Exhibit 4.2
THIS FIRST SUPPLEMENTAL INDENTURE, dated as of December 17, 1997, is
between MOTORS & GEARS, INC., a Delaware corporation (the "Company"), and STATE
STREET BANK AND TRUST COMPANY, as trustee (herein called the "Trustee").
PRELIMINARY STATEMENT
The Company and the Trustee have entered into an Indenture, dated as of
November 7, 1996 (the "Indenture"), with respect to the Company's 10 3/4% Senior
Notes due 2006. Capitalized terms used herein, not otherwise defined herein,
shall have the meanings given them in the Indenture.
Section 9.02 of the Indenture provides that, under certain circumstances, a
supplemental indenture may be entered into by the Company and the Trustee with
the written consent of the Holders of at least a majority in principal amount of
the then outstanding Senior Notes. In accordance with the terms of Sections
9.02 and 9.06 of the Indenture, the Company has, by resolution of the Board of
Directors, authorized this First Supplemental Indenture. The Trustee has
determined that this First Supplemental Indenture is in form satisfactory to it.
The Company has solicited consents to proposed amendments to the Indenture,
pursuant to the Consent Solicitation Statement, dated December 10, 1997 (as the
same may be amended, supplemented or otherwise modified from time to time, the
"Consent Solicitation"). This First Supplemental Indenture evidences the
proposed amendments described in the Consent Solicitation.
All things necessary to make this First Supplemental Indenture a valid
agreement of the Company and the Trustee and a valid amendment of and supplement
to the Indenture have been done.
NOW, THEREFORE, THIS FIRST SUPPLEMENTAL INDENTURE WITNESSETH:
For and in consideration of the premises, it is mutually covenanted and
agreed, for the equal and proportionate benefit of all Holders of the Securities
issued under the Indenture from and after the date of this First Supplemental
Indenture, as follows:
Section 1. Amendment to the Indenture
--------------------------
(a) Section. Definitions. The following definitions are amended and
restated in their entirety, or added to Section 1.01
of the Indenture in their alphabetically appropriate place, as applicable, to
read as follows:
"Cash Flow" means, for any given period and Person, the sum of, without
duplication, Consolidated Net Income, plus (a) the portion of Net Income
attributable to the minority interests in its Subsidiaries, to the extent not
included in calculating Consolidated Net Income, plus (b) any provision for
taxes based on income or profits to the extent such income or profits were
included in computing Consolidated Net Income, plus (c) Consolidated Interest
Expense, to the extent deducted in computing Consolidated Net Income, plus (d)
the amortization of all intangible assets, to the extent such amortization was
deducted in computing Consolidated Net Income (including, but not limited to,
inventory write-ups, goodwill, debt and financing costs, and Incentive
Arrangements), plus (e) any non-capitalized transaction costs incurred in
connection with financings, acquisitions or divestitures (including, but not
limited to, financing and refinancing fees, including those in connection with
the Offering, the Series C Offering and the Refinancing Plan, in each case, to
the extent deducted in computing Consolidated Net Income), plus (f) all
depreciation and all other non-cash charges (including, without limitation,
those charges relating to purchase accounting adjustments and LIFO adjustments),
to the extent deducted in computing Consolidated Net Income, plus (g) any
interest income, to the extent such income was not included in computing
Consolidated Net Income, plus (h) all dividend payments on preferred stock
(whether or not paid in cash) to the extent deducted in computing Consolidated
Net Income, plus (i) any extraordinary or non-recurring charge or expense
arising out of the implementation of SFAS 106 or SFAS 109 to the extent deducted
in computing Consolidated Net Income, plus (j) to the extent not covered in
clause (e) above, fees paid or payable in respect of the TJC Agreement to the
extent deducted in computing Consolidated Net Income, plus (k) the net loss of
any Person, other than those of a Restricted Subsidiary, to the extent deducted
in computing Consolidated Net Income, plus (l) net losses in respect of any
discontinued operations as determined in accordance with GAAP, to the extent
deducted in computing Consolidated Net Income; provided, however, that if any
such calculation includes any period during which an acquisition or sale of a
Person or the incurrence or repayment of Indebtedness occurred, then such
calculation for such period shall be made on a Pro Forma Basis.
