at a
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price in excess of the aggregate principal amount, plus accrued interest as
affecting the yield and maturity of the notes. However, the IRS may take a
different position which could affect both the timing of a U.S. holder's
recognition of income and the availability of our deduction with respect to
such additional amounts.
SALE, EXCHANGE AND RETIREMENT OF NOTES
Upon a sale, exchange (other than an exchange of notes for exchange notes)
or retirement of a note, a U.S. holder generally will recognize gain or loss
equal to the difference between the amount received upon the sale, exchange or
retirement (less any amount attributable to accrued interest which will be
taxable as ordinary income, if not previously taken into income) and the
holder's tax basis in the note at that time.
Gain or loss realized on the sale, exchange or retirement of a note will
be capital gain or loss and will be long-term capital gain or loss if at the
time of sale, exchange or retirement the note has been held for more than one
year. Under current law, long-term capital gains of certain non-corporate
holders are generally taxed at lower rates than items of ordinary income. The
use of capital losses is subject to limitations.
NON-U.S. HOLDERS
The following is a summary of the material U.S. federal tax consequences
that will apply to you if you are a Non-U.S. holder of the notes. This summary
does not present a detailed description of the U.S. federal tax consequences to
you in light of your particular circumstances. In addition, it does not deal
with Non-U.S. holders subject to special treatment under U.S. federal tax laws
(including if you are a controlled foreign corporation, a passive foreign
investment company, a foreign personal holding company, a corporation that
accumulates earnings to avoid U.S. federal income tax, or, in certain
circumstances, a United States expatriate).
Under present U.S. federal income tax law and subject to the discussion of
information reporting and backup withholding below, payments of interest on the
notes to or on behalf of any Non-U.S. holder who is not engaged in a trade or
business within the U.S. with which interest on the notes is effectively
connected will not be subject to U.S. federal income or withholding tax,
provided that:
o such beneficial owner does not actually or constructively own ten
percent or more of the total combined voting power of all classes of
our voting stock within the meaning of the Code and applicable U.S.
Treasury regulations,
o such beneficial owner is not a controlled foreign corporation for U.S.
federal income tax purposes (generally, a foreign corporation
controlled by U.S. shareholders) that is related to us through stock
ownership, and
o certain certification requirements are met.
A Non-U.S. holder will not be exempt from U.S. withholding tax, however,
if the withholding agent or intermediary knows or has reason to know the
Non-U.S. holder should not be exempt. If a Non-U.S. holder does not qualify for
the foregoing exemption, interest payments to the Non-U.S. holder generally
will be subject to a 30% withholding tax (unless reduced or eliminated by an
applicable treaty and certain certification requirements are met).
Any capital gain realized upon a sale, exchange or retirement of a note by
or on behalf of a Non-U.S. holder ordinarily will not be subject to a U.S.
federal withholding or income tax unless (i) such gain is effectively connected
with a U.S. trade or business of the holder or (ii) in the case of an
individual, such beneficial owner is present in the U.S. for 183 days or more
during the taxable year of the sale, exchange or retirement and certain other
requirements are met. As noted above, an exchange of a note for an exchange
note pursuant to the exchange offer will not constitute a taxable exchange.
If interest and other payments received by a Non-U.S. holder with respect
to the notes (including proceeds from the disposition of the notes) are
effectively connected with the conduct by the
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Non-U.S. holder of a trade or business within the U.S. (or the Non-U.S. holder
is otherwise subject to U.S. federal income taxation on a net basis with
respect to such holder's ownership of the notes), such Non-U.S. holder will
generally not be subject to withholding tax (provided certain certification
requirements are met), but instead will generally be subject to the rules
described above for a U.S. holder (subject to any modification provided under
an applicable income tax treaty). Such Non-U.S. holder may also be subject to
the "branch profits tax" if such Non-U.S. holder is a corporation.
INFORMATION REPORTING AND BACKUP WITHHOLDING
In general, information reporting will apply to payments of principal,
premium, if any, and interest on a note and the proceeds of the sale of a note
with respect to U.S. holders. Backup withholding at a rate of 30% (subject to
periodic reductions through 2006) will apply to such payments if a U.S. holder
fails to provide a taxpayer identification number to certify that such U.S.
holder is not subject to backup withholding, or otherwise to comply with the
applicable requirements of the backup withholding rules. Certain U.S. holders
(including, among others, corporations) are not subject to the backup
withholding and reporting requirements.
We must report annually to the IRS and to each Non-U.S. holder on Form
1042-S the amount of interest paid on a note, regardless of whether withholding
was required, and any tax withheld with respect to the interest. Under the
provisions of an income tax treaty and other applicable agreements, copies of
these information returns may be made available to the tax authorities of the
country in which the Non-U.S holder resides.
Backup withholding generally will not apply to payments made by us or our
paying agent to a Non-U.S. holder of a note who provides the requisite
certification (on an IRS Form W-8BEN or other applicable form) or otherwise
establishes that it qualifies for an exemption from backup withholding.
Payments of the proceeds of a disposition of the notes by or through a U.S.
office of a broker generally will be subject to backup withholding and
information reporting unless the Non-U.S. holder certifies that it is a
Non-U.S. holder under penalties of perjury or otherwise establishes that it
qualifies for an exemption. Payments of principal or premium, if any, or the
proceeds of a disposition of the notes by or through a foreign office of a U.S.
broker or foreign broker with certain relationships to the United States
generally will be subject to information reporting, but not backup withholding,
unless such broker has documentary evidence in its records that the holder is a
Non-U.S. holder and certain other conditions are met, or the exemption is
otherwise established.
Backup withholding is not an additional tax; any amounts withheld under
the backup withholding rules will be allowed as a refund or a credit against
such holder's U.S. federal income tax liability provided the required
information is furnished to the IRS.
