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REGISTRATION STATEMENT NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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Form S-1
REGISTRATION STATEMENT
UNDER THE
SECURITIES ACT OF 1933
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MS ACQUISITION CORP.
(Exact name of Registrant as specified in its charter)
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DELAWARE 3465 13-3799803
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer Identification
incorporation or organization) Classification Code Number) Number)
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1, RUE THOMAS EDISON
QUARTIER DES CHENES
78056 ST. QUENTIN EN YVELINES
FRANCE
(33-1) 39.41.20.00
(Address, including zip code, and telephone number, including area code,
of registrant's principal executive offices)
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AETNA INDUSTRIES, INC.
24331 SHERWOOD AVENUE
P.O. BOX 3067
CENTERLINE, MICHIGAN 48015-0067
UNITED STATES
(810) 759-2200
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
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Copies to:
ROBERT C. TREUHOLD, ESQ. RICHARD A. POLLACK, ESQ.
SHEARMAN & STERLING SULLIVAN & CROMWELL
114, AVENUE DES CHAMPS ELYSEES 125 BROAD STREET
75008 PARIS NEW YORK, NEW YORK 10004
FRANCE UNITED STATES
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Approximate date of commencement of proposed sale to public: As soon as
practicable after this Registration Statement becomes effective.
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [ ]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
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If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier registration statement for the same
offering. [ ]
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If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier registration statement for the same
offering. [ ]
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If delivery of the prospectus is expected to be made pursuant to Rule 434
under the Securities Act, check the following box. [ ]
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CALCULATION OF REGISTRATION FEE
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PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS AMOUNT TO BE OFFERING PRICE AGGREGATE AMOUNT OF
OF SECURITIES TO BE REGISTERED REGISTERED (1) PER SHARE (2) OFFERING PRICE REGISTRATION FEE
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Common Stock, $0.01 par value $ $92,000,000 $27,140
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(1) Includes shares of Common Stock that the Underwriters have the
option to purchase to cover over-allotments, if any.
(2) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457 under the Securities Act.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THIS REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SUCH
SECTION 8(A), MAY DETERMINE.
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Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such State.
SUBJECT TO COMPLETION, DATED , 1998
Shares
MS ACQUISITION CORP.
Common Stock
($.01 par value)
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All the shares of common stock, par value $.01 per share (the "Common Stock"),
of MS Acquisition Corp. (together with its consolidated subsidiaries, the
"Company") offered hereby are being sold by the Company (the "Offering"). Of the
newly issued shares of Common Stock offered hereby, all are
being offered initially by the Underwriters in the United States.
Prior to the Offering, there has been no public market for the Common Stock. It
is anticipated that the initial public offering price will be between $
and $ per share. This range is provided for information purposes only and
will have no bearing on the final offering price. For information relating to
the factors considered in determining the initial public offering price to the
public, see "Underwriting".
Application will be made to list the Common Stock on the New York Stock Exchange
("NYSE") under the symbol . The Common Stock will not be listed on any
other securities exchange in connection with the Offering.
In April 1998, MS Acquisition Corp. entered into a stock purchase agreement (the
"Stock Purchase Agreement") with Societe Financiere d'Etude et de Developpement
Industriel et Technologique S.A., a French societe anonyme ("Sofedit"), (the
"Combination"). Pursuant to the terms of the Stock Purchase Agreement, Sofedit's
former stockholders transferred the outstanding capital stock of Sofedit to MS
Acquisition Corp. in exchange for, among other items of consideration,
million shares of Common Stock of the Company. The Combination of Sofedit and MS
Acquisition Corp. has been accounted for as a reverse acquisition because the
former owners of Sofedit owned approximately 75% of the fully diluted
outstanding Common Stock of the Company immediately following the Combination.
For accounting purposes, Sofedit is considered to be the acquiror of, and the
predecessor to, the Company. In August 1998, the Company plans to change its
name from MS Acquisition Corp. to . See "The Company -- The Combination"
and "Principal Stockholders -- Stock Purchase Agreement".
FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED IN CONNECTION WITH
AN INVESTMENT IN THE COMMON STOCK, SEE "RISK FACTORS" BEGINNING ON PAGE 12
HEREIN.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
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UNDERWRITING
PRICE DISCOUNTS AND PROCEEDS TO
TO PUBLIC COMMISSIONS(1) THE COMPANY(2)
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Per Share................................... $ $ $
Total(3).................................... $ $ $
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(1) The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended.
(2) Before deduction of expenses payable by the Company estimated at $ .
(3) The Company has granted to the Underwriters an option, exercisable for 30
days from the date of this Prospectus, to purchase up to a maximum of
additional shares of Common Stock to cover over-allotments of
shares (the "Over-Allotment Option"). If such option is exercised in full,
the total Price to Public will be $ , Underwriting Discounts and
Commissions will be $ , and Proceeds to the Company will be
$ . See "Underwriting".
The shares of Common Stock are offered by the several Underwriters when, as
and if delivered to and accepted by the Underwriters, and subject to their right
to reject orders in whole or in part. It is expected that the shares of Common
Stock will be ready for delivery on or about , 1998, against payment in
immediately available funds.
CREDIT SUISSE FIRST BOSTON BEAR, STEARNS & CO. INC.
Prospectus dated , 1998
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PHOTO(S) AND GRAPHIC(S) FOR INSIDE FRONT COVER -- NO CAPTIONS
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DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
CERTAIN STATEMENTS CONTAINED IN THIS PROSPECTUS THAT ARE NOT RELATED TO
HISTORICAL FACTS ARE FORWARD-LOOKING STATEMENTS. SUCH FORWARD-LOOKING STATEMENTS
ARE BASED ON THE BELIEFS OF THE COMPANY'S MANAGEMENT AS WELL AS ON ASSUMPTIONS
MADE BY AND INFORMATION CURRENTLY AVAILABLE TO THE COMPANY AT THE TIME SUCH
STATEMENTS WERE MADE. WHEN USED IN THIS PROSPECTUS, THE WORDS "ANTICIPATE",
"BELIEVE", "ESTIMATE", "EXPECT", "INTENDS" AND SIMILAR EXPRESSIONS, AS THEY
RELATE TO THE COMPANY OR ITS SUBSIDIARIES ARE INTENDED TO IDENTIFY
FORWARD-LOOKING STATEMENTS. FURTHER, CERTAIN FORWARD-LOOKING STATEMENTS ARE
BASED UPON ASSUMPTIONS AS TO FUTURE EVENTS THAT MAY NOT PROVE TO BE ACCURATE.
ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE PROJECTED IN THE
FORWARD-LOOKING STATEMENTS AS A RESULT OF THE RISK FACTORS SET FORTH BELOW, THE
MATTERS SET FORTH IN THIS PROSPECTUS GENERALLY AND CERTAIN ECONOMIC AND BUSINESS
FACTORS, SOME OF WHICH MAY BE BEYOND THE CONTROL OF THE COMPANY. FACTORS THAT
COULD CAUSE OR CONTRIBUTE TO SUCH DIFFERENCES INCLUDE, BUT ARE NOT LIMITED TO,
THOSE DISCUSSED UNDER "RISK FACTORS", "MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS" AND "BUSINESS". THE COMPANY
CAUTIONS THE READER, HOWEVER, THAT THIS LIST OF FACTORS MAY NOT BE EXHAUSTIVE,
PARTICULARLY WITH RESPECT TO FUTURE FILINGS WITH THE COMMISSION. IN ANALYZING AN
INVESTMENT IN THE COMMON STOCK OFFERED HEREBY, PROSPECTIVE INVESTORS SHOULD
CAREFULLY CONSIDER, ALONG WITH THE OTHER MATTERS REFERRED TO HEREIN, THE RISK
FACTORS DESCRIBED WITHIN THIS PROSPECTUS.
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NO PERSON IS AUTHORIZED IN CONNECTION WITH ANY OFFERING MADE HEREBY TO GIVE
ANY INFORMATION OR TO MAKE ANY REPRESENTATION OTHER THAN AS CONTAINED IN THIS
PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY UNDERWRITER. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO
BUY THE COMMON STOCK OFFERED HEREBY BY ANY PERSON IN ANY JURISDICTION IN WHICH
IT IS UNLAWFUL FOR SUCH PERSON TO MAKE ANY SUCH OFFER OR SOLICITATION. NEITHER
THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL UNDER ANY
CIRCUMSTANCES IMPLY THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY
DATE SUBSEQUENT TO THE DATE HEREOF.
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CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN, OR OTHERWISE AFFECT THE PRICE OF THE SECURITIES
OFFERED HEREBY, INCLUDING OVER-ALLOTMENT, STABILIZING TRANSACTIONS, SYNDICATE
SHORT-COVERING TRANSACTIONS, PENALTY BIDS AND PASSIVE MARKET MAKING. FOR A
DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING".
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PRESENTATION OF FINANCIAL INFORMATION
In this Prospectus, references to "francs" or "FF" are to French francs and
references to "$" and "U.S. dollars" are to United States dollars. The Company
publishes its financial statements in U.S. dollars. The functional currency of
the Company's foreign subsidiaries is the applicable local currency. The assets
and liabilities of foreign subsidiaries have been translated into U.S. dollars
at the end of period rate of exchange, and their income statements and cash flow
statements are converted at the average rate of exchange for the relative
period. The resulting translation adjustment is included in shareholders' equity
as "cumulative translation adjustment". Sofedit, as the predecessor to the
Company, publishes its financial statements in French francs. For the purposes
of this Prospectus, Sofedit's consolidated balance sheet has been translated
into U.S. dollars using the end of period rate of exchange applicable for each
period and Sofedit's consolidated statement of operations have been translated
into U.S. dollars using the average exchange rate for each period. For
information regarding the end of period rate and the average rate of exchange
between the French franc and the U.S. dollar for 1993, 1994, 1995, 1996, 1997
and the first six months of 1997 and 1998, see "Exchange Rate Information" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Overview -- Exchange Rates".
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PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and the consolidated financial statements appearing elsewhere in
this Prospectus. In August 1998, the Company plans to change its name from MS
Acquisition Corp. to . In this Prospectus, MS Acquisition Corp. is
referred to as the "Company" from April 1, 1998, the effective date of the
Combination for accounting purposes. The consolidated financial statements of
the Company from April 1, 1998, reflect the consolidated results of Sofedit and
MS Acquisition. The term "MS Acquisition" refers to MS Acquisition Corp. and its
consolidated subsidiaries prior to April 1, 1998. The term "Sofedit" refers to
Societe Financiere d'Etude et de Developpement Industriel et Technologique S.A.
and its consolidated subsidiaries. The term "Aetna" refers to Aetna Industries,
Inc. and its consolidated subsidiaries. The term "Aetna Holdings" refers to
Aetna Holdings, Inc., the direct parent company of Aetna and wholly-owned
subsidiary of the Company. Unless otherwise indicated, (i) the information in
this Prospectus assumes that the Underwriters' Over-Allotment Option is not
exercised and (ii) amounts stated in U.S. dollars are reported in compliance
with U.S. GAAP.
THE COMPANY
The Company is a leading full-service supplier of highly engineered
metal-formed components, complex modules and mechanical assemblies for
automotive original equipment manufacturers ("OEMs") in Europe and North
America. The Company believes it produces one of the broadest ranges of
automotive stampings and other metal-formed products of any OEM supplier within
these markets. The Company's products are manufactured through a variety of
processes including complex stamping, high-pressure hydroforming and, beginning
in 1999, hot stamping. The Company's products include: (i) structural components
and modules for chassis, suspension, floor pan and engine cradle systems; (ii)
large exterior door and body panel modules; (iii) mechanical assemblies such as
pedal systems and door check mechanisms; and (iv) other complex components such
as stamped pulleys and crankshaft pulley dampers. The Company's products are
used by most of the major automotive OEMs worldwide, such as: Chrysler, General
Motors Corporation including Opel, Vauxhall, and Saab ("GM"), Jaguar,
Mercedes-Benz, Mitsubishi, Peugeot-Citroen, Porsche, Renault, Toyota,
Volkswagen, including Audi, SEAT and SKODA ("Volkswagen"), and Volvo. On a pro
forma basis, the Company's net sales for 1997 and the first six months of 1998
were $693.6 million and $375.3 million, respectively.
The Company's international presence is the result of the April 1998
combination of Sofedit and Aetna, two leading stamping and metal-forming
companies in Europe and North America, respectively. Today, the Company produces
over 100 types of products for 60 models on 40 platforms from 23 plants in
Europe and North America. The Company believes that the component supply segment
of the automotive supply industry is highly fragmented but undergoing
significant consolidation. This consolidation is being driven by OEM
requirements for increased global sourcing for global platforms, and increased
outsourcing of design and production. As a result of the Combination, the
Company believes it is uniquely positioned to capitalize on these trends.
The Company has a significant international presence with approximately 70%
and 30% of its pro forma 1997 net sales generated from sales to customers in
Europe and North America, respectively. The Company believes it is
well-positioned on top-selling vehicles in Europe and North America. For
example, the Company currently supplies products used on seven of the 10
top-selling vehicles in Europe, including the Renault Twingo, Megane and Clio,
the Opel Astra and Vectra, and the Volkswagen Golf and Polo. The Company also
supplies products used on such top-selling vehicles in North America as the
Chrysler Jeep Cherokee, Jeep Grand Cherokee and Jeep Wrangler, Chrysler
Cirrus/Dodge Stratus, Buick Riviera/Oldsmobile Aurora, Chevrolet Astro/GMC
Safari, Pontiac Bonneville, Buick Park Avenue, Chevrolet Cavalier and Saturn LS.
Approximately 78.5% of the Company's 1997 pro forma North American net sales
were derived from the higher-growth light truck segment.
The Company has a substantial number of new products for car and light
truck platforms in the early stages of production, including platforms for
Chrysler (two), GM (one), and CAMI (one) in North America and products for new
vehicles for Renault (six), for Peugeot-Citroen (five) and one for each of
Volkswagen,
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Mercedes-Benz, Mitsubishi, GM, Toyota and Volvo in Europe. In connection with
the introduction of these new products, the Company made significant investments
and incurred significant launch and other costs. The Company believes that it is
now well-positioned to realize the benefits of these investments as they reach
full production.
COMPETITIVE STRENGTHS
The Company believes it possesses the following distinct competitive
strengths: (i) international presence; (ii) strong relationships with a
diversified customer base; (iii) full-service technical, design and engineering
capabilities; (iv) a highly motivated and experienced management team; and (v) a
proven ability to identify and successfully manage acquisitions. The Company
intends to capitalize on these competitive strengths to continue to generate
consistent revenue growth and increased profitability in the future.
International Presence. With 23 plants in Europe and North America, the
Company believes it is one of a limited group of high-quality, full-service
automotive suppliers able to provide significant volumes of stampings and
mechanical assemblies on an international basis. The majority of the Company's
facilities are strategically located near OEM production facilities. The Company
also believes that its international approach has resulted in recent awards of
new business from existing customers, including GM's Opel unit in Poland and
Renault in Brazil, as well as awards of business from new customers such as
BMW/Rover, CAMI, and Mitsubishi North America.
Strong Relationships with a Diversified Customer Base. The Company's
full-service capabilities have enabled it to become a leading supplier to nearly
all of the world's major automotive OEMs, including Chrysler, GM, Jaguar,
Mercedes-Benz, Mitsubishi, Peugeot-Citroen, Porsche, Renault, Toyota, Volkswagen
and Volvo. Many of these major OEMs have become customers of the Company in the
last five years, which has contributed to significant sales growth. During this
period, the Company has solidified long-term relationships with Chrysler, GM,
Peugeot-Citroen and Renault, each of which accounted for more than 7% of the
Company's pro forma 1997 net sales, although no single customer accounted for
more than 25% of the Company's pro forma 1997 net sales.
Full-Service Technical, Design and Engineering Capabilities. The Company
believes it is one of a few automotive suppliers in Europe and North America
capable of meeting OEMs' demands for greater outsourcing of stampings and
mechanical assemblies at the earliest stages of product design as well as
continuous production stages. Supporting the Company's full-service capabilities
are its computer-aided design systems, prototype plants, hydroforming expertise
and large-bed presses, augmented by the efficiency of increasingly automated
production lines. These full-service capabilities enable the Company to pursue
its strategy of leveraging design and engineering skills to secure supply
relationships for complex products which are typically higher value-added. The
Company considers hydroforming to be an important technology and believes that
applications for hydroforming are increasing, as illustrated by Volvo's recent
selection of the Company to provide a hydroformed cross-member assembly for the
Volvo S80 model.
Highly Motivated and Experienced Management Team. The Company believes its
management and employees are highly motivated to meet corporate objectives due
to performance related incentive plans and the Company's decentralized
management style. The Company believes its decentralized approach to decision
making encourages employee participation in refining and improving production
processes and product quality. The Company's incentive plans for management
employees include discretionary annual bonuses and stock option plans based on
their ability to meet certain defined financial and quality performance
criteria. Moreover, members of the Company's senior management have an average
of approximately 17 years of experience in the automotive industry. In addition,
following the consummation of the Offering, the Company's senior management will
beneficially own approximately % of the outstanding Common Stock. See
"Management".
Proven Ability to Identify and Successfully Manage Acquisitions. Since
1989, the Company's management has completed seven acquisitions and two
strategic alliances. The Company's strategy has been to identify underperforming
companies with potential for operating improvements. In such acquisitions, the
Company has been able to apply its management expertise to increase efficiency
and to improve quality. For
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example, the Company's management team was able to improve dramatically
productivity and manufacturing efficiencies at the Lebranchu facility (the
Company's largest facility in Europe, which was acquired in 1994) by
approximately 57%, from 1995 to 1997, while net sales from the Lebranchu
facility operations increased by approximately 39% for the same period.
BUSINESS STRATEGY
The Company's business strategy is designed to foster growth, improve
manufacturing efficiency, reduce costs and increase productivity, thereby
improving profitability. Key elements of this business strategy include: (i)
leveraging and expanding its international presence to exploit future
opportunities; (ii) capitalizing on technical design and engineering
capabilities; (iii) exploiting new technologies such as high-pressure
hydroforming; (iv) achieving continuous quality improvements and enhancing
manufacturing efficiencies; and (v) pursuing strategic acquisitions.
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The Company's principal executive offices and European headquarters are
located at 1, rue Thomas Edison, Quartier des Chenes-B.P. 605, 78056 St. Quentin
en Yvelines Cedex, France and its telephone number is (33-1) 39-41-20-00. The
Company's North American headquarters are located at 24331 Sherwood Avenue,
Centerline, Michigan, United States of America and its telephone number is (810)
759-2200.
THE OFFERING
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Common Stock offered hereby(1).............. shares of Common Stock.
Common Stock to be outstanding after the
Offering(1)(2)(3)......................... shares of Common Stock.
Use of Proceeds(1).......................... The net proceeds of the Offering (estimated to be
approximately $ million) will be used primarily
to repay outstanding indebtedness.
See "Use of Proceeds".
NYSE Symbol................................. .
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(1) Assumes no exercise of the Underwriters' Over-Allotment Option. See
"Underwriting".
(2) Does not include (i) shares of Common Stock reserved for issuance
upon the exercise of stock options outstanding under the Stock Option Plan;
and (ii) an additional shares of Common Stock reserved for future
grants or awards under the Company's 1998 Equity Incentive Plan. See
"Management -- 1998 Equity Incentive Plan".