"Consolidated Interest Expense" means, for any given period and Person, the
aggregate of the interest expense in respect of all Indebtedness of such Person
and its Subsidiaries for such period, on a consolidated basis, determined in
accordance with GAAP (including amortization of original issue discount on any
such Indebtedness, all non-cash interest payments, the interest
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portion of any deferred payment obligation and the interest component of capital
lease obligations, but excluding amortization of deferred financing fees if such
amortization would otherwise be included in interest expense); provided,
however, that for the purpose of the Cash Flow Coverage Ratio, Consolidated
Interest Expense shall be calculated on a Pro Forma Basis; provided further that
any premiums, fees and expenses (including the amortization thereof) payable in
connection with the Offering, the Series C Offering and the Refinancing Plan and
the application of the net proceeds therefrom or any other refinancing of
Indebtedness will be excluded.
"JI Properties Services Agreement" means the properties services agreement,
dated as of July 25, 1997, between the Company and each of its Subsidiaries and
Jordan Industries, as in effect on the date of original issuance of the Series C
Senior Notes.
"Junior Seller Notes" mean the subordinated promissory note, dated
September 22, 1995, issued by ▇▇▇▇▇▇-▇▇▇▇▇ Industries, Inc., in the principal
amount of $5.0 million, and maturing on December 31, 2003 and the subordinated
promissory note, dated October 27, 1997, issued by Electrical Design Company, in
the principal amount of $4.0 million, and maturing on December 31, 2002, each as
in effect on the date of the original issuance of the Series C Senior Notes.
"New Subsidiary Advisory Agreement" means the advisory agreement, dated
July 25, 1997, between the Company and each of its subsidiaries and Jordan
Industries, as in effect on the date of the original issuance of the Series C
Senior Notes.
"New Subsidiary Consulting Agreement" means the management consulting
agreement, dated July 25, 1997, between the Company and each of its Subsidiaries
and Jordan Industries, as in effect on the date of the original issuance of the
Series C Senior Notes.
"New TJC Management Consulting Agreement" means the management consulting
agreement, dated July 25, 1997, between Jordan Industries and TJC Management
Corp., as in effect on the date of the original issuance of the Series C Senior
Notes.
"Offering Circular" means the Offering Circular, dated December 10, 1997,
relating to the Company's offering and placement of the Series C Senior Notes.
"Other Permitted Indebtedness" means: (i) Indebtedness of the Company and
its Restricted Subsidiaries existing as of the date of original issuance of the
Series C Senior Notes; (ii) Indebtedness of the Company and its Restricted
Subsidiaries in
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respect of bankers acceptances and letters of credit (including, without
limitation, letters of credit in respect of workers' compensation claims) issued
in the ordinary course of business, or other Indebtedness in respect to
reimbursement-type obligations regarding workers' compensation claims; (iii)
Refinancing Indebtedness, provided that: (A) the principal amount of such
Refinancing Indebtedness shall not exceed the outstanding principal amount of
Indebtedness (including unused commitments) extended, refinanced, renewed,
replaced, substituted or refunded plus any amounts incurred to pay premiums,
fees and expenses in connection therewith, (B) the Refinancing Indebtedness
shall have 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, substituted or refunded; provided, however, that
this limitation in this clause (B) does not apply to Refinancing Indebtedness of
Senior Indebtedness, and (C) in the case of Refinancing Indebtedness of
Subordinated Indebtedness, such Refinancing Indebtedness shall be subordinated
to the Senior Notes at least to the same extent as the Subordinated Indebtedness
being extended, refinanced, renewed, replaced, substituted or refunded; (iv)
intercompany Indebtedness of and among the Company and its Restricted
Subsidiaries (excluding guarantees by Restricted Subsidiaries of Indebtedness of
the Company not issued in compliance with Section 4.15; (v) Indebtedness of the
Company and its Restricted Subsidiaries incurred in connection with making
permitted Restricted Payments under clauses (iii) or (iv), but only to the
extent that such Indebtedness is provided by the Company or a Restricted
Subsidiary, or (xi) of Section 4.05(b); (vi) Indebtedness of any Non-Restricted
Subsidiary created after the date of original issuance of the Series C Senior