THE FOREGOING SUMMARY DOES NOT DISCUSS ALL ASPECTS OF U.S. FEDERAL INCOME
TAXATION THAT MAY BE RELEVANT TO A PARTICULAR HOLDER IN LIGHT OF ITS PARTICULAR
CIRCUMSTANCES AND TAX SITUATION. A HOLDER SHOULD CONSULT SUCH HOLDER'S TAX
ADVISOR AS TO THE SPECIFIC TAX CONSEQUENCES TO SUCH HOLDER OF THE OWNERSHIP AND
DISPOSITION OF THE NOTES, INCLUDING THE APPLICATION AND EFFECT OF STATE, LOCAL,
FOREIGN, AND OTHER TAX LAWS OR SUBSEQUENT VERSIONS THEREOF.
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PLAN OF DISTRIBUTION
Each broker-dealer that receives exchange notes for its own account
pursuant to the exchange offer must acknowledge that it will deliver a
prospectus in connection with any resale of such exchange notes. This
prospectus, as it may be amended or supplemented from time to time, may be used
by a broker-dealer in connection with resales of exchange notes received in
exchange for outstanding notes where such outstanding notes were acquired by
such broker-dealer as a result of market-making activities or other trading
activities. We have agreed that for a period of 30 days after effectiveness of
the exchange offer registration statement, we will make this prospectus, as
amended or supplemented, available to any broker-dealer for use in connection
with any such resale.
We will not receive any proceeds from any sale of exchange notes by
broker-dealers. Exchange notes received by broker-dealers for their own account
pursuant to the exchange offer may be sold from time to time in one or more
transactions in the over-the-counter market, in negotiated transactions,
through the writing of options on the exchange notes or a combination of such
methods of resale, at market prices prevailing at the time of resale, at prices
related to such prevailing market prices or at negotiated prices. Any such
resale may be made directly to purchasers or to or through brokers or dealers
who may receive compensation in the form of commissions or concessions from any
such broker-dealer and/or the purchasers of any such exchange notes. Any
broker-dealer that resells exchange notes that were received by it for its own
account pursuant to the exchange offer and any broker or dealer that
participates in a distribution of such exchange notes may be deemed to be an
"underwriter" within the meaning of the Securities Act and any profit of any
such resale of exchange notes and any commissions or concessions received by
any such persons may be deemed to be underwriting compensation under the
Securities Act. The letter of transmittal states that, by acknowledging that it
will deliver and by delivering a prospectus, a broker-dealer will not be deemed
to admit that it is an "underwriter" within the meaning of the Securities Act.
By acceptance of the exchange offer, each broker-dealer that receives exchange
notes pursuant to the exchange offer hereby agrees to notify us prior to using
this prospectus in connection with the sale or transfer of exchange notes, and
acknowledges and agrees that, upon receipt of notice from us of the happening
of any event which makes any statement in this prospectus untrue in any
material respect or which requires the making of any changes in this prospectus
in order to make the statements herein not misleading (which notice we agree to
deliver promptly to such broker-dealer), such broker-dealer will suspend use of
this prospectus until we have amended or supplemented the prospectus to correct
such misstatement or omission and have furnished copies of the amended or
supplemented prospectus to such broker-dealer.
For a period of 30 days after effectiveness of the exchange offer
registration statement, we will promptly upon request send additional copies of
this prospectus and any amendment or supplement thereto to any broker-dealer
that requests such documents in the letter of transmittal. We have agreed to
pay all expenses incident to the exchange offer (including the expenses of any
one special counsel for the Holders of the Notes) other than commissions or
concessions of any broker or dealers and will indemnify the Holders of the
Notes participating in the exchange offer (including any broker-dealers)
against certain liabilities, including liabilities under the Securities Act.
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LEGAL MATTERS
Certain legal matters with respect to the validity of the notes will be
passed upon for us by Cahill Gordon & Reindel, New York, New York.
EXPERTS
The consolidated financial statements of Metaldyne Corporation (formerly
known as MascoTech, Inc.) for the year ended December 31, 2001, the period from
November 28, 2000 to December 31, 2000, the period from January 1, 2000 to
November 27, 2000 and the year ended December 31, 1999 incorporated in this
prospectus by reference to the Current Report on Form 8-K filed on September
13, 2002 have been so incorporated in reliance on the report of
PricewaterhouseCoopers LLP, independent accountants, given on the authority of
said firm as experts in auditing and accounting.
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October 15, 2002 CONFIDENTIAL
METALDYNE CORPORATION
OFFER TO EXCHANGE ITS 11% SENIOR SUBORDINATED NOTES DUE 2012,
WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
FOR ANY AND ALL OF ITS 11% SENIOR SUBORDINATED NOTES DUE 2012.
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PROSPECTUS
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WE HAVE NOT AUTHORIZED ANY DEALER, SALESPERSON OR OTHER PERSON TO GIVE YOU
WRITTEN INFORMATION OTHER THAN THIS PROSPECTUS OR TO MAKE REPRESENTATIONS AS TO
MATTERS NOT STATED IN THIS PROSPECTUS. YOU MUST NOT RELY ON UNAUTHORIZED
INFORMATION. THIS PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES OR OUR
SOLICITATION OF YOUR OFFER TO BUY THE SECURITIES IN ANY JURISDICTION WHERE THAT
WOULD NOT BE PERMITTED OR LEGAL. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR
ANY SALES MADE HEREUNDER AFTER THE DATE OF THIS PROSPECTUS SHALL CREATE AN
IMPLICATION THAT THE INFORMATION CONTAINED HEREIN OR OUR AFFAIRS HAVE NOT
CHANGED SINCE THE DATE HEREOF.