(3) Assumes the conversion of all of the issued shares of Preferred Stock of the
Company into fully paid Common Stock. See "Description of Capital Stock --
Preferred Stock."
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SUMMARY UNAUDITED PRO FORMA AND HISTORICAL FINANCIAL DATA
The following summary historical financial information is derived from the
consolidated historical financial statements of the Company and Sofedit, as
predecessor, and the notes thereto and the consolidated financial statements of
MS Acquisition and the notes thereto, all included elsewhere in this Prospectus
(the "Consolidated Financial Statements"). The unaudited pro forma combined
condensed financial information is derived from the unaudited pro forma combined
condensed financial data of the Company included elsewhere in this Prospectus
(the "Unaudited Pro Forma Financial Data"). The historical Consolidated
Financial Statements of the Company and Sofedit, as predecessor for each year in
the three years ended December 31, 1997 were audited by Barbier Frinault &
Autres (a member firm of Arthur Andersen). The historical Consolidated Financial
Statements of MS Acquisition for each year in the three years ended December 31,
1995, December 28, 1996 and December 29, 1997 were audited by
PricewaterhouseCoopers LLP. The historical and pro forma financial information
of the Company for the six month periods ended June 30, 1997 and 1998 and the
historical financial information of MS Acquisition for the three month periods
ended March 30, 1997 and March 29, 1998 is unaudited, but in the opinion of
management reflects all adjustments necessary for a fair presentation of such
information. The Combination is accounted for as a reverse acquisition because
the former shareholders of Sofedit owned approximately 75% of the fully diluted
outstanding Common Stock of the Company immediately following the Combination.
For accounting purposes, Sofedit is considered to be the acquiror of, and the
predecessor to, the Company. The unaudited pro forma statement of operations
data for the year ended December 31, 1997 give pro forma effect to: (i) the
Combination; (ii) the Offering and the application of proceeds thereof; and
(iii) the conversion of Preferred Stock into Common Stock, as if these events
had occurred on January 1, 1997. The unaudited pro forma statement of operations
data for the six months ended June 30, 1997 and 1998 give pro forma effect to:
(i) the Combination; (ii) the Offering and the application of proceeds thereof;
and (iii) the conversion of Preferred Stock into Common Stock, as if these
events had occurred on January 1, 1997 and 1998, respectively. The unaudited pro
forma consolidated balance sheet data as of June 30, 1998 gives effect to: (i)
the Offering and the application of the proceeds thereof; and (ii) the
conversion of the Preferred Stock into Common Stock. The unaudited historical
statement of operations data of the Company for the six months ended June 30,
1998 represents the historical results of Sofedit, as predecessor, and, from
April 1, 1998, the effective date of the Combination for accounting purposes,
the consolidated results of MS Acquisition and Sofedit. The information provided
below should be read in conjunction with the Consolidated Financial Statements
and the Unaudited Pro Forma Financial Data.
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UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL DATA OF THE COMPANY
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PRO FORMA PRO FORMA
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YEAR ENDED SIX MONTHS ENDED
DEC. 31, JUNE 30,
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1997 1997 1998
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(U.S. DOLLARS IN MILLIONS)
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CONSOLIDATED STATEMENT OF OPERATIONS DATA:(1)(2)(3)
Net sales................................................... $693.6 $359.4 $375.3
Gross profit................................................ 82.2 48.4 44.2
Selling, general and administrative expenses................ 42.9 21.4 22.2
Research and development expenses........................... 7.4 4.1 4.2
Other (income) expense(4)................................... 7.6 2.8 2.2
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Operating income............................................ 24.3 20.1 15.6
Net interest expense........................................ 19.0 10.2 10.3
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Income before taxes......................................... 5.3 9.9 5.3
Income before discontinued operations....................... 4.3 6.7 3.2
Earnings per share before discontinued operations...........
OTHER DATA:(1)(2)(3)
EBITDA(5)................................................... $ 61.1 $ 40.8 $ 33.7
Capital expenditures........................................ 27.7 14.1 22.2
Depreciation and amortization............................... 36.8 20.7 18.1
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PRO FORMA
JUNE 30, 1998
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CONSOLIDATED BALANCE SHEET DATA (AT END OF
PERIOD):(2)(3)(6)(7)
Cash........................................................ $
Working capital(8)..........................................
Total assets................................................
Total debt..................................................
Stockholders' equity........................................
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(1) The unaudited pro forma Consolidated Statement of Operations Data and Other
Data for the year ended December 31, 1997 give pro forma effect to: (i) the
Combination; (ii) the Offering and the application of proceeds thereof; and
(iii) the conversion of Preferred Stock into Common Stock, as if these
events had occurred on January 1, 1997. The unaudited pro forma Consolidated
Statement of Operations Data and Other Data for the six months ended June
30, 1997 and June 30, 1998 give pro forma effect to: (i) the Combination;
(ii) the Offering and the application of proceeds thereof; and (iii) the
conversion of Preferred Stock into Common Stock, as if these events had
occurred on January 1, 1997 and January 1, 1998, respectively.
(2) The pro forma financial data do not reflect any cost savings expected to
result from the Combination.
(3) The unaudited pro forma Consolidated Statement of Operations Data and Other
Data were translated from French francs using the average FF/$1.00 exchange
rate for the respective year or six month period (FF5.85 per $1.00 for the
year ended December 31, 1997, FF5.72 per $1.00 for the six months ended June
30, 1997 and FF6.08 per $1.00 for the six months ended June 30, 1998).
Consolidated Balance Sheet Data were translated using the period end
FF/$1.00 exchange rate for the applicable six month period (FF6.05 per $1.00
for June, 30, 1998). See "Exchange Rate Information".
(4) In the year ended December 31, 1997, other expense includes: (i) a $2.6
million loss on the sale of a non-core subsidiary; and (ii) $2.5 million of
restructuring costs related to the rationalization of certain of the
Company's prototype facilities. In the six months ended June 30, 1997, other
expense includes a $1.3 million initial accrual for a loss on the sale of a
non-core subsidiary.
(5) EBITDA is defined as income before the effect of changes in accounting, plus
interest, income taxes, depreciation and amortization. Operating income
EBITDA is presented because it is a widely accepted financial indicator of a
company's ability to incur and service debt. However, EBITDA should not be
considered in isolation as a substitute for net income or cash flow data
prepared in accordance with generally accepted accounting principles or as a
measure of a company's profitability.
(6) The unaudited pro forma Consolidated Balance Sheet Data as of June 30, 1998
gives pro forma effect to: (i) the Offering and the application of proceeds
thereof; and (ii) the conversion of Preferred Stock into Common Stock.
(7) The pro forma Consolidated Balance Sheet Data is to be determined based upon
the amount of debt repaid from the proceeds of the Offering. See "Use of
Proceeds."
(8) Working capital is defined as current assets (including cash) minus current
liabilities. At June 30, 1998, the Company had sold receivables amounting to
$55.5 million under its accounts receivable program. Such receivables are
excluded from working capital. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Financial Condition".
8
<PAGE> 10
SUMMARY HISTORICAL FINANCIAL DATA FOR SOFEDIT AND THE COMPANY
<TABLE>
<CAPTION>
SOFEDIT THE COMPANY
----------------------------------------- --------------
HISTORICAL SIX HISTORICAL SIX
YEAR ENDED DEC. 31, MONTHS MONTHS
------------------------ ENDED JUNE 30, ENDED JUNE 30,
1995 1996 1997 1997 1998
------ ------ ------ -------------- --------------
(U.S. DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF OPERATIONS
DATA:(1)(2)
Net sales............................... $464.9 $484.7 $487.9 $255.6 $322.3
Gross profit............................ 67.6 60.1 58.5 34.7 36.3
Selling, general and administrative
expenses.............................. 28.4 29.2 26.1 14.0 18.2
Research and development expenses....... 4.4 7.6 7.4 4.1 4.2
Other (income) expense(3)............... 2.1 (0.6) 6.1 2.1 1.6
------ ------ ------ ------ ------
Operating income........................ 32.7 23.9 18.9 14.5 12.3
Net interest expense.................... 15.3 12.9 9.7 5.4 9.0
------ ------ ------ ------ ------
Income before taxes..................... 17.4 11.0 9.2 9.1 3.3
Income before discontinued operations... 16.0 11.4 7.2 6.7 1.9
Net income.............................. $ 12.8 $ 7.4 $ 4.7 $ 5.3 $ 0.4
OTHER DATA:(1)(2)(3)
EBITDA(4)............................... $ 59.3 $ 48.8 $ 46.5 $ 29.4 $ 28.1
Capital expenditures.................... 28.6 33.2 15.1 7.9 18.9
Depreciation and amortization........... 26.6 24.9 27.6 14.9 15.8
CONSOLIDATED BALANCE SHEET DATA (AT END
OF PERIOD):(1)(2)
Cash.................................... -- $ 11.3 $ 11.6 -- $ 22.9
Working capital(5)...................... -- 19.0 8.5 -- 3.0
Total assets............................ -- 408.5 361.9 -- 575.9
Total debt.............................. -- 140.1 115.2 -- 278.0
Stockholders' equity.................... -- 62.4 65.3 -- (5.2)
</TABLE>
9
<PAGE> 11
SUMMARY HISTORICAL FINANCIAL DATA FOR SOFEDIT AND THE COMPANY
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------
1995 1996 1997
----------- ----------- -----------
(FRENCH FRANCS IN MILLIONS; U.S. GAAP)
<S> <C> <C> <C>
CONSOLIDATED STATEMENT OF OPERATIONS DATA:(5)
Net sales................................................ FF2,320.0 FF2,479.3 FF2,848.1
Gross profit............................................. 337.5 307.4 341.4
Selling, general and administrative expenses............. 141.8 149.5 152.4
Research and development expenses........................ 21.8 38.9 43.2
Other (income) expense(3)................................ 10.4 (3.2) 35.6
--------- --------- ---------
Operating income......................................... 163.6 122.1 110.2
Net interest expense..................................... 76.8 65.8 56.6
--------- --------- ---------
Income before taxes...................................... 86.8 56.3 53.6
Income before discontinued operations.................... 79.7 58.1 42.1
Net income............................................... FF 64.0 FF 37.6 FF 27.6
OTHER DATA:(1)(6)
EBITDA(4)................................................ FF 296.3 FF 249.2 FF 270.8
Capital expenditures..................................... 142.7 170.0 87.9
Depreciation and amortization............................ 132.7 127.1 160.6
CONSOLIDATED BALANCE SHEET DATA (AT END OF PERIOD):(1)(6)
Cash..................................................... -- FF 59.4 FF 69.6
Working capital(5)....................................... -- 98.8 51.5
Total assets............................................. -- 2,139.4 2,167.2
Total debt............................................... -- 733.7 689.8
Stockholders' equity..................................... -- 327.0 391.0
</TABLE>
- ---------------
(1) Historical data for the six months ended June 30, 1997 are those of Sofedit,
as predecessor of the Company. The historical data for the six months ended
June 30, 1998 includes six months of results for Sofedit and the operations
of MS Acquisition from April 1, 1998. Sofedit did not prepare a U.S. GAAP
balance sheet as of December 31, 1995, or as of June 30, 1997.
(2) The Consolidated Statement of Operations Data and Other Data were translated
from French francs using the average FF/$1.00 exchange rate for the
respective year or six-month period (FF4.96 per $1.00 for the year ended
December 31, 1995, FF5.12 per $1.00 for the year ended December 31, 1996,
FF5.85 per $1.00 for the year ended December 31, 1997, FF5.72 per $1.00 for
the six months ended June 30, 1997 and FF6.08 per $1.00 for the six months
ended June 30, 1998). The Consolidated Balance Sheet Data were translated
using the period end FF/$1.00 exchange rate for the respective year or six
month period (FF 6.05 per $1.00 for June 30, 1998).
(3) In the year ended December 31, 1997, other expense includes: (i) a $2.6
million loss on the sale of a non-core subsidiary; and (ii) $2.5 million of
restructuring costs related to the rationalization of certain of the
Company's prototype facilities. In the six months ended June 30, 1997, other
expense includes a $1.3 million initial accrual for a loss on the sale of a
non-core subsidiary. In the year ended December 31, 1996, other expense
includes a $1.5 million gain on the sale of certain assets. In the year
ended December 31, 1995, other expense includes a $0.2 million gain on the
sale of certain assets.
(4) EBITDA is defined as income before the effect of changes in accounting plus
interest, income taxes, depreciation and amortization. Operating income
EBITDA is presented because it is a widely accepted financial indicator of a
company's ability to incur and service debt. However, EBITDA should not be
considered in isolation as a substitute for net income or cash flow data
prepared in accordance with generally accepted accounting principles or as a
measure of a company's profitability.
(5) Working capital is defined as current assets (including cash) minus current
liabilities. At December 31, 1996, December 31, 1997 and at June 30, 1998,
the Company had sold, under its accounts receivable program, receivables
amounting to $70.1 million, $53.8 million and $55.5 million, respectively.
See "Management's Discussion and Analysis of Financial Condition and Results
of Operations -- Financial Condition".
(6) French franc data is provided for information purposes only in order to
present the financial trends of Sofedit excluding currency translation
effects.
10
<PAGE> 12
SUMMARY HISTORICAL FINANCIAL DATA FOR MS ACQUISITION
<TABLE>
<CAPTION>
YEAR ENDED THREE MONTHS ENDED
------------------------------ ---------------------
DEC. 31, DEC. 29, DEC. 28, MARCH 30, MARCH 29,
1995 1996 1997 1997 1998
-------- -------- -------- --------- ---------
(U.S. DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF OPERATIONS DATA:
Net sales..................................... $211.9 $211.5 $205.7 $ 55.1 $ 53.1
Gross profit.................................. 28.4 30.5 24.4 8.1 8.1
Selling, general and administrative
expenses(1)................................. 12.6 14.9 16.8 3.6 4.3
Other (income) expense........................ 0.8 0.8 0.8 0.2 0.2
------ ------ ------ ------ ------
Operating income.............................. 15.0 14.8 6.8 4.3 3.6
Net interest expense.......................... 8.6 9.4 11.2 2.8 3.1
------ ------ ------ ------ ------
Income (loss) before taxes.................... 6.4 5.4 (4.4) 1.5 0.5
Income (loss) before preferred stock
dividends(2) 4.6 2.3 (3.0) 0.9 0.4
Net income (loss)............................. $ 4.6 $ 1.8 $ (4.3) $ 0.6 $ 0.0
OTHER DATA:
EBITDA(3)..................................... $ 21.6 $ 22.8 $ 16.7 $ 6.1 $ 5.5
Capital expenditures.......................... 10.1 7.0 10.7 3.0 3.2
Depreciation and amortization................. 6.6 8.0 9.9 1.8 1.9
CONSOLIDATED BALANCE SHEET DATA
(AT END OF PERIOD):
Cash.......................................... $ 0.3 $ 4.0 $ 0.0 $ 0.0 $ 0.3
Working capital (deficit)(4).................. (3.0) 7.7 3.9 7.3 3.5
Total assets.................................. 118.2 128.4 142.8 144.3 159.4
Total debt.................................... 57.7 94.2 106.0 96.3 112.0
Stockholders' equity (deficit)................ 5.0 (23.2) (27.6) (22.5) (27.5)
</TABLE>
- ---------------
(1) Included in selling, general and administrative expenses are management fees
payable to former stockholders of $0.3 million and $0.2 million for 1995 and
1996, respectively. Such fees were eliminated in 1996. In addition, included
in selling, general and administrative expenses for the year ended December
29, 1996 are $0.6 million of nonrecurring costs related to the 11 7/8%
Senior Notes.
(2) In the third quarter of 1996, MS Acquisition incurred an extraordinary
charge of $1.1 million relating to the early redemption of its subordinated
debt.
(3) EBITDA is defined as income before the effect of changes in accounting, plus
interest, income taxes, depreciation and amortization. Operating income
EBITDA is presented because it is a widely accepted financial indicator of a
company's ability to incur and service debt. However, EBITDA should not be
considered in isolation as a substitute for net income or cash flow data
prepared in accordance with generally accepted accounting principles or as a
measure of a company's profitability.
(4) Working capital is defined as current assets (including cash) minus current
liabilities.
11
<PAGE> 13
RISK FACTORS
In evaluating an investment in the Common Stock offered hereby, prospective
investors should carefully consider the following risk factors, as well as the
other information set forth elsewhere in this Prospectus.
OEM SUPPLIER INDUSTRY
The OEM supplier market in which the Company competes is highly cyclical
and depends on the overall strength of consumer demand for light trucks and
passenger cars. There can be no assurance that the automotive industry, for
which the Company supplies parts, will not experience downturns in the future. A
decrease in overall consumer demand for light trucks or passengers cars or a
general recession could have a material adverse effect on the Company.
DEPENDENCE ON KEY CUSTOMERS AND PRODUCTS
The Company's primary customers are Renault, Chrysler, Peugeot-Citroen and
GM, which accounted for 22.4%, 19.3%, 17.1% and 7.2%, respectively, of the
Company's total 1997 pro forma net sales. Sales to OEMs are not made pursuant to
long-term contractual arrangements but are competitively awarded for specific
projects in the case of both platform and factory assist work. Strong customer
relationships are critical to revenues generated from platform vehicle
production, which are increasingly contingent on whether the Company is chosen
by an OEM to participate in a platform development team. There can be no
assurance that business from these OEMs will continue at comparable levels in
the future or that European and North American OEMs will not experience setbacks
in their operations, such as labor difficulties or unsuccessful vehicle models.
In addition, a substantial portion of the Company's revenues in the United
States is derived from products used on the Chrysler Jeep Grand Cherokee. The
loss of Chrysler, GM, Renault or Peugeot-Citroen as customers, a significant
reduction in business generated by one of these companies, or a decline in sales
of the Chrysler Jeep Grand Cherokee, the Renault Twingo or the Peugeot-Citroen
806 could have a material adverse effect on the Company.
DEPENDENCE ON KEY PERSONNEL
The Company's success will depend, in part, on the efforts of its executive
officers and other key employees, including in particular Messrs. Francis Barge
and Ueli Spring. The future success of the Company will also depend on, among
other factors, the Company's ability to continue to attract and retain qualified
personnel, particularly engineering personnel. Although the Company believes its
relationships with its executive officers and key employees are good, the loss
of the services of any of the Company's executive officers or other key
employees or the failure to attract or retain employees could have a material
adverse effect on the financial condition and results of operations of the
Company. See "Management -- Executive Employment Agreements".
RISKS ASSOCIATED WITH ACQUISITION STRATEGY
One of the Company's principal business strategies is to expand its core
competencies through acquisitions of companies that the Company identifies as
complementary to its existing businesses and capable of achieving satisfactory
rates of return. The Company is usually engaged in various stages of evaluation
of potential acquisition candidates. Any such acquisition would be paid for
through available cash from the Company's operations, the incurrence of debt,
the issuance of capital stock or a combination of such financing. If the Company
determines that any one or more of these potential acquisitions or other
transactions would meet its criteria and may be accomplished on appropriate
terms, it expects to consummate them as quickly as possible. There can be no
assurance that any of the discussions in which the Company is engaged will
result in the completion of any acquisitions, that the Company will in the
future succeed in identifying or acquiring appropriate companies on attractive
terms or that the Company will be successful in integrating acquired companies
or realizing the desired benefits of such acquisitions.