Notes, provided that such Indebtedness is nonrecourse to the Company and its
Restricted Subsidiaries and the Company and its Restricted Subsidiaries have no
Obligations with respect to such Indebtedness; (vii) Indebtedness of the Company
and its Restricted Subsidiaries under Hedging Obligations; (viii) Indebtedness
of the Company and its Restricted Subsidiaries arising from the honoring by a
bank or other financial institution of a check, draft or similar instrument
inadvertently (except in the case of daylight overdrafts, which will not be, and
will not be deemed to be, inadvertent) drawn against insufficient funds in the
ordinary course of business; (ix) Indebtedness of any Person at the time it is
acquired as a Restricted Subsidiary, provided that such Indebtedness was not
issued by such Person in connection with or in anticipation of such acquisition;
(x) guarantees by Restricted Subsidiaries of Indebtedness of any Restricted
Subsidiary if such Indebtedness so guaranteed is permitted under the Indenture;
(xi) guarantees by a Restricted Subsidiary of Indebtedness of the Company if the
Indebtedness so guaranteed is permitted under the Indenture and the Senior Notes
are guaranteed by such Restricted Subsidiary to the extent required by Section
4.15; (xii)
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guarantees by the Company of Indebtedness of any Restricted Subsidiary if the
Indebtedness so guaranteed is permitted under the Indenture; (xiii) Indebtedness
of the Company and its Restricted Subsidiaries in connection with performance,
surety, statutory, appeal or similar bonds in the ordinary course of business;
(xiv) Indebtedness of the Company and its Restricted Subsidiaries in connection
with agreements providing for indemnification, purchase price adjustments and
similar obligations in connection with the sale or disposition of any of their
business, properties or assets; (xv) Indebtedness of the Restricted Subsidiaries
in respect of the Junior Seller Notes; (xvi) Indebtedness of the Restricted
Subsidiaries in respect of the MK Installment Note and the MK Installment Note
LC Facility; and (xvii) Indebtedness of the Company and its Restricted
Subsidiaries in respect of the Contingent Earnout Agreement.
"Senior Indebtedness" means: (i) all Obligations (including any interest
accruing subsequent to the filing of a petition of bankruptcy at the rate
provided for in the documentation with respect thereto, whether or not such
interest is an allowed claim under applicable law) on any Indebtedness of the
Company, whether outstanding on the date of issuance of the Senior Notes or
thereafter created, incurred or assumed, of the following types: (A) all
Indebtedness of the Company (including without limitation the Senior Notes and
the Series C Senior Notes) for money borrowed, and (B) all Indebtedness
evidenced by notes, debentures, bonds or other similar instruments for the
payment of which the Company is responsible or liable; (ii) all capitalized
lease obligations of the Company; (iii) all Obligations of the Company: (A) for
the reimbursement of any obligor on any letter of credit, banker's acceptance or
similar credit transaction, (B) all constituting Hedging Obligations, or (C)
issued as the deferred purchase price of property and all conditional sale
Obligations of the Company and all Obligations of the Company under any title
retention agreement; (iv) all guarantees of the Company with respect to
Obligations of other Persons of the type referred to in clauses (ii) and (iii)
and with respect to the payment of dividends of other Persons; and (v) all
Obligations of the Company consisting of modifications, renewals, extensions,
replacements and refundings of any Obligations described in clauses (i), (ii),
(iii) or (iv) unless, in the instrument creating or evidencing the same or
pursuant to which the same is outstanding, it is expressly provided that such
Obligations are subordinated or junior in right of payment to the Senior Notes;
provided, however, that Senior Indebtedness shall not be deemed to include: (1)
any Obligation of the Company to any Subsidiary, (2) any liability for federal,
state, local or other taxes owed or owing by the Company, (3) any accounts
payable or other liability to trade creditors arising in the ordinary course of
business (including guarantees thereof or instruments evidencing such
liabilities), (4) any Indebtedness, guarantee or Obligation
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of the Company that is contractually subordinated or junior in any respect to
any other Indebtedness, guarantee or Obligation of the Company, or (5) any
Indebtedness to the extent the same is incurred in violation of the Indenture.