There can be no assurance that the Company will realize the anticipated
benefits of the Combination. In addition, there can be no assurance that the
Company will not experience difficulties in integrating the
12
<PAGE> 14
operations and management systems of Aetna with those of Sofedit. The
integration of Aetna and Sofedit will require the experience and expertise of
certain key managers of Aetna and Sofedit who have been retained by the Company.
There can be no assurance that the Aetna managers retained by the Company will
remain with the Company for the time period necessary to integrate successfully
the operations of Aetna with those of the Company.
LABOR ISSUES
France recently implemented new legislation reducing the length of the
legal work week from 39 to 35 hours a week. Given that the legislation was
enacted on June 13, 1998, and will be effective as of January 1, 2000, the
Company is at present unable to estimate the impact such legislation might have
on the Company's labor expenses. The implementation of the French legislation
could have a material impact on the financial condition and results of the
operations of the Company.
Each of the Company's primary customers in the United States, Chrysler and
GM, has major contracts with the UAW. Because of North American OEMs' dependence
on a single union, labor difficulties and work stoppages at North American OEMs'
facilities may have an adverse impact on the Company. The recent strike at GM
had an effect on the Company's North American operations. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations --
Overview -- Recent GM Strike".
Substantially all of the Company's hourly employees are covered by
collective bargaining agreements. At the present time, the Company believes that
its relationships with these unions and employees are good. However, there can
be no assurance that this will continue to be the case. Strikes or work
stoppages could lead to an adverse impact on the Company's relationships with
customers, which could in turn have a material effect on the Company's business,
financial condition or results of operations. The Company's collective
bargaining agreements with its unions expire at various times at each production
facility. There can be no assurance that the Company will be able to negotiate
collective bargaining agreements acceptable to it in the future. See "Business
- -- Employees".
RELIANCE ON THIRD PARTY SUPPLIERS
The Company is dependent on third party suppliers for important raw
materials, components and equipment necessary to manufacture its products. The
most important raw material is steel, accounting for 28.4% of the Company's pro
forma 1997 cost of sales. In North America, the Company is party to steel
purchase programs with its major customers, which minimize the effect to the
Company of variations in steel prices. Such programs are not typically available
with the Company's major European customers and accordingly, the Company has
been subject to material variations in steel prices in Europe. The Company's
most important manufactured inputs are tooling, machinery and dies, which are
critical elements of the Company's production lines. Dependence on suppliers of
those inputs makes the Company subject to a risk that these suppliers will,
voluntarily or otherwise, stop providing the Company with necessary raw
materials or equipment of the quality and on the terms the Company requires.
While the Company believes it uses its best efforts to secure the highest
quality inputs on the best possible terms, there can be no assurance that one or
more suppliers will not fail to meet the Company's expectations due to changed
market conditions or problems at the supplier itself, including technical, labor
or financial problems. The Company has occasionally had problems with tooling
and machinery suppliers due to the bankruptcy of certain suppliers or failure to
meet quality standards. In two recent instances, such problems had a negative
impact on the Company's operations. The Company believes it has taken
appropriate steps to remedy these problems and to minimize the risk of their
reoccurrence. However, in the event a steel, tooling or other key supplier
failed to meet expectations, the Company could encounter difficulties in its own
production lines, and even fail to meet its own customer obligations. This could
result in a material adverse effect on the Company. See "Business -- Suppliers
and Raw Materials" and "Management's Discussion and Analysis of Financial
Condition and Results of Operations".
13
<PAGE> 15
COMPETITION
The automotive components supply industry is highly competitive. Some of
the Company's competitors, including certain divisions of its OEM customers, are
larger and have greater financial and other resources than the Company. The
large majority of the Company's sales are obtained through formal or informal
competitive bidding, as is customary in the automotive components supply
industry. While price is a major factor influencing whether the Company is
awarded business, other important factors include product quality and design,
production capacity and reliability, technological skill and performance, as
well as local and worldwide reputation, experience and customer relations. There
can be no assurance that the Company will be able to maintain its current
competitive position and continue to be awarded business by OEMs.
SUBSTANTIAL LEVERAGE AND DEBT SERVICE OBLIGATIONS
On a consolidated basis, the Company has indebtedness that is substantial
in relation to its stockholders' equity, as well as interest and debt service
requirements that are significant compared to its cash flow from operations. As
of June 30, 1998, after giving pro forma effect to the Offering and the planned
use of proceeds thereof, the Company's consolidated indebtedness amounted to
$ million. The level of the Company's indebtedness could have important
consequences to holders of the Common Stock, including: (i) a substantial
portion of the Company's cash flow from operations being required to be used to
service debt and not being available for other purposes; (ii) the Company's
ability to obtain additional debt financing in the future for working capital,
capital expenditures or acquisitions being limited; and (iii) the Company's
level of indebtedness limiting its flexibility in reacting to changes in the
industry and economic conditions generally. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Liquidity and
Capital Resources".
Certain of the Company's indebtedness contains restrictive covenants which
will affect, and may significantly limit or prohibit, among other things, the
ability of the Company, Aetna or other subsidiaries of the Company to incur
indebtedness, make prepayments of certain indebtedness, pay dividends, make
investments, engage in transactions with stockholders and affiliates, create
liens, sell assets and engage in mergers and acquisitions. In addition, certain
of the Company's indebtedness requires the Company to meet certain financial
ratios and tests and provides certain creditors with certain rights in the event
of a change of control of the Company. These covenants may significantly limit
the operating and financial flexibility of the Company and may limit its ability
to respond to changes in its business or competitive activities and its ability
to pay dividends. The ability of the Company to comply with such provisions may
be affected by events beyond its control. As of June 30, 1998, approximately
11.1% of the Company's indebtedness was secured, and in the event of any
default, the lenders could proceed against the collateral thereunder, which
consists of substantially all of the property and assets of the Company, other
than interests in real property.
FOREIGN CURRENCY TRANSLATION AND TRANSACTION RISK
The financial condition and results of operations of certain of the
Company's operating entities are reported in various foreign currencies
(principally French francs and British pounds sterling) and then translated into
U.S. dollars at the applicable exchange rate for inclusion in the Company's
financial statements. As a result, appreciation of the dollar against these
foreign currencies will have a negative impact on the reported sales and
operating profit of the Company (and conversely, depreciation of the dollar
against these foreign currencies will have a positive impact).
In addition, the Company incurs currency transaction risk whenever it or
one of its foreign subsidiaries enters into either a purchase or sales
transaction using a different currency than the relevant entity's functional
currency. However, the nature of the Company's business results in the Company
generally matching revenues and expenses of the same currency. Therefore,
Company does not currently use financial instruments to limit its exposure to
foreign currency transaction risk. Nevertheless, given the volatility of
currency exchange rates, there can be no assurance that the Company will be able
to manage effectively its currency transaction risks or that any volatility in
currency exchange rates will not have a material adverse effect on the Company's
financial condition or results of operations.
14
<PAGE> 16
FOREIGN MARKETS
Approximately 70% of the Company's pro forma 1997 net sales were derived
from sales outside the United States. The Company expects sales from
international markets to continue to represent a significant portion of its
total sales. Certain risks are inherent in international operations, including
the following: foreign customers may have longer payment cycles; foreign
countries may impose additional withholding taxes or otherwise tax the Company's
foreign income, impose tariffs or adopt other restrictions on foreign trade or
investment; U.S. export licenses may be difficult to obtain; intellectual
property rights may be more difficult to enforce in foreign countries;
fluctuations in exchange rates may affect product demand and may adversely
affect the profitability of products and services provided by the Company in
foreign markets where payment for the Company's products and services is made in
the local currency; and general economic conditions in the countries in which
the Company operates could have an adverse effect on the Company's earnings from
operations in those countries. Tax rates in certain foreign countries may exceed
those of the United States and foreign earnings may be subject to withholding
requirements or the imposition of tariffs, exchange controls or other
restrictions. There can be no assurance that any of these factors will not have
a material adverse effect on the Company's business and results of operations.
See "Business".
PRODUCT LIABILITY EXPOSURE
The Company is subject to the risk of exposure to product liability claims
in the event that the use of any of its products results in personal injury or
death, and there can be no assurance that the Company will not experience
material product liability losses in the future. In addition, if any of the
Company's products prove to be defective, the Company may be required to
participate in a government-imposed or OEM-instituted recall involving such
products. The Company maintains insurance against such product liability claims,
but there can be no assurance that such coverage will be adequate for
liabilities ultimately incurred or that its current insurance coverage will
continue to be available on terms acceptable to the Company. A successful claim
brought against the Company that exceeds available insurance coverage or a
requirement to participate in any product recall could have a material adverse
impact on the financial condition and results of operations of the Company. See
"Business -- Legal Proceedings".
CHANGE OF CONTROL
The Indenture of the Senior Notes of Aetna (the "Senior Notes Indenture")
provides that upon the occurrence of a Change of Control (as defined in
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources -- Outstanding Debt -- Aetna
Senior Notes"), Aetna will have to offer each holder the right to purchase all
or a portion of such holder's Senior Notes at a purchase price equal to 101% of
the principal amount thereof plus accrued and unpaid interest, if any, to the
date of the purchase.
The Company believes that the Offering may result in a Change of Control
under the Senior Notes Indenture. Consequently, immediately upon the
consummation of the Offering, the Company will offer to repurchase the Senior
Notes pursuant to the terms described above. The Company cannot predict the
extent to which holders of Senior Notes will tender such Notes, but based on
current market conditions, the Company believes that its offer to purchase the
Senior Notes will not be accepted in a material principal amount. As the Company
does not believe that it will receive a significant amount of tenders, the
Company has not currently arranged additional financing to cover such a
possibility. Therefore, any such tenders could have a material impact on the
financial position and results of operations of the Company.
IMPACT OF ENVIRONMENTAL REGULATION
The Company is subject to the requirements of foreign, federal, state and
local environmental and occupational health and safety laws and regulations.
There can be no assurance that the Company will be at all times in complete
compliance with all such requirements. The Company has made and will continue to
make capital and other expenditures to comply with environmental regulations. If
a release of hazardous substances occurs on or from the Company's properties or
any associated offsite disposal location, or if contamination is
15
<PAGE> 17
discovered at any of the Company's current or former properties, the Company may
be held liable, and the amount of such liability could be material. See
"Business -- Environmental Matters."
ENFORCEABILITY OF JUDGMENTS
A substantial portion of the assets of the Company is located outside the
United States. As a result, any judgment obtained in the United States against
the Company may not be collectible within the United States. In addition,
certain of the Company's directors and officers are not residents of the United
States. It may not be possible for holders or beneficial owners of Common Stock
to effect service within the United States upon the Company's directors and
officers who are not residents of the United States, or to enforce, either
inside or outside the United States, judgments obtained against such persons in
U.S. courts, or to enforce in U.S. courts judgments obtained against such
persons in courts in jurisdictions outside the United States, whether or not
predicated upon the civil liability provisions of federal securities laws or
other laws of the United States or any state thereof. In particular, if an
original action is brought in France predicated solely upon U.S. federal
securities laws, French courts may not have the requisite jurisdiction to grant
the remedies sought, and actions for enforcement in France of judgments of U.S.
courts rendered against such persons would require such French persons to waive
their right under Article 15 of the French Civil Code to be sued in France only.
The Company believes that no such persons have waived such right with respect to
actions predicated solely upon U.S. federal securities laws. In addition,
actions in the United States under the U.S. federal securities laws could be
affected under certain circumstances by the French law of July 26, 1968, as
modified by the French law of July 16, 1980, which may preclude or restrict the
obtaining of evidence in France or from French persons in connection with such
actions.
SHARES ELIGIBLE FOR FUTURE SALE; REGISTRATION RIGHTS
No prediction can be made as to the effect, if any, that future sales of
shares of the Company, or the availability of shares of the Company for future
sale, will have on the market price of the Common Stock prevailing from time to
time. Sales of a substantial number of shares of Common Stock of the Company, or
the perception that such sales could occur, could adversely affect prevailing
market prices of the Common Stock.
The current stockholders of the Company have piggyback and demand
registration rights with respect to the Company's Common Stock. These piggyback
and demand registration rights cover all of the shares of Common Stock
beneficially owned by the current stockholders of the Company. See "Principal
Stockholders -- Registration Rights Agreement".
shares of Common Stock of the Company will be outstanding after the
Offering. In addition, (i) shares of Common Stock are reserved for
issuance upon the exercise of outstanding stock options and (ii) shares
of Common Stock are reserved for future grants or awards under the Company's
1998 Equity Incentive Plan. The Company, its executive officers and directors
and its stockholders have agreed not to offer, sell or transfer any shares of
Common Stock for a period of 180 days after the date of this Prospectus without
the prior written consent of the Underwriters. These agreements cover
approximately shares of Common Stock. See "Shares Eligible for Future
Sale", "Management -- 1998 Equity Incentive Plan" and "Underwriting".
ABSENCE OF PUBLIC MARKET FOR THE COMMON STOCK
Prior to the Offering, there has been no public market for the Common
Stock. Although an application to list the Common Stock on the New York Stock
Exchange will be made prior to the Offering, there can be no assurance that an
active or liquid trading market in the Common Stock will develop upon completion
of the Offering or, if developed, that it will be sustained. The initial public
offering price of the Common Stock will be determined through negotiations
between the Company and the Underwriters and may not be indicative of the market
price for the Common Stock after the Offering. For a discussion of factors
considered in determining the offering price of the Common Stock to the public,
see "Underwriting". The market price for
16
<PAGE> 18
shares of the Company's Common Stock may be highly volatile depending on changes
in general market and industry conditions.
DILUTION
The initial public offering price is substantially higher than the pro
forma net tangible book value per share of Common Stock. Accordingly, purchasers
of Common Stock offered hereby will incur immediate and substantial dilution in
tangible book value per share of Common Stock of $ . See "Dilution".
17
<PAGE> 19
THE COMPANY
The Company is a leading full-service supplier of highly engineered
metal-formed components, complex modules and mechanical assemblies for
automotive OEMs in Europe and North America. The Company's principal operating
subsidiaries are Sofedit in Europe and Aetna in North America.
THE COMBINATION
The Combination of Sofedit and MS Acquisition was completed on April 14,
1998. In connection with the Combination, Sofedit's former stockholders
transferred the outstanding capital stock of Sofedit to MS Acquisition in
exchange for: (i) promissory notes of MS Acquisition in the principal amount of
$40.9 million; (ii) dividends in an amount of approximately $1.0 million; (iii)
270,000 shares of Series B Preferred Stock ($27.0 million stated value) of MS
Acquisition; (iv) shares of Common Stock of MS Acquisition; and (v)
the assumption of approximately $12.0 million of debt of the former Sofedit
stockholders. The Combination has been accounted for as a reverse acquisition
because the former owners of Sofedit owned approximately 75% of the fully
diluted outstanding Common Stock of the Company immediately following the
Combination. For accounting purposes, Sofedit is considered to be the acquiror
of, and the predecessor to, the Company. See "Principal Stockholders -- Stock
Purchase Agreement".
Sofedit is a leading full-service supplier of highly engineered
metal-formed components, complex modules and assemblies for European automotive
OEMs. Sofedit's principal customers are Renault and Peugeot, which in 1997
represented 37.3% and 28.5%, respectively, of Sofedit's net sales (excluding
tooling sales). Since its formation in 1989, Sofedit has rapidly grown as a
result of internal growth and the completion of seven acquisitions. Four of
Sofedit's acquisitions were completed within its first six months of operations
and included: (i) CLA S.A., which provided prototyping capabilities; (ii) Cabrit
S.A., which provided complex stamping expertise; (iii) Sotramex S.A., which
provided significant incremental manufacturing capacity as well as assembly
expertise; and (iv) Bonin S.A., which provided access to important customers
such as Peugeot-Citroen. Sofedit's acquisition of Laprade Emboutissage S.A. in
1991 and Aubecq S.A. in two steps in 1992 and 1994 significantly expanded
Sofedit's presence in the market for pedal systems and pulleys, respectively.
Sofedit's acquisition of Lebranchu S.A. in 1994 is its most recent acquisition
and it approximately doubled the size of Sofedit in terms of net sales. The
acquisition of Lebranchu significantly expanded Sofedit's product lines,
customer base and geographic presence and was encouraged by Lebranchu's two
largest customers, Renault and Peugeot-Citroen. For the year ended December 31,
1997, Sofedit had net sales of $487.9 million.
Aetna is a leading full-service supplier of highly engineered metal-formed
components, complex modules and assemblies for North American automotive OEMs.
Aetna has been a direct supplier to Chrysler and GM since 1941, with 1997 net
sales to these customers accounting for, respectively, 65.1% and 24.1% of
Aetna's 1997 net sales of $205.7 million.
18
<PAGE> 20
USE OF PROCEEDS
The net proceeds to the Company from the Offering (using an assumed
offering price of $ per share and after deducting underwriting discounts
and commissions and estimated expenses of the Offering payable by the Company)
are estimated to be approximately $ million (approximately $
million if the Over-Allotment Option is exercised in full). The proceeds of the
Offering will be used to repay: (i) approximately $40.9 million of the 11.0%
Promissory Notes of the Company due October 14, 1999; (ii) approximately $8.5
million of the 11.0% Junior Subordinated Promissory Notes of Aetna Holdings
("Junior Notes"), including interest accrued thereon; (iii) approximately $12.0
million of bank debt assumed in connection with the Combination, due between
1999 and 2000 and bearing an interest rate of PIBOR + 1.3%; and (iv)
approximately $ million under the Senior Revolving Credit Facility,
bearing an average interest rate of 9.5%. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Liquidity and
Capital Resources -- Outstanding Debt."
EXCHANGE RATE INFORMATION
A majority of the Company's pro forma net sales were reported in French
francs. The following table sets forth, for the periods and dates indicated,
certain information concerning the noon buying rate in New York for cable
transfers in U.S. dollars as certified for customs purposes by the Federal
Reserve Bank of New York (the "Noon Buying Rate") expressed in French francs per
$1.00. On August 10, 1998, the Noon Buying Rate was FF 5.9700 per $1.00.
<TABLE>
<CAPTION>
YEAR HIGH LOW AVERAGE(1) PERIOD END
---- -------- -------- ----------- ----------
<S> <C> <C> <C> <C>
1998 (through June 30).......................... FF6.2130 FF5.8940 FF6.0757 FF6.0470
1997 (through June 30).......................... 5.8752 5.1932 5.7196 5.8752
1997............................................ 6.3491 5.1932 5.8509 6.0190
1996............................................ 5.2850 4.9025 5.1184 5.1928
1995............................................ 5.3870 4.7755 4.9567 4.8975
1994............................................ 5.9785 5.1120 5.5106 5.3445
1993............................................ 6.0560 5.3000 5.6852 5.9190
</TABLE>
- ---------------
(1) The average of the Noon Buying Rates on the last business day of each month
during the period indicated.
DIVIDEND POLICY
The Company does not intend to pay cash dividends in the future. In
addition, certain agreements governing the Company's indebtedness restrict the
ability of the Company to pay cash dividends. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Liquidity and
Capital Resources".
19
<PAGE> 21
DILUTION
The net tangible book value of the Company as of June 30, 1998, was
$ million or $ per share. After giving effect to the
application of the estimated net proceeds from the Offering as set forth under
"Use of Proceeds", the pro forma net tangible book value of the Company as of
June 30, 1998 would have been approximately $ million, or $ per
share. This represents an immediate increase in net tangible book value of
$ per share to the existing stockholders and an immediate dilution of
$ per share to investors purchasing shares of Common Stock in this
Offering. "Dilution per share" represents the difference between price per share
to be paid by new investors and pro forma net tangible book value per share of
Common Stock after the Offering.
The following table illustrates this per share dilution:
<TABLE>
<S> <C>
Initial public offering price per share..................... $
Pro forma net tangible book value per share at June 30,
1998(1)...................................................
Increase in pro forma net tangible book value per share
attributable to price paid by investors in this
Offering..................................................
Pro forma net tangible book value per share after this
Offering..................................................
Dilution in net tangible book value per share to new
investors in this Offering(2)............................. $
====
</TABLE>
- ---------------
(1) Net tangible book value per share is determined by dividing the net tangible
book value of the Company by the number of outstanding shares of Common
Stock. Net tangible book value is calculated as total assets, less goodwill
and other intangible assets (net of amortization) and total liabilities.
(2) Dilution is determined by subtracting pro forma net tangible book value per
share of Common Stock from the assumed initial public offering price per
share paid by investors in the Offering.
After the Offering, there will be outstanding options to purchase
shares of Common Stock at an exercise price of $ per share of Common
Stock and all 405,096 shares of Preferred Stock will be converted into
shares of Common Stock concurrent with the consummation of the Offering. The
exercise of these options and the conversion of the Preferred Stock would result
in a net tangible book value per share of $ .
Assuming the Underwriters' Over-Allotment Option were exercised in full,
pro forma as adjusted net tangible book value after exercise of such
Over-Allotment Option would be $ per share, the immediate increase in pro
forma as adjusted net tangible book value of shares owned by existing
stockholders would be $ per share, and the immediate dilution to new
investors in the Offering would be $ per share.
The following table summarizes, as of June 30, 1998, the number of shares
of Common Stock purchased from the Company, the total consideration paid to the
Company (equal, in the case of the current stockholders, to the original
consideration for the Common Stock held by them, plus additional contributions
made by them in respect of the Common Stock), and the average price per share
paid by the current stockholders and by the investors purchasing Common Stock in
the Offering.
<TABLE>
<CAPTION>
COMMON STOCK TOTAL
PURCHASED CONSIDERATION
---------------- ---------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
------ ------- ------ ------- -------------
<S> <C> <C> <C> <C> <C>
Current Stockholders.......................... % $ % $
New Investors.................................
---- --- ------ --- ------
Total....................................... % $ % $
</TABLE>
20
<PAGE> 22
CAPITALIZATION
The following table sets forth the consolidated capitalization of the
Company as of June 30, 1998 and as adjusted to give effect to the Offering, the
application of the net proceeds thereof and the conversion of the Preferred
Stock of the Company into Common Stock. See "Use of Proceeds". This table should
be read in conjunction with "Selected Unaudited Pro Forma Combined Condensed
Financial Data, "Selected Historical Consolidated Financial Information of
Sofedit and the Company", "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and the Consolidated Financial Statements
included elsewhere herein. See also "Description of Capital Stock".
<TABLE>
<CAPTION>
AS OF JUNE 30, 1998
---------------------------
ACTUAL(1) AS ADJUSTED(2)
--------- --------------
(U.S. DOLLARS IN MILLIONS)
<S> <C> <C>
Short-term debt:
Current portion of long-term debt......................... $ 14.3 $ --
Senior Revolving Credit Facility.......................... 25.9 --
Other short-term debt..................................... 15.3 --
------ ------
Total short-term debt(3)............................... $ 55.5 $ --
====== ======
Long-term debt:
11 7/8% Senior Notes...................................... $ 85.0 $ --
11% Junior Notes of Aetna Holdings(4)(5).................. 8.2 --
11% Promissory Notes of the Company(6).................... 39.2 --
Bank debt assumed in the Combination(7)................... 12.0 --
Other long-term debt including capital lease obligations.... 78.1 --
------ ------
Total long-term debt................................... 222.5 --
------ ------
Preferred Stock:
Series A Convertible Preferred Stock, par value $.01;
stated value $100; authorized 363,128; issued 344,443
and outstanding 135,096................................ 14.0 --
Series B Convertible Preferred Stock, par value $.01;
stated value $100; authorized 270,000; issued and
outstanding 270,000.................................... 27.0 --
------ ------
Total Preferred Stock.................................. 41.0 --
------ ------
Stockholders' equity (deficit):
Common Stock, par value $.01; authorized ; issued
historical, as adjusted, outstanding
historical, as adjusted(8)............. --
Additional paid-in capital................................ 39.6 --
Retained earnings......................................... (39.8) --
Cumulative translation adjustment......................... (5.0) --
------ ------
Total stockholders' equity (deficit)...................... (5.2) --
------ ------
Total capitalization...................................... $258.3 $ --
====== ======
</TABLE>
- ---------------
(1) Does not include shares of Common Stock reserved for issuance upon
exercise of stock options outstanding under the Stock Option Plan of the
Company.
(2) Includes shares of Common Stock to be issued upon conversion of the
Preferred Stock of the Company.
(3) Does not include $55.5 million of receivables sold under an accounts
receivables sale program.
(4) Includes approximately $0.5 million in unfunded contractual obligations of
Aetna Holdings to former MS Acquisition option holders.
(5) Does not include approximately $0.3 million of accrued and unpaid interest
which will be paid with the proceeds of the Offering. See "Use of Proceeds".
(6) Does not include approximately $1.7 million of unamortized discount, which,
together with the principal, will be paid with the proceeds of the Offering.
See "Use of Proceeds".
21
<PAGE> 23
(7) Former direct and indirect stockholders of Sofedit had bank loans which were
assumed in connection with the Combination. Does not include approximately
$0.3 million of accrued and unpaid interest on such loans, which, together
with the principal, will be paid from the proceeds of the Offering. See "Use
of Proceeds".
(8) The Company intends to proceed with a split of the Common Stock prior to the
Offering.
22
<PAGE> 24
SELECTED UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL DATA
The following selected unaudited pro forma combined condensed financial
data do not purport to be indicative of the results of operations or the
financial position of the Company that would have actually been obtained had
such transactions been completed as of the assumed dates and for the period
presented, or which may be obtained in the future. The pro forma adjustments are
described in the accompanying notes and are based upon available information and
certain assumptions that the Company believes are reasonable. The Unaudited Pro
Forma Financial Data should be read in conjunction with the Consolidated
Financial Statements and "Management's Discussion and Analysis of Financial
Condition and Results of Operations" included elsewhere in this Prospectus.
The Combination is accounted for as a reverse acquisition because the
former shareholders of Sofedit owned approximately 75% of the fully diluted
outstanding Common Stock of the Company immediately following the Combination.
For accounting purposes, Sofedit is considered to be the acquiror of, and the
predecessor to, the Company. The pro forma statement of operations data for the
year ended December 31, 1997 give pro forma effect to: (i) the Combination; (ii)
the Offering and the application of proceeds thereof; and (iii) the conversion
of Preferred Stock into Common Stock, as if these events had occurred on January
1, 1997. The unaudited pro forma statement of operations data for the six months
periods ended June 30, 1997 and June 30, 1998 give pro forma effect to: (i) the
Combination; (ii) the Offering and the application of proceeds thereof; and
(iii) the conversion of Preferred Stock into Common Stock, as if these events
had occurred on January 1, 1997 and January 1, 1998, respectively.
23
<PAGE> 25
SELECTED UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL DATA
(U.S. DOLLARS IN MILLIONS, EXCEPT FOR SHARE DATA)
PRO FORMA STATEMENT OF OPERATIONS DATA FOR THE SIX MONTHS ENDED JUNE 30, 1998
<TABLE>
<CAPTION>
ADJUSTMENTS
MS ----------------------------------------
ACQUISITION SOFEDIT COMBINATION OFFERING PRO FORMA
HISTORICAL HISTORICAL ADJUSTMENTS ADJUSTMENTS(A) COMBINED
----------- ---------- ----------- -------------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Net sales.................... $100.3 $275.0 $ -- $ -- $375.3
Cost of sales................ 88.8 242.1 0.2 (b) -- 331.1
------ ------ ----- ----- ------
Gross profit................. 11.5 32.9 (0.2) -- 44.2
Selling, general and
administrative expenses.... 9.0 13.2 -- -- 22.2
Research and development
expenses................... -- 4.2 -- -- 4.2
Other (income) expense....... 0.6 1.4 0.2 (b) -- 2.2
------ ------ ----- ----- ------
Operating income (loss)...... 1.9 14.1 (0.4) -- 15.6
Net interest expense......... 7.3 4.8 0.8 (c) (2.6) (d) 10.3
------ ------ ----- ----- ------
Income (loss) before taxes... (5.4) 9.3 (1.2) 2.6 5.3
Income tax provision
(credit)................... (1.4) 3.0 (0.4) (e) 0.9 (e) 2.1
------ ------ ----- ----- ------
Income (loss) before
discontinued operations.... $ (4.0) $ 6.3 $(0.8) $ 1.7 $ 3.2
====== ====== ===== ===== ======
Income per share before
discontinued operations
(f)........................ $
======
</TABLE>
PRO FORMA STATEMENT OF OPERATIONS DATA FOR THE SIX MONTHS ENDED JUNE 30, 1997
<TABLE>
<CAPTION>
ADJUSTMENTS
MS ----------------------------------------
ACQUISITION SOFEDIT COMBINATION OFFERING PRO FORMA
HISTORICAL HISTORICAL ADJUSTMENTS ADJUSTMENTS(A) COMBINED
----------- ---------- ----------- -------------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Net sales.................... $103.8 $255.6 $ -- $ -- $359.4
Cost of sales................ 89.7 220.9 0.4 (b) -- 311.0
------ ------ ----- ----- ------
Gross profit................. 14.1 34.7 (0.4) -- 48.4
Selling, general and
administrative expenses.... 7.4 14.0 -- -- 21.4
Research and development
expenses................... -- 4.1 -- -- 4.1
Other (income) expense....... 0.4 2.1 0.3 (b) -- 2.8
------ ------ ----- ----- ------
Operating income (loss)...... 6.3 14.5 (0.7) 20.1
Net interest expense......... 5.7 5.4 1.7 (c) (2.6) (d) 10.2
------ ------ ----- ----- ------
Income (loss) before taxes... 0.6 9.1 (2.4) 2.6 9.9
Income tax provision
(credit)................... 0.4 2.6 (0.7) (e) 0.9 (e) 3.2
------ ------ ----- ----- ------
Income (loss) before
discontinued operations.... $ 0.2 $ 6.5 $(1.7) $ 1.7 $ 6.7
====== ====== ===== ===== ======
Income per share before
discontinued operations
(f)........................ $
======
</TABLE>
See accompanying notes to the unaudited pro forma combined condensed financial
data.
24
<PAGE> 26
SELECTED UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL DATA
(U.S. DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)
PRO FORMA STATEMENT OF OPERATIONS DATA FOR THE YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
ADJUSTMENTS
MS ------------------------------
ACQUISITION SOFEDIT COMBINATION OFFERING PRO FORMA
HISTORICAL HISTORICAL ADJUSTMENTS ADJUSTMENTS (A) COMBINED
----------- ---------- ----------- --------------- ---------
<S> <C> <C> <C> <C> <C>
Net sales.................... $205.7 $487.9 $ -- $ -- $693.6
Cost of sales................ 181.3 429.4 0.7(b) -- 611.4
------ ------ ----- ----- ------
Gross profit................. 24.4 58.5 (0.7) -- 82.2
Selling, general and
administrative expenses.... 16.8 26.1 -- -- 42.9
Research and development
expenses................... -- 7.4 -- -- 7.4
Other (income) expense....... 0.8 6.1 0.7(b) -- 7.6
------ ------ ----- ----- ------
Operating income (loss)...... 6.8 18.9 (1.4) -- 24.3
Net interest expense......... 11.2 9.7 3.3(c) (5.2)(d) 19.0
------ ------ ----- ----- ------
Income (loss) before taxes... (4.4) 9.2 (4.7) 5.2 5.3
Income tax provision
(credit)................... (1.4) 2.0 (1.4)(e) 1.8(e) 1.0
------ ------ ----- ----- ------
Income (loss) before
discontinued operations.... $ (3.0) $ 7.2 $(3.3) $ 3.4 $ 4.3
====== ====== ===== ===== ======
Income per share before
discontinued operations
(f)........................ $
======
</TABLE>
See accompanying notes to the unaudited pro forma combined condensed financial
data.
25
<PAGE> 27
NOTES TO THE SELECTED UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL DATA
(U.S. DOLLARS IN MILLIONS)
(a) The Offering and the application of the proceeds thereof and the conversion
of Preferred Stock into Common Stock are referred to herein as Offering
Adjustments.
(b) These pro forma adjustments reflect the impact of the allocation of purchase
price to the assets and liabilities of MS Acquisition on the pro forma
condensed statement of operations. The excess purchase price was allocated
to the assets and liabilities of MS Acquisition as follows:
<TABLE>
<S> <C>
Inventory and tooling....................................... $ 0.8
Property, plant and equipment............................... 7.3
Incremental goodwill........................................ 35.0
</TABLE>
<TABLE>
<CAPTION>
COST OF OTHER (INCOME)
SALES EXPENSE TOTAL
------- -------------- -----
<S> <C> <C> <C>
Additional depreciation on property, plant and
equipment step-ups................................ $0.7 $ -- $ 0.7
Elimination of amortization of previously recorded
goodwill.......................................... -- (0.8) (0.8)
Goodwill amortization on Combination over 40
years............................................. -- 1.5 1.5
---- ----- -----
Year ended December 31, 1997........................ $0.7 $ 0.7 $ 1.4
==== ===== =====
Six months ended June 30, 1998(i)................... $0.2 $ 0.2 $ 0.4
==== ===== =====
Six months ended June 30, 1997...................... $0.4 $ 0.3 $ 0.7
==== ===== =====
</TABLE>
- ---------------
(i) The pro forma results for the six months ended June 30, 1998 include
three months of historical Combination adjustments.
(c) The pro forma Combination adjustment for interest expense reflects the
issuance and assumption of the following debt:
<TABLE>
<CAPTION>
INTEREST INTEREST INTEREST
EXPENSE FOR EXPENSE FOR EXPENSE FOR
THE YEAR THE SIX THE SIX
ENDED MONTHS ENDED MONTHS ENDED
DECEMBER 31, JUNE 30, JUNE 30,
DESCRIPTION AMOUNT DISCOUNT NET 1997 1997 1998
----------- ------ -------- ----- ------------ --------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Promissory notes......... $40.9 $2.5 $38.4 $2.5 $1.3 $0.6
Assumed debt of former
stockholders........... 12.0 -- 12.0 0.8 0.4 0.2
----- ---- ----- ---- ---- ----
$52.9 $2.5 $50.4 $3.3 $1.7 $0.8
===== ==== ===== ==== ==== ====
</TABLE>
The promissory notes by their terms are non-interest bearing until the
earlier of (a) one year from the date of the Combination, or (b) the
consummation of an initial public offering. As required under generally
accepted accounting principles, the Company has discounted the promissory
notes to reflect the appropriate interest rate. For purposes of these pro
forma statements, the Company has assumed an interest rate of LIBOR + 1.0%
(6.5% at the date of the Combination of April 1, 1998). This interest rate
is consistent with the terms of the promissory notes should interest be
payable in the future. The assumed debt represents bank term loans secured
by a pledge of shares of Common Stock of Sofedit by its former direct and
indirect stockholders. The assumed debt bears an interest at an estimated
rate of PIBOR + 1.3% (4.8% total rate).
(d) The pro forma Offering Adjustments reflect the repayment of the following
debt. See "Use of Proceeds".
26
<PAGE> 28
<TABLE>
<CAPTION>
REDUCTION IN
INTEREST REDUCTION IN
EXPENSE FOR INTEREST EXPENSE
THE YEAR FOR THE SIX
ENDED MONTHS ENDED
ESTIMATED DECEMBER 31, JUNE 30,
DESCRIPTION AMOUNT INTEREST RATE 1997 1997 AND 1998
----------- ------ ------------- -------------- ----------------
<S> <C> <C> <C> <C>
Promissory notes........................ $ $(2.5) $(1.3)
Assumed debt of former stockholders..... (0.8) (0.4)
Junior Notes............................ (0.9) (0.4)
Reduction in short-term borrowings...... (1.0) (0.5)
----- ----- -----
$ (g) $(5.2) $(2.6)
===== ===== =====
</TABLE>
(e) Adjustments represent the estimated income tax effect of the pro forma
adjustments, excluding goodwill, which will not be deductible for tax
purposes, using an effective income tax rate of 35%.
(f) Pro forma earnings per common share and pro forma weighted average common
shares outstanding give effect to the issuance of Common Stock offered by
the Company in the Offering and the conversion of the Preferred Stock into
shares of Common Stock as if the transactions had occurred at
January 1, 1998. The pro forma earnings per share are not necessarily
indicative of what actual earnings per share would have been if the
Offering and related transactions discussed above had occurred on the basis
assumed.
(g) Amounts to be repaid with the proceeds from the Offering to be determined
based upon net proceeds to be received. See "Use of Proceeds."
27
<PAGE> 29
SELECTED HISTORICAL CONSOLIDATED FINANCIAL INFORMATION OF
THE COMPANY AND SOFEDIT, AS PREDECESSOR
The following selected historical consolidated financial information of
Sofedit with respect to the five years ended December 31, 1997 is derived from
the Consolidated Financial Statements of the Company and Sofedit, as predecessor
to the Company. Such Consolidated Financial Statements have been audited by
Barbier, Frinault & Autres (a member firm of Arthur Andersen). The historical
financial data of Sofedit reported in accordance with French GAAP for each of
the two years ended December 31, 1993 and 1994 were derived from consolidated
financial statements of Sofedit audited by Cabinet Constantin & Associes. The
unaudited historical statement of operations and other data for the six months
ended June 30, 1997 are comprised of Sofedit, as predecessor to the Company. The
unaudited historical statement of operations and other data for the six months
ended June 30, 1998 include Sofedit and the operations of MS Acquisition from
April 1, 1998. The historical financial information for the six month periods
ended June 30, 1997 and June 30, 1998 are unaudited but, in the opinion of
management, reflects all adjustments necessary for a fair presentation of such
information. The selected consolidated financial information provided below
should be read in conjunction with "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and the Consolidated Financial
Statements of the Company and Sofedit, as predecessor to the Company.