Senior Indebtedness shall include all Obligations in respect of the Senior Notes
and the Series C Senior Notes and the Indenture.
To the extent any payment on the Senior Notes, whether by or on behalf of
the Company, as proceeds of security or enforcement of any right of setoff or
otherwise, is declared to be fraudulent or preferential, set aside or required
to be paid to a trustee, receiver or other similar party under any bankruptcy,
insolvency, receivership or similar law, then if such payment is recovered by,
or paid over to, such trustee, receiver or other similar party, the Senior Notes
or part thereof originally intended to be satisfied by such payment shall be
deemed to be reinstated and outstanding as if such payment had not occurred.
"Series C Offering" means the offer and sale of the Series C Senior Notes
as contemplated by the Offering Circular.
"Series C Senior Notes" means the Company's 10 3/4% Series C and Series D
Notes due 2006.
"Transition Agreement" means the transition agreement, dated as of July 25,
1997, between the Company and Jordan Industries, as in effect on the date of
original issuance of the Series C Senior Notes.
(b) The following Sections of the Indenture are hereby amended and restated
in their entirety, or added to the Indenture in their numerically predetermined
place, to read as follows:
Section 4.05. Limitation on Restricted Payments.
(a) The Company shall not, and shall not permit any Restricted Subsidiary
to, directly or indirectly, (i) declare or pay any dividend or make any
distribution on account of the Company's or such Restricted Subsidiary's Capital
Stock or other Equity Interests (other than dividends or distributions payable
in Capital Stock or other Equity Interests (other than Disqualified Stock) of
the Company or a Restricted Subsidiary and other than dividends or distributions
payable by a Restricted Subsidiary to another Restricted Subsidiary or to the
Company); (ii) purchase, redeem or otherwise acquire or retire for value any
Capital Stock or other Equity Interests of the Company or any of its Restricted
Subsidiaries (other than any such Equity Interest purchased from the Company or
any Restricted Subsidiary for fair market value (as determined by the Board of
Directors in good faith); (iii) voluntarily prepay Subordinated Indebtedness,
whether any such Subordinated Indebtedness is outstanding on, or
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issued after, the date of original issuance of the Senior Notes except as
specifically permitted by the covenants of this Indenture; (iv) make any
Restricted Investment (all such dividends, distributions, purchases,
redemptions, acquisitions, retirements, prepayments and Restricted Investments,
being collectively referred to as "Restricted Payments"), if, at the time of
such Restricted Payment:
(A) a Default or Event of Default shall have occurred and be continuing or
shall occur as a consequence thereof, or
(B) immediately after such Restricted Payment and after giving effect
thereto on a Pro Forma basis, the Company shall not be able to issue
$1.00 of additional Indebtedness pursuant to Section 4.07(a), or
(C) such Restricted Payment, together with the aggregate of all other
Restricted Payments made after the date of original issuance of the
Series C Senior Notes, without duplication, exceeds the sum of (1) 50%
of the aggregate Consolidated Net Income (including, for this purpose,
gains from Asset Sales and, to the extent not included in Consolidated
Net Income, any gain from a sale or disposition of a Restricted
Investment) of the Company (or, in case such aggregate is a loss, 100%
of such loss) for the period (taken as one accounting period) from the
beginning of the first fiscal quarter commencing immediately after the
date of original issuance of the Series C Senior Notes and ended as of
the Company's most recently ended fiscal quarter at the time of such
Restricted Payment, plus (2) 100% of the aggregate net cash proceeds
and the fair market value of any property or securities (as determined
by the Board of Directors in good faith) received by the Company from
the issue or sale of Capital Stock or other Equity Interests of the
Company subsequent to the date of original issuance of the Series C
Senior Notes (other than (x) Capital Stock or other Equity Interests
issued or sold to a Restricted Subsidiary and (y) the issuance or sale
of Disqualified Stock), plus (3) $5,000,000, plus (4) the amount by
which the principal amount of and any accrued interest on either (x)
Senior Indebtedness of the Company or (y) any Indebtedness of any
Restricted Subsidiary is reduced on the Company's consolidated balance