<TABLE>
<CAPTION>
SOFEDIT AS PREDECESSOR TO THE COMPANY THE COMPANY
------------------------------------------------------- -----------
SIX MONTHS SIX MONTHS
YEAR ENDED DECEMBER 31, ENDED ENDED
------------------------------------------ JUNE 30, JUNE 30,
1993 1994 1995 1996 1997 1997(1) 1998(1)
------ ------ ------ ------ ------ ---------- -----------
(U.S. DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
U.S. GAAP(2)
Net sales........................ -- -- $464.9 $484.7 $487.9 $255.6 $322.3
Cost of sales.................... -- -- 397.3 424.6 429.4 220.9 286.0
------ ------ ------ ------ ------
Gross profit..................... -- -- 67.6 60.1 58.5 34.7 36.3
Selling, general and
administrative expenses........ -- -- 28.4 29.2 26.1 14.0 18.2
Research and development
expenses....................... -- -- 4.4 7.6 7.4 4.1 4.2
Other (income) expense(4)........ -- -- 2.1 (0.6) 6.1 2.1 1.6
------ ------ ------ ------ ------
Operating income................. -- -- 32.7 23.9 18.9 14.5 12.3
Net interest expense............. -- -- 15.3 12.9 9.7 5.4 9.0
------ ------ ------ ------ ------
Income before taxes.............. -- -- 17.4 11.0 9.2 9.1 3.3
Income (loss) before discontinued
operations..................... -- -- 16.0 11.4 7.2 6.7 1.9
------ ------ ------ ------ ------
Net income....................... -- -- $ 12.8 $ 7.4 $ 4.7 $ 5.3 $ 0.4
====== ====== ====== ====== ======
OTHER DATA:
EBITDA(5)........................ -- -- $ 59.3 $ 48.8 $ 46.5 $ 29.4 $ 28.1
Capital expenditures............. -- -- 28.6 33.2 15.1 7.9 18.9
Depreciation and amortization.... -- -- 26.6 24.9 27.6 14.9 15.8
FRENCH GAAP(6)
Net sales........................ $139.5 $316.1 $488.3 $506.5 $508.9 -- --
Operating income................. 13.6 28.6 37.4 20.2 20.0 -- --
Income before taxes.............. 7.1 15.8 19.6 10.0 4.1 -- --
Net income....................... 6.3 12.7 16.5 9.6 3.6 -- --
</TABLE>
28
<PAGE> 30
<TABLE>
<CAPTION>
THE COMPANY
SOFEDIT AS PREDECESSOR TO THE COMPANY -----------
------------------------------------------ SIX MONTHS
YEAR ENDED DECEMBER 31, ENDED
------------------------------------------ JUNE 30,
1993 1994 1995 1996 1997 1997(1)
------ ------ ------ ------ ------ -----------
(U.S. DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA (AT END OF PERIOD):
U.S. GAAP(2)
Cash........................................ -- -- -- $ 11.3 $ 11.6 $ 22.9
Working capital(6).......................... -- -- -- 19.0 8.5 3.0
Total assets................................ -- -- -- 408.5 361.9 575.9
Total debt.................................. -- -- -- 140.1 115.2 278.0
Stockholders' equity........................ -- -- -- 62.4 65.3 (5.2)
FRENCH GAAP(6)
Total assets................................ $120.2 $320.2 $405.5 $429.7 $379.2 --
Stockholders' equity........................ 30.8 72.7 92.7 94.5 84.2 --
</TABLE>
- ---------------
(1) Historical data for the six months ended June 30, 1997 are comprised of
Sofedit, as predecessor. The data for the six months ended June 30, 1998
include Sofedit and the operations of MS Acquisition from April 1, 1998.
Sofedit and the Company has not prepared French GAAP data for the six month
periods ended June 30, 1997 and 1998, respectively.
(2) U.S. GAAP Statement of Operations Data has not been prepared for the two
years ended December 31, 1993 and December 31, 1994. U.S. GAAP Balance Sheet
Data has not been prepared as of December 31, 1993, 1994 and 1995.
(3) Consolidated Statement of Operations Data and Other Data were translated
using the average FF/$1.00 exchange rate for the respective year or
six-month period (FF 5.69 per $1.00 for the year ended December 31, 1993,
FF5.51 per $1.00 for the year ended December 31, 1994, FF4.96 per $1.00 for
the year ended December 31, 1995, FF5.12 per $1.00 for the year ended
December 31, 1996, FF5.85 per $1.00 for the year ended December 31, 1997,
FF5.72 per $1.00 for the six months ended June 30, 1997 and FF6.08 per $1.00
for the six months ended June 30, 1998). Consolidated Balance Sheet Data
were translated using the period end FF/$1.00 exchange rate for the
respective year or six-month period (FF 6.05 per $1.00 for June 30, 1998).
(4) In the year ended December 31, 1997, other expense includes: (i) a $2.6
million loss on the sale of a non-core subsidiary; and (ii) $2.5 million of
restructuring costs related to the rationalization of certain of the
Company's prototype facilities. In the six months ended June 30, 1997, other
expense includes a $1.3 million initial accrual for a loss on the sale of a
non-core subsidiary. In the year ended December 31, 1996, other expense
includes a $1.5 million gain on the sale of certain assets. In the year
ended December 31, 1995, other expense includes a $0.2 million gain on the
sale of certain assets.
(5) EBITDA is defined as income before the effect of changes in accounting plus
interest, income taxes, depreciation and amortization. EBITDA is presented
because it is a widely accepted financial indicator of a company's ability
to incur and service debt. However, EBITDA should not be considered in
isolation as a substitute for net income or cash flow data prepared in
accordance with generally accepted accounting principles or as a measure of
a company's profitability or liquidity.
(6) Working capital is defined as current assets (including cash) minus current
liabilities. At December 31, 1996, December 31, 1997, and at June 30, 1998,
the Company sold, under its accounts receivable program, receivables
amounting to $70.1 million, $53.8 million and $55.5 million, respectively.
See "Management's Discussion and Analysis of Financial Condition and Results
of Operations -- Financial Condition"
(7) The main accounting differences between U.S. and French GAAP relate to the
capitalization of research and development costs and of start-up costs, and
to accounting for pension and retirement indemnities. The primary
differences in presentation include (i) classifying sales of scrap as sales
under French GAAP and as a reduction of cost of sales under U.S. GAAP and
(ii) the exclusion of goodwill amortization, employee profit sharing expense
and non-recurring items, such as restructuring, from operating income under
French GAAP.
29
<PAGE> 31
SELECTED HISTORICAL CONSOLIDATED FINANCIAL INFORMATION OF
MS ACQUISITION
The following selected historical consolidated financial information of MS
Acquisition with respect to the five years ended December 29, 1997 is derived
from the Consolidated Financial Statements of MS Acquisition. Such Consolidated
Financial Statements have been audited by PricewaterhouseCoopers LLP. The
financial information of MS Acquisition for the three month periods ended March
30, 1997 and March 29, 1998 is unaudited but, in the opinion of management,
reflects all adjustments necessary for a fair presentation of such information.
The selected consolidated financial information provided below should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and the Consolidated Financial Statements of MS
Acquisition.
<TABLE>
<CAPTION>
YEAR ENDED THREE MONTHS ENDED
---------------------------------------------------- ---------------------
DEC. 28, DEC. 29, DEC. 31, DEC. 28, DEC. 29, MARCH 30, MARCH 29,
1993 1994 1995 1996 1997 1997 1998
-------- -------- -------- -------- -------- --------- ---------
(U.S. DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF
OPERATIONS DATA:
Net sales.............................. $162.9 $204.8 $211.9 $211.5 $205.7 $ 55.1 $ 53.1
Cost of sales.......................... 139.5 172.4 183.5 181.0 181.3 47.0 45.0
------ ------ ------ ------ ------ ------ ------
Gross profit........................... 23.4 32.4 28.4 30.5 24.4 8.1 8.1
Selling, general and administrative
expenses............................. 11.7 12.1 12.6 14.9 16.8 3.6 4.3
Other (income) expense(1).............. 0.8 0.8 0.8 0.8 0.8 0.2 0.2
Operating income....................... 10.9 19.5 15.0 14.8 6.8 4.3 3.6
Net interest expense................... 9.0 8.9 8.6 9.4 11.2 2.8 3.1
------ ------ ------ ------ ------ ------ ------
Income (loss) before taxes............. 1.9 10.6 6.4 5.4 (4.4) 1.5 0.5
Income (loss) before preferred stock
dividends(2)......................... 0.9 6.6 4.6 2.3 (3.0) 0.9 0.4
Preferred stock dividends.............. -- -- -- 0.5 1.3 0.3 0.4
------ ------ ------ ------ ------ ------ ------
Net income (loss)(3)(4)................ $ (3.9) $ 6.6 $ 4.6 $ 1.8 $ (4.3) $ 0.6 $ 0.0
====== ====== ====== ====== ====== ====== ======
OTHER DATA:
EBITDA(4).............................. $ 16.9 $ 25.7 $ 21.6 $ 22.8 $ 16.7 $ 6.1 $ 5.5
Capital expenditures................... 3.5 6.1 10.1 7.0 10.7 3.0 3.2
Depreciation and amortization.......... 6.0 6.2 6.6 8.0 9.9 1.8 1.9
BALANCE SHEET DATA (AT END OF PERIOD):
U.S. GAAP
Cash................................... $ 0.0 $ 0.2 $ 0.3 $ 4.0 $ 0.0 $ 0.0 $ 0.3
Working capital (deficit)(5)........... 1.0 (3.3) (3.0) 7.7 3.9 7.3 3.5
Total assets........................... 109.6 113.3 118.2 128.4 142.8 144.3 159.4
Total debt............................. 75.6 63.1 57.7 94.2 106.0 96.3 112.0
Stockholders' equity (deficit)......... (5.6) 0.7 5.0 (23.2) (27.6) (22.5) (27.5)
</TABLE>
- ---------------
(1) Included in selling, general and administrative expenses are management fees
payable to former stockholders of $0.8 million, $0.3 million, $0.3 million
and $0.2 million for 1993, 1994, 1995 and 1996, respectively. Due to
reaching selected thresholds and measurements, selling, general and
administrative expenses include $0.5 million of fees related to prior years
which were recorded in 1993. Such fees were eliminated in 1996. In addition,
included in selling, general and administrative expenses for the year ended
December 29, 1996 was $0.6 million of nonrecurring costs related to the
11 7/8% Senior Notes.
(2) In the third quarter of 1996, MS Acquisition incurred an extraordinary
charge of $1.1 million relating to the early redemption of its subordinated
debt.
(3) Effective January 1, 1993, MS Acquisition adopted SFAS No. 109, "Accounting
for Income Taxes", which resulted in a one-time, non-cash after tax charge
of $4.8 million.
(4) EBITDA is defined as income before the effect of changes in accounting plus
interest, income taxes, depreciation and amortization. EBITDA is presented
because it is a widely accepted financial indicator of a company's ability
to incur and service debt. However, EBITDA should not be considered in
isolation as a substitute for net income or cash flow data prepared in
accordance with generally accepted accounting principles or as a measure of
a company's profitability or liquidity.
(5) Working capital is defined as current assets (including cash) minus current
liabilities.
30
<PAGE> 32
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion is based upon and should be read in conjunction
with the Unaudited Pro Forma Financial Data and the notes thereto of the Company
and the Consolidated Financial Statements and the notes thereto of each of
Sofedit and MS Acquisition, appearing elsewhere in this Prospectus.
OVERVIEW
The Company is a leading full-service supplier of highly engineered
metal-formed components, complex modules and mechanical assemblies for
automotive OEMs in Europe and North America. The Company's principal operating
subsidiaries are Sofedit in Europe and Aetna in North America.
The Company's results of operations depend primarily on the volume of
automobile sales in Europe and North America. The Company has a significant
international presence with approximately 70% and 30% of its pro forma 1997 net
sales generated from sales to customers in Europe and North America,
respectively.
The Combination. For accounting purposes, the Combination of Sofedit and
MS Acquisition was effective on April 1, 1998. The Combination has been
accounted for as a reverse acquisition because the former owners of Sofedit
owned approximately 75% of the fully diluted outstanding Common Stock of the
Company immediately following the Combination. Accordingly, Sofedit is
considered to be the acquiror of, and predecessor to, the Company. See
"Principal Stockholders -- Stock Purchase Agreement".
Impact of Product Launches on the Financial Results of the Company. The
Company ordinarily begins working on products awarded for new or redesigned
models two to five years prior to the launch of such models. During such period,
the Company incurs: (i) costs related to the design and engineering of such
products; (ii) carrying costs related to the production of the tools and dies
used to manufacture such products; and (iii) launch costs associated with the
initial production of such product. In general, design and engineering costs are
expensed in the period incurred unless they are reimbursed by the customer.
Costs incurred in the production of the tools and dies are generally capitalized
and invoiced to and paid by the customer as tooling sales prior to production.
Launch costs, which are generally incurred prior to and immediately after
initial production, are expensed as incurred. As a customer requirement and as
part of the Company's operating procedure, many tests and trials are performed
to minimize launch costs which can result from product complexity and the
inherent inefficiencies of lower initial volumes during the build-up to full
production levels.
The Company incurred significant launch costs during 1996, 1997 and 1998 as
a result of several hundred new product launches. In 1997, the Company had 205
new product launches for 18 models (all in Europe) and is scheduled to launch
125 new products for 10 models in 1998 (85 products for seven models in Europe
and 40 products for three models in North America). The Company experienced a
number of inefficiencies with two of its major product launches in 1997 and 1998
related to changes in specifications provided by an OEM with respect to one of
the launches and improper tooling being supplied by a customer with respect to a
second launch. These events resulted in nonrecurring charges of approximately
$8.5 million in 1997 and $2.0 million in the first six months of 1998. The
Company expects its recent product launches to form the foundation for growth in
net sales for the next several years. In addition, as products launched in 1997
and 1998 reach full production levels and the causes of the nonrecurring charges
experienced in 1997 which have continued into 1998 are addressed, the Company
expects to realize improved operating performance. The Company expects to
continue launching new products in 1999, although below the exceptional levels
experienced in 1997 and 1998.
Raw Materials. In North America, the Company participates in steel
purchase programs with its major customers, which minimizes the effect of
variations in steel prices on the Company. Such programs are not typically
available with the Company's major European customers and accordingly the
Company has been subject to material variations in steel prices in Europe. The
Company expects, however, that some of its major European customers will offer
such programs in the future.
31
<PAGE> 33
Recent GM Strike. The Company's results of operations have occasionally
been negatively affected by labor disruptions at OEMs. The Company's results of
operations were most recently impacted by the strike at various of GM's North
American operations in June and July of 1998, which the Company expects will
reduce 1998 net sales by an amount between $3.0 million to $4.0 million.
However, the Company expects that such reductions in 1998 net sales will not
have a material effect on operating income.
Discontinued Operations. The Company plans to discontinue two operations
during 1998, both of which have been classified as discontinued operations for
accounting purposes in the Consolidated Financial Statements of the Company.
These businesses consisted of a cooking pan business (the Company's only non-
automotive related business) as well as a non-core plastic automotive components
business. In 1997, these businesses contributed net sales and net operating
losses of $14.0 million and $2.5 million, respectively. The Company expects to
sell these operations by the end of 1998. If the Company is not able to sell
these operations, costs of up to $4.0 million could be incurred to cease these
operations.
Exchange Rates. Approximately 70% of the Company's operating expenditures
and net sales in 1997 were denominated in currencies other than the U.S. dollar.
As a result of the appreciation of the U.S. dollar against these foreign
currencies, the Company experienced a negative impact on the reported sales and
profitability of the Company for certain of the periods presented herein. The
Company does not engage in foreign exchange hedging transactions because the
nature of the Company's business results in the Company generally matching
revenues and costs of the same currency. Except as otherwise indicated,
reference below to currency effects relate to the translation of Sofedit data
from French francs to U.S. dollars for presentation purposes. See "Exchange Rate
Information" and "Risk Factors -- Foreign Markets" and "Risk Factors -- Foreign
Currency Translation and Transaction Risk".
THE COMPANY
Results of Operations (pro forma and historical)
The following table sets forth, for the periods indicated, the principal
line items of the Company's pro forma statement of operations expressed as a
percentage of sales. In addition, set forth below are the historical results of
operations expressed as a percentage of sales for Sofedit, the predecessor of
the Company, for the six months ended June 30, 1997 and 1998. As required under
reverse acquisition accounting the unaudited historical statement of operations
data of the Company for the six months ended June 30, 1998 represents the
historical results of Sofedit, as predecessor, and, from April 1, 1998, the
effective date of the Combination for accounting purposes, the consolidated
results of MS Acquisition and Sofedit. This table should be read in conjunction
with the Unaudited Pro Forma Financial Data and the Consolidated Financial
Statements included elsewhere in this Prospectus.
32
<PAGE> 34
AS A PERCENTAGE OF NET SALES
<TABLE>
<CAPTION>
PRO FORMA HISTORICAL
--------------------------------- ----------------
TWELVE MONTHS SIX MONTHS ENDED SIX MONTHS ENDED
ENDED JUNE 30, JUNE 30,
DECEMBER 31, ---------------- ----------------
1997 1997 1998 1997 1998
------------- ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
RESULTS OF OPERATIONS
Net sales.................................. 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of sales.............................. 88.2 86.5 88.2 86.4 88.7
----- ----- ----- ----- -----
Gross profit............................... 11.8 13.5 11.8 13.6 11.3
Selling, general and administrative
expenses................................. 6.2 6.0 5.9 5.5 5.7
Research and development expenses.......... 1.0 1.1 1.1 1.6 1.3
Other (income) expense..................... 1.1 0.8 0.6 0.8 0.5
----- ----- ----- ----- -----
Operating income........................... 3.5 5.6 4.2 5.7 3.8
Net interest expense....................... 2.7 2.8 2.7 2.1 2.8
----- ----- ----- ----- -----
Income before taxes........................ 0.8 2.8 1.5 3.6 1.0
Income before discontinued operations...... 0.6 1.9 0.8 2.6 0.6
Net income................................. -- -- -- 2.1% 0.0%
</TABLE>
Six Months Ended June 30, 1998 Compared to Six Months Ended June 30, 1997 on a
Pro Forma and Historical Basis
The pro forma financial results of the Company described below reflect: (i)
the Combination as if it had occurred on January 1, 1997 with respect to 1997
pro forma financial data, and on January 1, 1998 with respect to 1998 pro forma
financial data; (ii) the Offering and the application of proceeds thereof as
described under "Use of Proceeds" as if the Offering occurred on January 1, 1997
and 1998, respectively; and (iii) the conversion of the Preferred Stock into
Common Stock.
Net Sales. The Company's net sales consist primarily of production sales,
tooling sales and prototype sales. Production sales represent sales of the
Company's products. The Company generally finances production of tooling until
it is delivered to the Company by a third party, at which point the Company is
reimbursed by its customer at a previously agreed price and the transaction is
accounted for as tooling sales. Prototype sales represent sales of new product
designs engineered by the Company's prototype operations.
Pro forma net sales of the Company were $375.3 million for the first six
months of 1998, an increase of $15.9 million, or 4.4%, compared to pro forma net
sales of $359.4 million for the first six months of 1997. Adjusted for currency
effects, pro forma net sales increased by 11.2%. The increase in pro forma net
sales was due principally to: (i) new product launches in the first six months
of 1998; and (ii) products launched in 1997 reaching full production during
1998. During the first six months of 1998, the major models on which the Company
had significant content included the Renault Twingo, Megane, Clio and Laguna;
the Peugeot-Citroen 806-Evasion; and the Chrysler Jeep Cherokee and Jeep Grand
Cherokee and Chrysler minivans.
Historical net sales of Sofedit, as predecessor, were $255.6 million for
the six months ended June 30, 1997, compared to $322.3 million for the six
months ended June 30, 1998, which reflects the results of operations of MS
Acquisition from April 1, 1998.