sheet upon the conversion or exchange other than by a Restricted
Subsidiary subsequent to the date of original issuance of the Series C
Senior Notes of any Indebtedness of the Company or any Restricted
Subsidiary (not held by the Company or any Restricted Subsidiary) for
Capital Stock
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or other Equity Interests (other than Disqualified Stock) of the
Company or any Restricted Subsidiaries (less the amount of any cash,
or the fair market value of any other property or securities (as
determined by the Board of Directors in good faith), distributed by
the Company or any Restricted Subsidiary (to Persons other than the
Company or any other Restricted Subsidiary) upon such conversion or
exchange), plus (5) if any Non-Restricted Subsidiary is redesignated
as a Restricted Subsidiary, the value of the deemed Restricted Payment
resulting therefrom and determined in accordance with the second
sentence of Section 4.16; provided, however, that for purposes of this
clause (5), the value of any redesignated Non-Restricted Subsidiary
shall be reduced by the amount that any such redesignation replenishes
or increases the amount of Restricted Investments permitted to be made
pursuant to Section 4.05(b)(iii).
(b) Notwithstanding Section 4.05(a), the following Restricted Payments may
be made: (i) the payment of any dividend within 60 days after the date of
declaration thereof, if at said date of declaration such payment would comply
with all the provisions hereof (including, but not limited to, this Section
4.05); (ii) making Restricted Investments at any time, and from time to time, in
an aggregate outstanding amount of $20,000,000 after the date of original
issuance of the Series C Senior Notes (it being understood that if any
Restricted Investment after the date of original issuance of the Series C Senior
Notes pursuant to this clause (ii) is sold, transferred or otherwise conveyed to
any Person other than the Company or a Restricted Subsidiary, the portion of the
net cash proceeds or fair market value of securities or properties paid or
transferred to the Company and its Restricted Subsidiaries in connection with
such sale, transfer or conveyance that relates or corresponds to the repayment
or return of the original cost of such a Restricted Investment will replenish or
increase the amount of Restricted Investments permitted to be made pursuant to
this Section 4.05(b)(ii), so that up to $20,000,000 of Restricted Investments
may be outstanding under this Section 4.05(b)(ii) at any given time; provided
that any Restricted Investment in a Restricted Subsidiary made pursuant to this
clause (ii) is made for fair market value (as determined by the Board of
Directors in good faith); (iii) the repurchase, redemption, retirement or
acquisition of the Company's stock from the executives, management, employees or
consultants of the Company or its Subsidiaries pursuant to the terms of any
subscription, stockholder or other agreement or plan, up to an aggregate amount
not to exceed $5,000,000; (iv) any loans, advances, distributions or payments
from the Company to its Restricted Subsidiaries, or any loans, advances,
distributions or payments by a Restricted
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Subsidiary to the Company or to another Restricted Subsidiary, in each case
pursuant to intercompany Indebtedness, intercompany management agreements and
other intercompany agreements and obligations; (v) investments in marketable
securities and other negotiable instruments through the ▇▇▇▇▇▇▇ Penn Funds
(including the ▇▇▇▇▇▇▇ Penn Interest Income Fund); (vi) the purchase,
redemption, retirement or other acquisition of (A) any Senior Indebtedness of
the Company or any Indebtedness of a Restricted Subsidiaries required by its
terms to be purchased, redeemed, retired or acquired with the net proceeds from
asset sales (as defined in the instrument evidencing such Senior Indebtedness or
Indebtedness) or upon a change of control (as defined in the instrument
evidencing such Senior Indebtedness or Indebtedness) and (B) the Senior Notes
pursuant to Sections 4.13 and 4.14; (vii) the payment of (A) consulting,
financial and investment banking fees under the TJC Agreement, provided, that no
Default or Event of Default shall have occurred and be continuing or shall occur
as a consequence thereof, and the Company's Obligations to pay such fees under
the TJC Agreement shall be subordinated expressly to the Company's Obligations
in respect of the Senior Notes, and (B) indemnities, expenses and other amounts
under the TJC Agreement; (viii) to the extent constituting Restricted Payments,
payments under the Tax Sharing Agreement, New Subsidiary Consulting Agreement,