Cost of Sales and Gross Profit. Pro forma cost of sales was $331.1 million
for the first six months of 1998 (88.2% of pro forma net sales for the same
period), an increase of $20.1 million, or 6.5%, compared to pro forma cost of
sales of $311.0 million for the first six months of 1997 (86.5% of pro forma net
sales for the same period). Adjusted for currency effects, pro forma cost of
sales increased by 13.4%. Pro forma cost of sales increased primarily as a
result of increased net sales volume and a significant level of launch costs. In
Europe, pro forma cost of sales as a percentage of pro forma net sales increased
principally due to: (i) a significant number of recently launched products being
manufactured at volumes below full production levels; (ii) significant steel
price increases in Europe; (iii) a change of sales mix leading to increased
purchases of
33
<PAGE> 35
components for which the Company's added-value is lower; (iv) approximately $2.0
million in nonrecurring charges related to the effects on the Company from the
bankruptcy of an equipment supplier; and (v) certain price concessions given to
two of the Company's major customers. In North America, cost of sales as a
percentage of net sales increased principally due to: (i) costs in connection
with the launch of the new Jeep Grand Cherokee and the phasing out of the
production of the previous model in May, 1998; (ii) a significant increase in
tooling sales which typically have a higher cost of sales component than the
Company's production sales; and (iii) the negative impact of the GM strike.
As a result of the factors discussed above, pro forma gross profit was
$44.2 million for the first six months of 1998 (11.8% of pro forma net sales for
the same period), a decrease of $4.2 million, or 8.7%, compared to pro forma
gross profit of $48.4 million for the first six months of 1997 (13.5% of pro
forma net sales for the same period). Adjusted for currency effects, pro forma
gross profit decreased by 2.8%. In Europe, adjusting for currency effects, gross
profit for the first six months of 1998 increased by 1.0%, compared to pro forma
gross profit for the first six months of 1997. In North America, pro forma gross
profit decreased by 17.5% for the first six months of 1998, compared to pro
forma gross profit for the first six months of 1997.
Historical cost of sales of Sofedit, as predecessor, was $220.9 million for
the six months ended June 30, 1997, compared to $286.0 million for the six
months ended June 30, 1998, which reflects the operations of MS Acquisition from
April 1, 1998. Historical gross profit of Sofedit, as predecessor, was $34.7
million for the six months ended June 30, 1997, compared to $36.3 million for
the six months ended June 30, 1998, which reflects the results of MS Acquisition
from April 1, 1998.
Selling, General and Administrative Expenses. Pro forma selling, general
and administrative expenses were $22.2 million for the first six months of 1998
(5.9% of pro forma net sales for the same period), an increase of $0.8 million,
or 3.7%, compared to pro forma selling, general and administrative expenses of
$21.4 million for the first six months of 1997 (6.0% of pro forma net sales for
the same period). Adjusted for currency effects, selling, general and
administrative expenses increased by 10.5%.
Historical selling, general and administrative expenses of Sofedit, as
predecessor, were $14.0 million for the six months ended June 30, 1997, compared
to $18.2 million for the six months ended June 30, 1998, which reflects the
results of MS Acquisition from April 1, 1998.
Research and Development Expenses. Pro forma research and development
expenses were $4.2 million for the six months ended June 30, 1998 (1.1% of pro
forma net sales for the same period), an increase of $0.1 million, or 2.4%,
compared to pro forma research and development expenses of $4.1 million for the
six months ended June 30, 1997 (1.1% of pro forma net sales for the same
period). Adjusted for currency effects, pro forma research and development
expenses increased by 9.1%.
Historical research and development expenses of Sofedit, as predecessor,
were $4.1 million for the six months ended June 30, 1997, compared to $4.2
million for the six months ended June 30, 1998, which reflects the results of MS
Acquisition from April 1, 1998.
Other (Income) Expense. Other (income) expense of the Company includes
goodwill amortization and employee profit sharing, as well as nonrecurring
expenses such as restructuring costs. Pro forma other expense was $2.2 million
for the first six months of 1998 and consisted primarily of $0.8 million of
goodwill amortization, $0.7 million of employee profit sharing expense, and $0.7
million of nonrecurring expenses. For the six months ended June 30, 1997, the
Company's other expense was $2.8 million and consisted primarily of $0.9 million
of goodwill amortization, $0.8 million of employee profit sharing expense and
$1.1 million of nonrecurring expenses.
Historical other expense of Sofedit, as predecessor, was $2.1 million for
the six months ended June 30, 1997, compared to other expense of $1.6 million
for six months ended June 30, 1998, which reflects the results of MS Acquisition
from April 1, 1998.
Operating Income. As a result of the factors discussed above, pro forma
operating income was $15.6 million for the first six months of 1998 (4.2% of net
sales for the same period), a decrease of $4.5 million, or 22.4%, compared to
operating income of $20.1 million for the first six months of 1997 (5.6% of
34
<PAGE> 36
pro forma net sales for the period). Adjusted for currency effects, pro forma
operating income decreased by 17.4%. In Europe, adjusted for currency effects,
operating income increased by 3.2% for the first six months of 1998 compared to
the first six months of 1997. In North America, operating income decreased by
69.8% for the first six months of 1998 compared to the first six months of 1997.
Historical operating income of Sofedit, as predecessor, was $14.5 million
for the six months ended June 30, 1997, compared to $12.3 million for the six
months ended June 30, 1998, which reflects the results of MS Acquisition from
April 1, 1998.
Net Interest Expense. Net interest expense for the Company includes
interest expense net of interest income. Pro forma net interest expense was
$10.3 million for the first six months of 1998, an increase of $0.1 million, or
1.0%, compared to pro forma net interest expense of $10.2 million for the first
six months of 1997. The Company's average debt during the first six months of
1998 was $276.2 million, with a weighted average interest rate of 4.5% for
European operations and 10.4% for North American operations. The Company's
average debt during the first six months of 1997 was $282.6 million, with a
weighted average interest rate of 4.5% for European operations and 10.8% for
North American operations. The Company did not benefit from significant interest
earnings during either period.
Historical net interest expense of Sofedit, as predecessor, was $5.4
million for the six months ended June 30, 1997, compared to $9.0 million for the
six months ended June 30, 1998, which reflects the results of MS Acquisition
from April 1, 1998.
Income Before Taxes. As a result of the factors discussed above, pro forma
income before taxes was $5.3 million for the first six months of 1998 (1.5% of
pro forma net sales for the same period), a decrease of $4.6 million, or 46.5%,
compared to pro forma income before taxes of $9.9 million for the first six
months of 1997 (2.8% of pro forma net sales for the same period). Adjusted for
currency effects, pro forma income before taxes decreased by 43.0%.
The pro forma income tax provision was $2.1 million for the first six
months of 1998, with an effective tax rate of 39.6%, compared to $3.2 million
for the first six months of 1997, with an effective tax rate of 32.3%. The
increase in effective tax rate was mainly due to a reduction in a research and
development tax credit.
Historical income before taxes of Sofedit, as predecessor, was $9.1 million
for the six months ended June 30, 1997, compared to $3.3 million for the six
months ended June 30, 1998, which reflects the results of MS Acquisition from
April 1, 1998.
Income Before Discontinued Operations. As a result of the factors
discussed above, pro forma income before discontinued operations was $3.2
million for the six months ended June 30, 1998 (0.8% of pro forma net sales for
the same period), a decrease of $3.5 million, or 52.2%, compared to pro forma
income before discontinued operations of $6.7 million for the first six months
of 1997 (1.9% of pro forma net sales for the same period). Adjusted for currency
effects, pro forma income before discontinued operations decreased by 44.4%.
Historical income before discontinued operations of Sofedit, as
predecessor, was $6.7 million for the six months ended June 30, 1997, compared
to $1.9 million for the six months ended June 30, 1998, which reflects the
results of MS Acquisition from April 1, 1998.
Twelve Months Ended December 31, 1997 on a Pro Forma Basis
Net Sales. Pro forma net sales of the Company were $693.6 million for
1997. During 1997, the major models on which the Company had significant content
included: the Renault Twingo, Megane and Clio; the Opel Astra and Vectra; the
Volkswagen Golf and Polo; the Chrysler Jeep Cherokee, Jeep Grand Cherokee, Jeep
Wrangler and Chrysler Cirrus/Dodge Stratus; and the GM Oldsmobile Aurora/Buick
Riviera.
Cost of Sales and Gross Profit. Pro forma cost of sales was $611.4 million
in 1997 (88.2% of pro forma 1997 net sales).
Pro forma gross profit was $82.2 million in 1997 (11.8% of pro forma 1997
net sales).
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<PAGE> 37
Selling, General and Administrative Expenses. Pro forma selling, general
and administrative expenses were $42.9 million for 1997 (6.2% of pro forma 1997
net sales).
Research and Development Expenses. Pro forma research and development
expenses were $7.4 million in 1997 (1.0% of pro forma 1997 net sales).
Other (Income) Expense. Pro forma other expense was $7.6 million in 1997
and consisted primarily of: (i) goodwill amortization of $1.9 million; (ii)
employee profit sharing expense of $1.4 million; (iii) a restructuring charge of
$2.5 million relating to the rationalization of certain prototype facilities;
and (iv) a loss of $2.6 million on the disposal of a non-core subsidiary
partially offset by other income of $0.8 million.
Operating Income. As a result of the factors discussed above, pro forma
operating income was $24.3 million in 1997 (3.5% of pro forma 1997 net sales).
Net Interest Expense. Pro forma net interest expense was $19.0 million in
1997. The Company's average debt during this period was $214.7 million, with a
weighted average interest rate of 4.5% for the European operations and 11.1% for
the North American operations. The Company did not benefit from significant
interest earnings during this period.
Income Before Taxes. As a result of the factors discussed above, pro forma
income before taxes in 1997 was $5.3 million.
The pro forma income tax provision for 1997 was $1.0 million, with an
effective tax rate of 18.9%.
Income Before Discontinued Operations. As a result of the factors
discussed above, pro forma income before discontinued operations was $4.3
million in 1997 (0.6% of pro forma 1997 net sales).
36
<PAGE> 38
SOFEDIT
Results of Operations
The following table sets forth, for the periods indicated, Sofedit's
statement of operations expressed as a percentage of net sales. This table and
subsequent discussions should be read in conjunction with the Consolidated
Financial Statements and related notes of Sofedit included elsewhere in this
Prospectus.
AS A PERCENTAGE OF NET SALES
<TABLE>
<CAPTION>
TWELVE MONTHS ENDED
DECEMBER 31,
-----------------------
1995 1996 1997
----- ----- -----
<S> <C> <C> <C>
RESULTS OF OPERATIONS
Net sales................................................... 100.0% 100.0% 100.0%
Cost of sales............................................... 85.5 87.6 88.0
----- ----- -----
Gross profit................................................ 14.5 12.4 12.0
Selling, general & administrative expenses.................. 6.1 6.0 5.4
Research and development expenses........................... 0.9 1.6 1.5
Other (income) expense...................................... 0.5 (0.1) 1.2
----- ----- -----
Operating income............................................ 7.0 4.9 3.9
Net interest expense........................................ (3.3) (2.6) (2.0)
----- ----- -----
Income before taxes......................................... 3.7 2.3 1.9
Income before discontinued operations....................... 3.4 2.3 1.5
Net income.................................................. 2.8% 1.5% 1.0%
</TABLE>
Twelve Months Ended December 31, 1997 Compared to Twelve Months Ended December
31, 1996
Net Sales. Net sales were $487.9 million for 1997, an increase of $3.2
million, or 0.7%, compared to $484.7 million of net sales in 1996. Adjusted for
currency effects, net sales increased by 14.9%. The increase in net sales was
due principally to: (i) 205 new product launches in 1997 as compared with 155
new launches in 1996; (ii) products launched in 1996 that reached full
production during 1997; (iii) an increase in tooling revenues of $24.3 million
in advance of scheduled future product launches; and (iv) an increase in the
volume of automobile production in Western Europe of 4.9% between 1996 and 1997.
Cost of Sales and Gross Profit. Cost of sales was $429.4 million in 1997
(88.0% of 1997 net sales), an increase of $4.8 million, or 1.1%, compared to
1996 cost of sales of $424.6 million (87.6% of 1996 net sales). Adjusted for
currency effects, cost of sales increased by 15.4%. Cost of sales increased as a
result of increased net sales volume and a significant level of launch costs.
Cost of sales as a percentage of sales increased due principally to: (i) a
significant number of recently launched products being manufactured at volumes
below full production levels; (ii) a change of sales mix leading to increased
purchases of components for which the Company's added-value is lower; (iii) a
significant increase in tooling sales which typically have a higher cost of
sales component than the Company's production sales; and (iv) certain charges
related to a significant number of new product launches. In particular, the
Company incurred approximately $7.0 million of nonrecurring charges related to
changes in specifications provided by an OEM with respect to one major product
launch and the supply of improper tooling by a customer with respect to a second
product launch. In addition, the bankruptcy of one of the Company's equipment
suppliers significantly disrupted the Company's operations and resulted in a
nonrecurring charge of approximately $1.5 million.
As a result of the factors discussed above, gross profit was $58.5 million
in 1997 (12.0% of 1997 net sales), a decrease of $1.6 million, or 2.7%, compared
to 1996 gross profit of $60.1 million (12.4% of 1996 net sales). Adjusted for
currency effects, gross profit increased by 11.1%.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses were $26.1 million in 1997 (5.4% of 1997 net sales), a
decrease of $3.1 million, or 10.6%, compared to selling,
37
<PAGE> 39
general and administrative expenses of $29.2 million in 1996 (6.0% of 1996 net
sales). Adjusted for currency effects, selling, general and administrative
expenses increased by 1.9%. The decrease in selling, general and administrative
expenses as a percentage of sales was due primarily to: (i) increased net sales
volumes over a relatively fixed level of selling, general and administrative
expenses; and (ii) savings from the closure of certain of the Company's
prototyping facilities, partially offset by the implementation of a broader
administrative structure at certain subsidiaries in anticipation of future
growth.
Research and Development Expenses. Research and development expenses were
$7.4 million in 1997 (1.5% of 1997 net sales), a decrease of $0.2 million, or
2.6%, compared to research and development expenses of $7.6 million in 1996
(1.6% of 1996 net sales). Adjusted for currency effects, research and
development expenses increased by 11.1%. This increase was due principally to
new applications of important technologies such as hydroforming, hot stamping
and weight reduction programs involving new steel and aluminum alloys.
Other (Income) Expense. In 1997, other expense was $6.1 million and
consisted primarily of: (i) $0.4 million of goodwill amortization; (ii) $1.4
million of employee profit sharing expense; and (iii) $4.3 million in
nonrecurring charges. These nonrecurring charges included a $2.5 million
restructuring charge related to the rationalization of the Company's prototype
facilities and a $2.6 million charge related to the loss on disposal of a
noncore subsidiary. In 1996, other income was $0.6 million and consisted
primarily of goodwill amortization of $0.4 million, employee profit sharing
expense of $1.3 million and a nonrecurring gain on the sale of a prototype press
of $1.5 million.
Operating Income. As a result of the factors discussed above, operating
income was $18.9 million in 1997 (3.9% of 1997 net sales), a decrease of $5.0
million, or 20.9%, compared to operating income of $23.9 million in 1996 (4.9%
of 1996 net sales). Adjusted for currency effects, operating income decreased by
9.8%.
Net Interest Expense. Net interest expense was $9.7 million in 1997, a
decrease of $3.2 million, or 24.8%, compared to net interest expense of $12.9
million in 1996. The decrease was attributable to a reduction in interest rates
and of net indebtedness. The average interest rate and average debt were
approximately 4.5% and $114.6 million, respectively, in 1997, compared to 5.1%
and $143.8 million in 1996.
Income Before Taxes. As a result of the factors discussed above, income
before taxes was $9.2 million in 1997 (1.9% of 1997 net sales), a decrease of
$1.8 million, or 16.4%, compared to income before taxes of $11.0 million in 1996
(2.3% of 1996 net sales). Adjusted for currency effects, income before taxes
decreased by 4.8%.
Income tax expense was $2.0 million in 1997, compared to an income tax
credit of $0.4 million in 1996. The effective tax rate was 21.7% in 1997. The
higher effective tax rate in 1997 resulted largely from non-deductible losses on
disposal of investments and a reduction in the available research and
development tax credits.
Income Before Discontinued Operations. As a result of the factors
discussed above, net income before discontinued operations was $7.2 million for
1997 (1.5% of 1997 net sales), a decrease of $4.2 million, or 36.8%, compared to
income before discontinued operations of $11.4 million in 1996 (2.3% of 1996 net
sales). Adjusted for currency effects, income before discontinued operations
decreased by 27.5%.
Net Income. As a result of the factors discussed above, net income was
$4.7 million (1.0% of 1997 net sales), a decrease of $2.7 million, or 36.5%,
compared to net income of $7.4 million in 1996 (1.5% of 1996 net sales).
Adjusted for currency effects, net income decreased by 27.0%.
Twelve Months Ended December 31, 1996 Compared to Twelve Months Ended December
31, 1995
Net Sales. Net sales were $484.7 million in 1996, an increase of $19.8
million, or 4.3%, compared to net sales of $464.9 million in 1995. Adjusted for
currency effects, net sales increased by 6.8%. The increase in net sales was due
principally to: (i) 155 new product launches in 1996 as compared to 19 product
launches in 1995; (ii) products launched in 1995 that reached full production
during 1996; and (iii) an increase in automobile production of 3.7% in Western
Europe between 1996 and 1995.
38
<PAGE> 40
Cost of Sales and Gross Profit. Cost of sales was $424.6 million in 1996
(87.6% of 1996 net sales), an increase of $27.3 million, or 6.9%, compared to
cost of sales of $397.3 million in 1995 (85.5% of 1995 net sales). Adjusted for
currency effects, cost of sales increased by 9.5%. Cost of sales increased as a
result of increased net sales volume and a significant level of launch costs.
Cost of sales as a percentage of net sales increased due principally to: (i) a
significant number of launched products manufactured at volumes below full
production levels; and (ii) a change of sales mix leading to increased purchases
of components for which the Company's added-value is lower, which was partially
offset by a decrease in steel purchase prices.
As a result of the factors discussed above, gross profit was $60.1 million
in 1996 (12.4% of 1996 net sales), a decrease of $7.5 million, or 11.1%,
compared to gross profit of $67.6 million in 1995 (14.5% of 1995 net sales).
Adjusted for currency effects, gross profit decreased by 8.9%.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses were $29.2 million in 1996 (6.0% of 1996 net sales), an
increase of $0.8 million, or 2.8%, compared to selling, general and
administrative expenses of $28.4 million in 1995 (6.1% of 1995 net sales).
Adjusted for currency effects, selling, general and administrative expenses
increased by 5.5%. Selling, general and administrative expenses increased in
1996 due principally to the implementation of a broader administrative structure
in preparation for future growth as well as the relocation of the Company's
headquarters.
Research and Development Expenses. Research and development expenses were
$7.6 million for 1996 (1.6% of 1996 net sales), an increase of $3.2 million, or
72.7%, compared to research and development expenses of $4.4 million in 1995
(0.9% of 1995 net sales). Adjusted for currency effects, research and
development expenses increased by 78.5%. The increase in research and
development expenses was due primarily to research and development relating to
hydroforming technology, heat shields and engine supports.
Other (Income) Expense. In 1996, other income was $0.6 million and
consisted primarily of (i) goodwill amortization of $0.4 million; (ii) employee
profit sharing expense of $1.3 million; and (iii) a nonrecurring gain of $1.5
million relating to the sale of a prototype press. In 1995, other expense was
$2.1 million and consisted primarily of: (i) goodwill amortization of $0.3
million; and (ii) employee profit sharing expense of $2.4 million.