Transition Agreement and the JI Properties Services Agreement; (ix) to the
extent constituting Restricted Payments, payments under the New Subsidiary
Advisory Agreement, provided such payments will not be made and shall be accrued
so long as any Default or Event of Default shall have occurred and be continuing
or shall occur as a consequence thereof, and the Company's obligations to pay
such fees under the New Subsidiary Advisory Agreement shall be subordinated
expressly to the Company's Obligations in respect of the Senior Notes and
indemnities, expenses and other amounts under the New Subsidiary Advisory
Agreement; (x) the redemption, repurchase, retirement or the acquisition of any
Capital Stock or other Equity Interests of the Company or any Restricted
Subsidiary in exchange for, or out of the proceeds of, the substantially
concurrent sale (other than to a Subsidiary of the Company) of other Capital
Stock or other Equity Interests of the Company or any Restricted Subsidiary
(other than any Disqualified Stock); provided that any net cash proceeds that
are utilized for any such redemption, repurchase, retirement or other
acquisition, and any Net Income resulting therefrom, shall be excluded from this
Section 4.05(a)(iv)(c)(1) and (c)(2); (xi) the defeasance, redemption or
repurchase of pari passu or Subordinated Indebtedness with the net cash proceeds
from an issuance of permitted Refinancing Indebtedness or the substantially
concurrent sale (other than to a Subsidiary of the Company) of Capital Stock or
other Equity Interests of the Company or of a Restricted Subsidiary (other than
Disqualified Stock); provided that any net cash proceeds that are utilized for
any such defeasance, redemption or repurchase, and any Net Income
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resulting therefrom, shall be excluded from this Section 4.05(a)(iv)(c)(1) and
(c)(2); (xii) payments of fees, expenses and indemnities in respect of the
Company's and its Subsidiaries' directors and such payments to Parent (and its
parent companies) in respect of their directors, provided that the aggregate
amount of such fees payable to all such directors does not exceed $250,000 in
any fiscal year; (xiii) payments to Parent (and its parent companies) in respect
of accounting, legal or other professional or administrative expenses or
reimbursements or franchise or similar taxes and governmental charges incurred
by them relating to the business, operations or finances of the Company and its
Subsidiaries and in respect of fees and related expenses associated with their
registration statements filed with the Commission and subsequent ongoing public
reporting requirements; (xiv) so long as Parent files consolidated income tax
returns which include the Company, payments to Parent (and its parent companies)
pursuant to the Tax Sharing Agreement; (xv) payments in respect of the Junior
Seller Notes, the MK Installment Note and the MK Installment Note LC Facility;
(xvi) payments in connection with the Imperial Acquisitions, the Offering, the
Series C Offering and the Refinancing Plan; (xvii) payments in respect of the
Contingent Earnout Agreement; (xviii) Restricted Investments made or received in
connection with the sale, transfer or disposition of any business, properties or
assets of the Company or any Restricted Subsidiary, provided, that if such sale,
transfer or disposition constitutes an Asset Sale, the Company complies with
Section 4.14; (xix) any Restricted Investment constituting securities or
instruments of a Person issued in exchange for trade or other claims against
such Person in connection with a financial reorganization or restructuring of
such Person; and (xx) any Restricted Investment constituting an equity
investment in a Receivables Subsidiary.
Section 4.07. Limitation on Incurrence of Indebtedness.
(a) The Company shall not, and shall not permit any Restricted Subsidiary
to, issue any Indebtedness (other than the Indebtedness represented by the
Senior Notes and the Series C Senior Notes in an amount not to exceed $270
million in the aggregate) unless the Company's Cash Flow Coverage Ratio for its
four full fiscal quarters next preceding the date such additional Indebtedness
is issued would have been at least 2.00 to 1, if such date is on or prior to
November 15, 1998, and 2.25 to 1 thereafter, in each case determined on a Pro
Forma basis (including, for this purpose, any other Indebtedness incurred since
the end of the applicable four quarter period) as if such additional
Indebtedness and any other Indebtedness issued since the end of such four-
quarter period had been issued at the beginning of such four-quarter period.
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(b) Section 4.07(a) shall not apply to the issuance of (i) Indebtedness of
the Company and/or its Restricted Subsidiaries as measured on such date of
issuance in an aggregate principal amount outstanding on any such date of
issuance not exceeding the greater of (A) $115,000,000 aggregate principal
amount pursuant to the New Credit Agreement and (B) an aggregate principal
amount up to the sum of (1) 85% of the book value of the Receivables of the
Company and its Restricted Subsidiaries on a consolidated basis and (2) 65% of
the book value of the inventories of the Company and its Restricted Subsidiaries
on a consolidated basis; provided that the aggregate principal amount of
Indebtedness outstanding under this clause (i) together with the aggregate
principal amount of Indebtedness outstanding under clause (iv) below shall not
exceed $120.0 million in aggregate principal amount at any one time outstanding;
(ii) Indebtedness of the Company and its Restricted Subsidiaries pursuant to any
Receivables Financing; (iii) Indebtedness of the Company and its Restricted
Subsidiaries in connection with capital leases, sale and leaseback transactions,
purchase money obligations, capital expenditures or similar financing
transactions relating to (A) their properties, assets and rights as of the date
of original issuance of the Series C Senior Notes up to $5,000,000 in aggregate
principal amount or (B) their properties, assets and rights acquired after the
date of original issuance of the Series C Senior Notes, provided that the
aggregate principal amount of such Indebtedness under this Section
4.07(b)(iii)(B) does not exceed 100% of the cost of such properties, assets and
rights; (iv) additional Indebtedness of the Company and its Restricted
Subsidiaries in an aggregate principal amount up to $25,000,000 (all or any
portion of which may be issued as additional Indebtedness under the New Credit
Agreement); provided that the aggregate principal amount of Indebtedness
outstanding under this clause (iv) together with the aggregate principal amount
of Indebtedness outstanding under clause (i) above shall not exceed $120.0
million in aggregate principal amount at any one time outstanding; and (v) Other
Permitted Indebtedness.
(c) Notwithstanding Sections 4.07(a) and (b), no Restricted Subsidiary
shall under any circumstances issue a guarantee of any Indebtedness of the
Company except for guarantees issued by Restricted Subsidiaries pursuant to
Section 4.15, provided, however, that the foregoing will not limit or restrict
guarantees issued by Restricted Subsidiaries in respect of Indebtedness of other
Restricted Subsidiaries.
Section 4.08. Limitation on Transactions With Affiliates.
(a) Except as otherwise set forth herein, neither the Company nor any of
its Restricted Subsidiaries shall make any loan, advance, guarantee or capital
contribution to, or for the benefit of, or sell, lease, transfer or dispose of
any properties
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or assets to, or for the benefit of, or purchase or lease any property or assets
from, or enter into or amend any contract, agreement or understanding with, or
for the benefit of, an Affiliate (each such transaction or series of related
transactions that are part of a common plan, an "Affiliate Transaction"), except
in good faith and on terms that are no less favorable to the Company or the
relevant Restricted Subsidiary than those that would have been obtained in a
comparable transaction on an arm's length basis from an unrelated Person.