Operating Income. As a result of the factors discussed above, operating
income was $23.9 million in 1996 (4.9% of 1996 net sales), a decrease of $8.8
million, or 26.9%, compared to operating income of $32.7 million in 1995 (7.0%
of 1995 net sales). Adjusted for currency effects, operating income decreased by
25.3%.
Net Interest Expense. Net interest expense was $12.9 million, a decrease
of $2.4 million, compared to net interest expense of $15.3 million in 1995. This
decrease was attributable primarily to a reduction in interest rates. The
weighted average interest rate and the average debt of Sofedit were 4.8% and
$734 million, respectively, for 1996, compared to 5.1% and $702 million,
respectively, for 1995.
Income Before Taxes. As a result of the factors discussed above, income
before taxes was $11.0 million in 1996 (2.3% of 1996 net sales), a decrease of
$6.4 million, or 36.8%, compared to income before taxes of $17.4 million in 1995
(3.7% of 1995 net sales). Adjusted for currency effects, income before taxes
decreased by 35.1%.
Income taxes in 1996 resulted in a credit of $0.4 million, compared with an
income tax provision of $1.4 million in 1995. The credit was a result of a
higher research and development tax credit in 1996 compared to 1995.
Income Before Discontinued Operations. As a result of the factors
discussed above, income before discontinued operations was $11.4 million for
1996 (2.3% of 1996 net sales), a decrease of $4.6 million, or 28.8%, compared to
income before discontinued operations of $16.0 million in 1995 (3.4% of 1995 net
sales). Adjusted for currency effects, income before discontinued operations
decreased by 27.1%.
Net Income. As a result of the factors discussed above, net income was
$7.4 million in 1996 (1.5% of 1996 net sales), a decrease of $5.4 million, or
42.2%, compared to net income of $12.8 million in 1995 (2.8% of 1995 net sales).
Adjusted for currency effects, net income decreased 40.9%.
39
<PAGE> 41
MS ACQUISITION
Results of Operations
The following table sets forth, for the periods indicated, MS Acquisition's
consolidated statement of operations expressed as a percentage of net sales.
This table and subsequent discussions should be read in conjunction with the
Consolidated Financial Statements and related notes thereto of MS Acquisition.
Because the Combination was accounted for as of April 1, 1998, the purchase
accounting adjustments on MS Acquisition relating to the Combination are not
reflected in the results described below. See "-- The Company -- Results of
Operations (pro forma and historical)".
AS A PERCENTAGE OF NET SALES
<TABLE>
<CAPTION>
TWELVE MONTHS ENDED THREE MONTHS ENDED
-------------------------------- ----------------------
DEC. 31, DEC. 29, DEC. 28, MARCH 30, MARCH 29,
1995 1996 1997 1997 1998
-------- -------- -------- --------- ---------
<S> <C> <C> <C> <C> <C>
RESULTS OF OPERATIONS
Net sales................................ 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of sales............................ 86.6 85.6 88.1 85.3 84.7
----- ----- ----- ----- -----
Gross profit............................. 13.4 14.4 11.9 14.7 15.3
Selling, general and administrative
expenses............................... 5.9 7.0 8.2 6.5 8.1
Other (income) expense................... 0.4 0.4 0.4 0.4 0.4
----- ----- ----- ----- -----
Operating income......................... 7.1 7.0 3.3 7.8 6.8
Net interest expense..................... 4.1 4.4 5.4 5.1 5.9
----- ----- ----- ----- -----
Income (loss) before taxes............... 3.0 2.6 (2.1) 2.7 0.9
Net income (loss)........................ 2.2% 0.9% (2.1)% 1.1% 0.0%
</TABLE>
Three Months Ended March 29, 1998 Compared to Three Months Ended March 30,
1997
Net Sales. Net sales were $53.1 million for the first quarter of 1998, a
decrease of $2.0 million, or 3.6%, compared to net sales of $55.1 million for
the first quarter of 1997. The decrease in net sales was due primarily to: (i)
the disposal of low volume, marginally profitable roll-form jobs; and (ii) the
phasing out of production related to GM's C/K truck due to a platform change
that began in third quarter 1997. This decrease was partially offset by an
increase in Jeep Cherokee sales. The most important models for which MS
Acquisition supplied modules and components were the Chrysler Jeep Cherokee and
Jeep Grand Cherokee and Chrysler minivans.
Cost of Sales and Gross Profit. Cost of sales was $45.0 million for the
first quarter of 1998 (84.7% of net sales for the same period), a decrease of
$2.0 million, or 4.3%, compared to cost of sales of $47.0 million in the first
quarter of 1997 (85.3% of net sales for the same period). Cost of sales
decreased primarily as a result of the improved production on factory assist
work, which generally consists of short-term assignments to produce components
of existing models previously made in-house by OEMs. The Company currently
participates in steel buying programs with Chrysler and GM under which the
Company has substantially mitigated the effects of steel price volatility.
As a result of the factors discussed above, gross profit was $8.1 million
for the first quarter of 1998 (15.3% of net sales for the same period), compared
to $8.1 million for the first quarter of 1997 (14.7% of net sales for the same
period).
Selling, General and Administrative Expenses. Selling, general and
administrative expenses were $4.3 million for the first quarter of 1998 (8.1% of
net sales for the same period), an increase of $0.7 million, or 19.4%, compared
to selling, general and administrative expenses of $3.6 million for the first
quarter of 1997 (6.5% of net sales for the same period). The increase, as a
percentage of sales, was due to launch costs and additional staff hired to
support new platforms, especially for the new Chrysler Jeep Grand Cherokee, the
Saturn LS and new CAMI programs.
40
<PAGE> 42
Other (Income) Expense. In the first quarter of 1998 and 1997, other
expense consisted of goodwill amortization of $0.2 million in each period.
Operating Income. As a result of the factors discussed above, operating
income was $3.6 million for the first quarter of 1998 (6.8% of net sales for the
same period), a decrease of $0.7 million, or 16.3%, compared to operating income
of $4.3 million for the first quarter of 1997 (7.8% of net sales for the same
period).
Net Interest Expense. Net interest expense was $3.1 million for the first
quarter of 1998, an increase of $0.3 million, or 10.7%, compared to net interest
expense of $2.8 million for the first quarter of 1997. The weighted average
interest rate and average debt were 10.4% and $109.7 million, respectively, for
the first quarter of 1998, compared to 11.7% and $95.6 million, respectively,
for the first quarter of 1997.
Income Before Taxes. As a result of the factors discussed above, income
before taxes was $0.5 million for the first quarter of 1998 (0.9% of net sales
for the same period), a decrease of $1.0 million, or 66.7%, compared to income
before taxes of $1.5 million for the first quarter of 1997 (2.7% of 1997 net
sales for the same period).
The income tax provision in the first quarter of 1998 was $0.1 million with
an effective tax rate of 30.9%, compared to a provision of $0.6 million with an
effective tax rate of 38.7% for the same period in 1997.
Net Income. As a result of the factors discussed above, net income was
negligible for the first quarter of 1998, a decrease of $0.6 million, compared
to net income of $0.6 million for the first quarter of 1997 (1.1% of net sales
for the same period). Net income included preferred dividends of $0.4 million
and $0.3 million in the first quarters of 1998 and 1997, respectively.
Twelve Months Ended December 28, 1997 Compared to Twelve Months Ended December
29, 1996
Net Sales. Net sales were $205.7 million in 1997, a decrease of $5.8
million, or 2.7%, compared to net sales in 1996 of $211.5 million. The decrease
in net sales was due principally to the planned phase-out of two programs: a
cargo van floor pan and side rail assemblies, and a small truck door beam
program, during the second quarter of 1996, partially offset by increased
Chrysler minivan sales and factory assist work. During 1997, models on which MS
Acquisition had significant content included the Chrysler Jeep Cherokee and
Grand Cherokee and Chrysler minivans.
Cost of Sales and Gross Profit. Cost of sales was $181.3 million in 1997
(88.1% of 1997 net sales), an increase of $0.3 million, or 0.2%, compared to
cost of sales of $181.0 million in 1996 (85.6% of 1996 net sales). Cost of sales
as a percentage of net sales increased primarily as a result of inefficiencies
in factory assist work in the second half of 1997.
As a result of the factors discussed above, gross profit was $24.4 million
in 1997 (11.9% of 1997 net sales), a decrease of $6.1 million, or 20.0%,
compared to gross profit of $30.5 million in 1996 (14.4% of 1996 net sales).
Selling, General and Administrative Expenses. Selling, general and
administrative expenses were $16.8 million in 1997 (8.2% of 1997 net sales), an
increase of $1.9 million, or 12.8%, compared to selling, general and
administrative expenses of $14.9 million in 1996 (7.0% of 1996 net sales). As a
percentage of sales, the increase in selling, general and administrative
expenses was due principally to the hiring of additional engineering and quality
assurance staff to support new business.
Other (Income) Expense. Other expense was $0.8 million in each of 1997 and
1996 as goodwill amortization remained constant in the two periods.
Operating Income. As a result of the factors discussed above, operating
income was $6.8 million for 1997 (3.3% of 1997 net sales), a decrease of $8.0
million, or 54.1%, compared to operating income of $14.8 million in 1996 (7.0%
of 1996 net sales).
Net Interest Expense. Net interest expense was $11.2 million in 1997, an
increase of $1.8 million, or 19.1%, compared to net interest expense of $9.4
million in 1996. The weighted average interest rate and
41
<PAGE> 43
average debt for 1997 were 11.1% and $100.1 million, respectively, compared to
12.2% and $77.2 million, respectively, in 1996.
Income Before Taxes. As a result of the factors discussed above, loss
before taxes was $4.4 million in 1997 ((2.1)% of 1997 net sales), a decrease of
$9.8 million, compared to income before taxes of $5.4 million in 1996 (2.6% of
1996 net sales).
The credit for income taxes in 1997 was $1.4 million, as compared to a
provision for taxes of $2.0 million, with an effective tax rate of 36.5% in
1996.
Net Income (loss). As a result of the factors discussed above, net loss
was $4.3 million in 1997 ((2.1)% of 1997 net sales), a decrease of $6.1 million
compared to net income of $1.8 million in 1996 (0.9% of 1996 net sales). Net
income (loss) included $1.3 million and $0.5 million of preferred dividends in
1997 and 1996, respectively.
Twelve Months Ended December 29, 1996 Compared to Twelve Months Ended December
31, 1995
Net Sales. Net sales were $211.5 million in 1996, a decrease of $0.4
million, or 0.2%, compared to net sales of $211.9 million in 1995. The decrease
in net sales was due principally to the planned phase-out of a full size GM van
as well as the successful completion of a factory assist job which ran for 16
months from early 1994 to mid-1995. Partially offsetting these decreases was an
increase in net sales of the Chrysler Jeep Cherokee, full year production of the
GM minivan and incremental GM factory assist work. Tooling sales increased in
1996 compared to 1995 principally as a result of the GM G-car weld assembly
tooling. Prototype sales increased in 1996 compared to 1995 as a result of the
Chrysler Jeep Grand Cherokee prototype. During 1996, major vehicle models
supplied by MS Acquisition were the Chrysler Jeep Cherokee and Jeep Grand
Cherokee and the GM minivan. During 1995, major vehicles supplied were the
Chrysler Jeep Cherokee and Jeep Grand Cherokee and the full-size GM cargo van.
Cost of Sales and Gross Profit. Cost of sales was $181.0 million in 1996
(85.6% of 1996 net sales), a decrease of $2.5 million, or 1.4%, compared to cost
of sales of $183.5 million in 1995 (86.6% of 1995 net sales). Cost of sales
decreased due to a loss of net sales after the planned successful completion of
a Chrysler factory assist job which had run from early 1994 to mid-1995.
Additionally, gross profit was negatively affected by a 17-day work stoppage in
March, 1996 at two GM plants.
As a result of the factors above, gross profit was $30.5 million in 1996
(14.4% of net sales in 1996), an increase of $2.1 million, or 7.4%, compared to
gross profit of $28.4 million in 1995 (13.4% of 1995 net sales).
Selling, General and Administrative Expenses. Selling, general and
administrative expenses were $14.9 million in 1996 (7.0% of 1996 net sales), an
increase of $2.3 million, or 18.3%, compared to selling, general and
administrative expenses of $12.6 million in 1995 (5.9% of 1995 net sales).
Selling, general and administrative expenses were negatively impacted in 1996 by
$0.6 million of nonrecurring costs associated with the issuance of the Senior
Notes and other related costs, $0.4 million in writeoffs of uncollectible
accounts receivable and additional engineering expenses of $1.3 million to
support new programs.
Other (Income) Expense. Other expense was $0.8 million in each of 1996 and
1995 as goodwill amortization remained constant in the two periods.
Operating Income. As a result of the factors discussed above, operating
income was $14.8 million in 1996 (7.0% of 1996 net sales), a decrease of $0.2
million, or 1.3%, as compared to operating income in 1995 of $15.0 million (7.1%
of 1995 net sales).
Net Interest Expense. Net interest expense was $9.4 million in 1996, a
decrease of $0.8 million, or 9.3%, compared to net interest expense of $8.6
million in 1995. The weighted average interest rate and average debt for 1996
were 12.2% and $77.2 million, respectively, compared to 13.3% and $64.4 million,
respectively, for 1995.
42
<PAGE> 44
Income Before Taxes. As a result of the factors discussed above, income
before taxes was $5.4 million in 1996 (2.6% of 1996 net sales), a decrease of
$1.0 million, or 15.6%, compared to income before taxes of $6.4 million in 1995
(3.0% of 1995 net sales).
The provision for income taxes was $2.0 million in 1996, with an effective
rate of 36.5%, as compared to a provision of $1.8 million with an effective tax
rate of 29.0% in 1995. The 1995 effective tax rate was lower than the statutory
rate primarily as a result of the effect of the graduated rates on the deferred
tax balances and the reversal of reserves no longer required, partially offset
by the impact of non-deductible goodwill amortization. The 1996 effective tax
rate primarily reflected the impact of non-deductible goodwill amortization.
Net Income. As a result of the factors discussed above, net income was
$1.8 million for 1996 (0.9% of 1996 net sales), a decrease of $2.8 million, or
60.9%, compared to net income of $4.6 million in 1995 (2.2% of 1995 net sales).
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary sources of liquidity are cash generated from
operations and short-term and long-term debt, including the sale of receivables.
The Company's principal use for these funds is to finance working capital needs,
debt service requirements and planned maintenance and expansion activities. The
Company's liquidity is affected by both the cyclical nature of its business and
its level of net sales. The Company believes that operating cash flow and its
line of bank credit will be sufficient to cover its short-term and long-term
capital expenditures and debt repayment obligations. Nevertheless, the Company's
ability to meet these liquidity demands will depend upon future operating
performance, which will be affected by prevailing economic conditions and
financial, business and other factors, certain of which are beyond the Company's
control.
As described under "Risk Factors", the Company will make a tender offer for
the Senior Notes. Based on current market conditions, the Company believes that
its offer to purchase will not be accepted in a material principal amount.
Consequently, the Company has not currently arranged additional financing to
cover the repayment of interest and principal of any or all the Senior Notes.
Financial Condition
At June 30, 1998, the Company had available cash, cash equivalents and
marketable securities totaling $22.9 million, compared to $11.6 million on a pro
forma basis at December 31, 1997. At June 30, 1998, the Company had current
assets of $315.5 million and $312.5 million in current liabilities, giving it
working capital (including cash) of $3.0 million, compared to pro forma working
capital at December 31, 1997 of $12.4 million.
At June 30, 1998, the Company was committed to working capital expenditures
of approximately $11.4 million through the end of 1998 for welding and assembly
machinery and press automation. The Company expects to cover these commitments
through cash flows from operating activities and leasing contracts.
At June 30, 1998, the Company had $24.3 million available under its Amended
and Restated Credit Agreement dated as of April 10, 1998 and further amended on
May 20, 1998 and August 6, 1998, among Aetna, the Company, Aetna Holdings, Aetna
Export Sales Co., Aetna Canada and NBD Bank (the "Senior Revolving Credit
Facility"). In addition, the Company had outstanding, at June 30, 1998, $55.5
million under its accounts receivables sale program. See "-- Outstanding Debt".
Certain indebtedness of the Company and its subsidiaries contains
restrictive covenants, including the maintenance of certain financial ratios and
restrictions on dividend payments to the Company from certain Company
subsidiaries. The restriction on Aetna's dividend payments under the Senior
Notes (as defined below) may adversely affect the Company's liquidity. In
addition, due to covenants in the Senior Notes related to Aetna's consolidated
fixed charge coverage ratio and net worth, in order for Aetna to incur
additional debt above the minimum allowed under the Senior Notes, Aetna would be
required to obtain suitable approval from the holders of the Senior Notes. As of
June 30, 1998, the Consolidated Fixed Charge Coverage Ratio of
43
<PAGE> 45
Aetna was 1.9 to 1.00. As a result, since that date, Aetna has been prohibited
from incurring additional indebtedness or paying dividends to its parent, Aetna
Holdings. The Company believes, however, that sufficient cash flow is available
to its non-Aetna operations to meet the needs of these other operations
independently. See "Risk Factors -- Substantial Leverage and Debt Service
Obligations" and "--Outstanding Debt".
Sales of Receivables
As of June 30, 1998, the Company had $55.5 million of receivables sold to
finance short-term working capital needs. On average, the discount rate on these
sales is PIBOR +0.5%.
Cash Flows
The Company's pro forma net cash from operating activities was $29.4
million during the first six months of 1998, an increase of $8.3 million, or
39.3%, compared to pro forma net cash from operating activities of $21.1 million
for the first six months of 1997. Adjusting for currency effects, pro forma net
cash from operating activities increased by 48.3%. This increase was due
primarily to more efficient management of the Company's working capital,
including sales of receivables under a receivable sales program, partially
offset by a declining cash flow from operating activities in the Company's North
American operations. Pro forma net cash flow from operating activities was $31.6
million in 1997.
The Company's pro forma cash used in investing activities was $20.9 million
during the first six months of 1998, an increase of $4.3 million, or 25.9%,
compared to pro forma cash used in investing activities of $16.6 million during
the first six months of 1997. Adjusting for currency effects, pro forma cash
used in investing activities increased by 34.3%. This increase was due
principally to: (i) a significant investment in capital equipment to further
automate the Company's largest facility in Europe; and (ii) the reconfiguration
and retooling of certain of the Company's North American facility in advance of
several major product launches. This increase was partially offset by the effect
of the Company's purchase for approximately $3.9 million of a minority interest
in an aluminum business in 1997. Pro forma cash used in investing activities was
$31.6 million in 1997.
The Company's pro forma cash provided by financing activities was $3.0
million during the first six months of 1998, compared to pro forma cash used in
financing activities of $6.5 million in the first six months of 1997. Pro forma
cash flow from financing activities was due principally to borrowings from a
short-term credit source to finance a significant increase in tooling production
in advance of several major product launches, partially offset by an increase in
repayments of other indebtedness in the first six months of 1998 of
approximately $2.1 million. Pro forma cash used in financing activities was $1.6
million in 1997.
Outstanding Debt
At June 30, 1998, the Company had total outstanding debt of $278.0 million,
including $55.5 million in short-term debt and $222.5 million in long-term debt.
Short-term debt consisted primarily of short-term bank loans and borrowings
under the Senior Revolving Credit Facility and $15.3 million in bank overdrafts.