(b) The Company shall not, and shall not permit any Restricted Subsidiary
to, engage in any Affiliate Transaction involving aggregate payments or other
transfers by the Company and its Restricted Subsidiaries in excess of $5,000,000
(including cash and non-cash payments and benefits valued at their fair market
value by the Board of Directors of the Company in good faith), unless the
Company delivers to the Trustee: (i) a resolution of the Board of Directors
stating that the Board of Directors (including a majority of the disinterested
directors, if any) has, in good faith, determined that such Affiliate
Transaction complies with the provisions of this Indenture; and (ii)(A) with
respect to any Affiliate Transaction involving the incurrence of Indebtedness, a
written opinion of a nationally recognized investment banking or accounting firm
experienced in the review of similar types of transactions, (B) with respect to
any Affiliate Transaction involving the transfer of real property, fixed assets
or equipment, either directly or by a transfer of 50% or more of the Capital
Stock of a Restricted Subsidiary which holds any such real property, fixed
assets or equipment, a written appraisal from a nationally recognized appraiser
experienced in the review of similar types of transactions or (C) with respect
to any Affiliate Transaction not otherwise described in (A) or (B) above, a
written certification from a nationally recognized professional experienced in
evaluating similar types of transactions, in each case, stating that the terms
of such transaction are fair to the Company or such Restricted Subsidiary, as
the case may be, from a financial point of view.
(c) Notwithstanding Sections 4.08(a) and (b), this Section 4.08 shall not
apply to (i) transactions between the Company and any Restricted Subsidiary or
between Restricted Subsidiaries; (ii) payments under the New Subsidiary
Advisory Agreement, the New Subsidiary Consulting Agreement, the Transition
Agreement, the JII Properties Services Agreement and the Tax Sharing Agreement;
(iii) payments under the Contingent Earnout Agreement; (iv) any other payments
or transactions permitted pursuant to Section 4.05; (v) reasonable compensation
paid to officers, employees or consultants of the Company or any Subsidiary as
determined in good faith by the Company's Board of Directors or executives; (vi)
transactions in connection with a Receivables
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Financing; or (vii) payments and transactions in connection with the Imperial
Acquisitions, the Refinancing Plan, the Offering and the Series C Offering.
Section 2. Effectiveness; Termination
--------------------------
(a) This First Supplemental Indenture is entered into pursuant to and
consistent with Section 9.02 of the Indenture, and nothing herein shall
constitute an amendment, supplement or waiver requiring the approval of each
Holder pursuant to clauses (1) through (6) of the last paragraph of Section
9.02.
(b) This First Supplemental Indenture shall become effective and binding on
the Company, the Trustee and the Holders of the Senior Notes upon the execution
and delivery by the parties to this First Supplemental Indenture; provided,
however, that the provisions of the Indenture referred to in Section 1 above
(such provisions being referred to as the "Amended Provisions") will remain in
effect in the form they existed prior to the execution of this First
Supplemental Indenture, the deletions the amendments of the Amended Provisions
will not become operative, and the terms of the Indenture will not be amended,
modified or deleted, in each case until the date and time (the "Payment Date")
that the Company pays the Consent Payments to the Trustee. Upon the Payment
Date, the Amended Provisions will automatically be deleted or modified as
contemplated by Section 1 above.
Section 3. Reference to and Effect on the Indenture.
----------------------------------------
(a) On and after the Payment Date, each reference in the Indenture to "the
Indenture," "this Indenture," "hereunder," "hereof" or "herein" shall mean and
be a reference to the Indenture as supplemented by this First Supplemental
Indenture unless the context otherwise requires.
(b) Except as specifically amended above, the Indenture shall remain in
full force and effect and is hereby ratified and confirmed.
Section 4. Governing Law.
-------------
This First Supplemental Indenture shall be construed and enforced in
accordance with, and interpreted under, the internal laws of the State of New
York, without reference to the conflict of laws provisions thereof.
Section 5. Counterparts and Methods of Execution.
-------------------------------------
This First Supplemental Indenture may be executed in several counterparts,
all of which together shall constitute one
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agreement binding on all parties, notwithstanding that all parties have not
signed the same counterpart.
Section 6. Titles.
------
Section titles are for descriptive purposes only and shall not control or
alter the meaning of this First Supplemental Indenture as set forth in the text.
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IN WITNESS WHEREOF, the Company and the Trustee have caused this First
Supplemental Indenture to be duly executed by their respective officers
thereunto duly authorized all as of the day and year first above written.
MOTORS & GEARS
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇
---------------------------
Its: CFO
--------------------------
STATE STREET BANK AND TRUST
COMPANY, as Trustee
By: /s/ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
---------------------------
Its: Assistant Vice President
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