Long-term debt consisted of $85.0 million of Senior Notes and $109.6 million in
long-term bank loans and $27.9 million of capital leases.
Aetna Senior Notes
In 1996, Aetna issued and registered $85.0 million of 11 7/8% Senior Notes
due 2006 (the "Senior Notes"). The Senior Notes are senior unsecured obligations
of Aetna, ranking pari passu in right of payment with all other senior unsecured
obligations of Aetna. The Senior Notes are redeemable, at Aetna's option, in
whole at any time or in part from time to time, on and after October 1, 2001,
upon not less than 30 nor more than 60 days' notice, at a redemption price
ranging from 105.9% to approximately 100.0%, depending upon the time of
redemption. The indenture of the Senior Notes of Aetna (the "Senior Notes
Indenture") provides that upon the occurrence of a Change of Control, Aetna will
be required to offer to each holder the option to purchase all or a portion of
such holder's Senior Notes, at a purchase price equal to 101% of the principal
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<PAGE> 46
amount thereof plus accrued and unpaid interest, if any, to the date of
purchase. "Change of Control" is defined under the Senior Note Indenture to
include, among others, one or more of the following events: (i) prior to the
first public offering of voting stock of MS Acquisition, Aetna Holdings or
Aetna, any person or group (other than certain stockholders) shall be entitled
to designate for election directors of MS Acquisition, Aetna Holdings or Aetna
having a majority of the total voting power of the Board of Directors of MS
Acquisition, Aetna Holdings or Aetna, or (ii) after the first public offering of
voting stock of MS Acquisition, Aetna Holdings or Aetna, any person or group
(other than certain stockholders) is or becomes the beneficial owner, directly
or indirectly, of voting stock that represents more than a majority of the
aggregate voting power of all classes of the voting stock of MS Acquisition,
Aetna Holdings or Aetna, voting together as a single class. If the Company were
to experience one or more of these Change of Control events, there can be no
assurance that the holders of the Senior Notes would not tender all or part of
their Senior Notes for redemption by the Company, which could result in a
material adverse effect on the Company's financial position. If all of such
Senior Notes were tendered, the Company estimates it would have to pay $85.9
million in principal and unpaid and accrued interest thereon within 60 days.
The Company believes that the Offering may result in a Change of Control.
Upon consummation of the Offering, the Company will offer to purchase all of the
Senior Notes pursuant to the Change of Control provisions of the Senior Notes
Indenture.
The Senior Notes Indenture contains certain covenants for the benefit of
the holders of the Senior Notes that, among other things, limit the ability of
Aetna and its subsidiaries to: (i) enter into certain transactions with
affiliates; (ii) consummate certain asset sales; (iii) incur indebtedness that
is senior in right of payment to the Senior Notes; (iv) incur liens; (v) merge
or consolidate with any other person; (vi) sell, assign, transfer, lease, convey
or otherwise dispose of all or substantially all of the assets of Aetna; or
(vii) pay dividends. Under the ratios included in the Senior Note Indenture,
Aetna is currently restricted from paying dividends and from incurring certain
additional indebtedness. See "-- Financial Condition".
Aetna's Senior Revolving Credit Facility
Aetna is currently party to a Senior Revolving Credit Facility that
provides for a revolving credit facility, including letters of credit, in an
aggregate principal amount of up to $56.5 million. All loans incurred under the
Senior Revolving Credit Facility mature on March 31, 2001. At June 30, 1998,
Aetna had borrowed $25.9 million under the Senior Revolving Credit Facility.
Indebtedness of Aetna under the Senior Revolving Credit Facility is secured
by a first priority security interest on the assets of Aetna and its
subsidiaries. Aetna's borrowings under the Senior Revolving Credit Facility bear
interest at a floating rate.
The Senior Revolving Credit Facility requires that the Company meet certain
financial tests, including, without limitation, minimum levels of consolidated
net worth, minimum interest coverage, a maximum leverage ratio, and a maximum
amount of capital expenditures. The Senior Revolving Credit Facility contains
certain covenants which, among other things, limit the incurrence of additional
indebtedness, investments, dividends, transactions with affiliates, asset sales,
acquisitions, mergers and consolidations, liens and encumbrances and other
matters customarily restricted in such agreements.
Other Debt of the Company
At June 30, 1998, the Company and its subsidiaries had approximately $56.5
million of bank term loans outstanding, $31.2 million of capital leases, $15.3
million in bank overdrafts and $3.4 million of other debt that will remain
outstanding after application of the proceeds of the Offering. These loans and
capital leases contain terms and conditions which are standard in France and the
United States.
In addition, the Company intends to prepay the following indebtedness with
the proceeds of the Offering: approximately $12.0 million of bank term loans of
the former Sofedit stockholders assumed by the Company in connection with the
Combination; $8.2 million of Junior Notes; and $40.9 million of Promissory
Notes. See "Use of Proceeds".
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<PAGE> 47
EUROPEAN MONETARY UNION
Since a substantial portion of the Company's activities are carried out in
Europe, the Company is actively preparing for the introduction of a single
European currency. After January 1, 1999, the Company will be required, upon the
request of any party with which it transacts, to use the euro as a currency of
payment in its European commercial activities in certain financial transactions
and in dealings with administrative bodies. On the basis of currently available
information, the Company does not expect that expenses to be incurred in
connection with the introduction of the euro as a currency of payment will have
a material adverse effect on the results of operations or financial position of
the Company.
INFLATION
The Company believes that the relatively moderate inflation over the last
few years has not had a significant impact on the Company's revenues or
profitability and that the Company has been able to offset the effects of
inflation by increasing prices or by realizing improvements in operating
efficiency.
YEAR 2000
The Company has conducted a review of its computer systems to identify
those areas that may not be Year 2000 compliant and is developing a plan to
resolve the issue. The Company believes that by modifying existing software and
obtaining new releases of licensed software, the Year 2000 transition can be
carried out without significant operational expenses or significant investments
in computer systems improvements. On the basis of currently available
information, the Company does not expect that expenses to be incurred in
connection with the continuing identification of systems which are not Year 2000
compliant and with their replacement or upgrade will have a material adverse
impact on the results of operations or financial position of the Company. There
can be, however, no assurances of the absence of any disruptions in the
Company's own systems or those of its customers and suppliers. The Company
considers that sufficient resources have been dedicated to address these issues
in a timely manner.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133 ("SFAS 133"), "Accounting for Derivative
Instruments and Hedging Activities". SFAS 133 addresses the accounting for
derivative instruments. This statement is not expected to have any effect on the
Company's financial position or results of operations.
In April 1998, the Accounting Standards Executive Committee issued
Statement of Position 98-5 ("SOP" 98-5), "Reporting on the Costs of Start-up
Activities". This statement prescribes accounting treatment for start-up
activities and is effective for fiscal years beginning after December 15, 1998.
This statement is not expected to have a material effect on the Company's
financial position or results of operations.
In February, 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 132 ("SFAS 132") "Employers'
Disclosure about Pension and Other Post-Retirement Benefits." SFAS 132 revises
employers' disclosures about pension and other post-retirement benefit plans but
does not change the measurement or recognition of those plans. This statement is
not expected to have a material effect on the Company's financial position or
results of operations.
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<PAGE> 48
BUSINESS
GENERAL
The Company is a leading full-service supplier of highly engineered
metal-formed components, complex modules and mechanical assemblies for
automotive OEMs in Europe and North America. The Company believes it produces
one of the broadest ranges of automotive stampings and other metal-formed
products of any OEM supplier within these markets. The Company's products are
manufactured through a variety of processes including complex stamping,
high-pressure hydroforming and, beginning in 1999, hot stamping. The Company's
products include: (i) structural components and modules for chassis, suspension,
floor pan and engine cradle systems; (ii) large exterior door and body panel
modules; (iii) mechanical assemblies such as pedal systems and door-check
mechanisms; and (iv) other complex components such as stamped pulleys and
crankshaft pulley dampers. The Company's products are used by most of the major
automotive OEMs worldwide, such as Chrysler, GM, Jaguar, Mercedes-Benz,
Mitsubishi, Peugeot-Citroen, Porsche, Renault, Toyota, Volkswagen and Volvo. On
a pro forma basis, the Company's net sales for 1997 and the first six months of
1998 were $693.6 million and $375.3 million, respectively.
The Company's international presence is the result of the April 1998
combination of Sofedit and Aetna, two leading stamping and metal-forming
companies in Europe and North America, respectively. Today, the Company produces
over 100 types of products for 60 models on 40 platforms from 23 plants in
Europe and North America. The Company believes that the component supply segment
of the automotive supply industry is highly fragmented but undergoing
significant consolidation. This consolidation is being driven by OEM
requirements for increased global sourcing for global platforms and increased
outsourcing of design and production. As a result of the Combination, the
Company believes it is uniquely positioned to capitalize on these trends.
The Company has a significant international presence with approximately 70%
and 30% of its pro forma 1997 net sales generated from sales to customers in
Europe and North America, respectively. The Company believes it is
well-positioned on top-selling vehicles in Europe and North America. For
example, the Company currently supplies products used on seven of the ten
top-selling vehicles in Europe, including the Renault Twingo, Megane and Clio,
the Opel Astra and Vectra, and the Volkswagen Golf and Polo. The Company also
supplies products used on such top-selling vehicles in North America as the
Chrysler Jeep Cherokee, Jeep Grand Cherokee and Jeep Wrangler, Chrysler
Cirrus/Dodge Stratus, Buick Riviera/Oldsmobile Aurora, Chevrolet Astro/GMC
Safari, Pontiac Bonneville, Buick Park Avenue, Chevrolet Cavalier and Saturn LS.
Approximately 78.5% of the Company's 1997 pro forma North American net sales
were derived from the higher-growth light truck segment.
The Company has a substantial number of new products for car and light
truck platforms in the early stages of production, including platforms for
Chrysler (two), GM (one) and CAMI (one) in North America and products for new
vehicles for Renault (six), for Peugeot-Citroen (five) and one for each of
Volkswagen, Mercedes-Benz, Mitsubishi, GM, Toyota and Volvo in Europe. In
connection with the introduction of these new products, the Company made
significant investments and incurred significant launch and other costs. The
Company believes that it is now well-positioned to realize the benefits of these
investments as they reach full production.
The Company's business strategy is to: (i) leverage and expand its
international presence to exploit future opportunities; (ii) capitalize on
technical design and engineering capabilities; (iii) exploit new technologies
such as high-pressure hydroforming; (iv) achieve continuous quality improvements
and enhance manufacturing efficiencies; and (v) pursue strategic acquisitions.
INDUSTRY OVERVIEW
The Company believes that the component supply segment of the automotive
supply industry is highly fragmented and undergoing significant consolidation.
This consolidation is being driven by OEM requirements for increased global
sourcing for global platforms, and increased outsourcing of design and
production. The
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<PAGE> 49
Company believes that these requirements can best be met by suppliers such as
the Company, which have sufficient size, geographic presence and financial
resources to meet such demands.
Global Sourcing Trends. OEMs are positioning themselves to meet global
demands by designing and producing cars on a reduced number of global platforms
which can be designed in one vehicle center but produced and sold in many
different geographic markets, thereby allowing OEMs to reduce design costs and
take full advantage of low-cost manufacturing locations. For example, GM has
announced it will use three major global platforms in its international
passenger car operations, and European OEMs have announced similar initiatives.
The Company believes that such standardization of OEM platforms will result in
fewer suppliers, with each of the remaining suppliers delivering greater
volumes. The Company believes that only suppliers with facilities strategically
located near OEM facilities will be able to take advantage of this trend.
Increased Systems/Modular Sourcing. In conjunction with the changing
trends regarding global platforms, OEMs increasingly require suppliers to be
capable of providing complete systems or modules rather than separate component
parts. A system is a group of component parts which operate together to provide
a specific engineering-driven function, whereas a module is a group of systems
and/or component parts which are assembled and shipped to the OEM for
installation in a vehicle as a unit. By outsourcing complete systems or modules,
OEMs are able to reduce the costs associated with the design and integration of
different components and improve quality by enabling their suppliers to assemble
and test major portions of the vehicle prior to beginning production. As a
result of the trend of having suppliers produce and assemble larger modules,
proximity to the OEMs' facilities is increasingly important. This trend is more
advanced in North America than in Europe.
Increased Supplier Design and Development. The Company believes that
implementation of global sourcing strategies is accelerating the trend toward
involving potential suppliers earlier in the design and development process of
new global platforms. Consequently, the Company believes that the key success
factors for OEM suppliers have changed from pure cost minimization to total
program management that encompasses state-of-the-art design, manufacture and
delivery of high-quality products at competitive prices on a global scale.
Continued Outsourcing. As in other segments of the automotive components
industry, the Company expects outsourcing to accelerate in the stamping and
metal-forming areas. In both Europe and North America, class A exposed surface
panels ("body-in-white") have traditionally been produced in-house by OEMs,
while unexposed body structure and unexposed underbody/chassis assemblies are
being increasingly outsourced. In general, outsourcing of stampings in Europe
has been constrained by the geographic dispersion of OEM assembly plants. The
Company believes that opportunities for outsourcing will considerably increase
for suppliers having the geographic reach and ability to supply components and
modules from nearby manufacturing facilities.
COMPETITIVE STRENGTHS
The Company believes it possesses the following distinct competitive
strengths: (i) international presence; (ii) strong relationships with a
diversified customer base; (iii) full-service technical, design and engineering
capabilities; (iv) a highly motivated and experienced management team; and (v) a
proven ability to identify and successfully manage acquisitions. The Company
intends to capitalize on these competitive strengths to continue to generate
consistent revenue growth and increased profitability in the future.
International Presence. With 23 plants in Europe and North America, the
Company believes it is one of a limited group of high-quality, full-service
automotive suppliers able to provide significant volumes of stampings and
mechanical assemblies on an international basis. The majority of the Company's
plants are strategically located near OEM production facilities. The Company
also believes that its international approach has resulted in recent awards of
new business from existing customers, including GM's Opel unit in Poland and
Renault in Brazil, as well as awards of business from new customers such as
BMW/Rover, CAMI and Mitsubishi North America.
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<PAGE> 50
Strong Relationships with a Diversified Customer Base. The Company's
full-service capabilities have enabled it to become a leading supplier to nearly
all of the world's major automotive OEMs, including Chrysler, GM, Jaguar,
Mercedes-Benz, Mitsubishi, Peugeot-Citroen, Porsche, Renault, Toyota, Volkswagen
and Volvo. Many of these major OEMs have become customers of the Company in the
last five years, which has contributed to significant sales growth. During this
period, the Company has solidified long-term relationships with Chrysler, GM,
Peugeot-Citroen and Renault, each of which accounted for more than 7% of the
Company's pro forma 1997 net sales, although no single customer accounted for
more than 25% of the Company's pro forma 1997 net sales.
Full-Service Technical, Design and Engineering Capabilities. The Company
believes it is one of a few automotive suppliers in Europe and North America
capable of meeting OEMs' demands for greater outsourcing of stampings and
mechanical assemblies at the earliest stages of product design as well as during
continuous production stages. Supporting the Company's full-service capabilities
are its computer-aided design systems, prototype plants, hydroforming expertise
and large-bed presses, augmented by the efficiency of an increasingly automated
production lines. These full-service capabilities enable the Company to pursue
its strategy of leveraging design and engineering skills to secure supply
relationships for complex products which are typically higher value-added. The
Company considers hydroforming to be an important technology and believes that
applications for hydroforming are increasing, as illustrated by Volvo's recent
selection of the Company to provide a hydroformed cross-member assembly for the
Volvo S80 model.
Highly Motivated and Experienced Management Team. The Company believes its
management and employees are highly motivated to meet corporate objectives due
to performance incentive plans and the Company's decentralized management style.
The Company believes its decentralized approach to decision making encourages
employee participation in refining and improving production processes and
product quality. The Company's incentive plans for management employees include
discretionary annual bonuses and stock option plans based on their ability to
meet certain defined financial and quality performance criteria. Moreover,
members of the Company's senior management have an average of approximately 17
years of experience in the automotive industry. In addition, following the
consummation of the Offering, the Company's senior management will beneficially
own approximately % of the outstanding Common Stock. See "Management".
Proven Ability to Identify and Successfully Manage Acquisitions. Since
1989, the Company's management has completed seven acquisitions and two
strategic alliances. The Company's strategy has been to identify underperforming
companies with potential for operating improvements. In such acquisitions, the
Company has been able to apply its management expertise to increase efficiency
and to improve quality. For example, the Company's management team was able to
improve dramatically productivity and manufacturing efficiencies at the
Lebranchu facility (the Company's largest facility in Europe, which was acquired
in 1994) by approximately 57%, from 1995 to 1997, while net sales from the
Lebranchu facility operations increased by approximately 39% for the same
period.
BUSINESS STRATEGY
The Company's business strategy is designed to foster growth, improve
manufacturing efficiency, reduce costs and increase productivity, thereby
improving profitability. Key elements of this business strategy include: (i)
leveraging and expanding its international presence to exploit future
opportunities; (ii) capitalizing on technical design and engineering
capabilities; (iii) exploiting new technologies such as high-pressure
hydroforming; (iv) achieving continuous quality improvements and enhancing
manufacturing efficiencies; and (v) pursuing strategic acquisitions.
Leverage and Expand International Presence. The Company believes that
international capabilities are necessary to ensure its selection by OEMs as a
supplier for future highly attractive global platforms. The Company currently
operates 12 manufacturing facilities in Europe and 11 manufacturing facilities
in North America, allowing it to supply products to its customers on a local
basis in two of the world's largest markets. The Company is also committed to
continued expansion of its international operations in certain other attractive
markets, including Eastern Europe, Asia and Latin America. For example, the
Company has
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<PAGE> 51
recently purchased a facility in Brazil where the Company expects to commence
production of components for Renault in 1999. In addition, the Company recently
established strategic alliances in Slovenia and Turkey and is actively pursuing
similar opportunities in Argentina and Japan. By leveraging and expanding its
international presence, the Company believes it will be well-positioned to win
future awards on attractive global and other platforms outside Europe and North
America.
Capitalize on Technical Design and Engineering Capabilities. The Company
works with OEMs throughout the product development cycle, from concept vehicle
and prototype development through the design and implementation of manufacturing
processes. The Company believes that by working with its customers early in the
design process, it is able to secure new business and provide its customers with
significant cost reduction solutions.
Exploit New Technologies. The Company's expertise in high-pressure
hydroforming, aluminum stamping and thixoforming are important elements of its
growth strategy. The Company believes that these capabilities have been
instrumental in meeting OEMs' focus on lighter-weight vehicles and will be
increasingly important to the Company's key customers as applications for such
technologies on future models continue to expand.
Achieve Continuous Quality Improvements and Enhance Manufacturing
Efficiencies. The Company continues to implement initiatives to improve product
quality and reduce manufacturing costs. The Company's emphasis on continuous
improvement using techniques such as the Kaizen process and the ongoing
elimination of non-value-added steps in its manufacturing process aim to meet
the increasingly stringent demands by OEMs. Specifically, the Company's
objectives are to manufacture and deliver its products on a just-in-time basis
which requires standardization of production processes, product changeovers and
increased automation through the flexible use of robotics and manufacturing
cells. In addition, the Company strives to rapidly adjust its production lines
to identify any problems as they develop and to maximize the consistent quality
of its products.
Pursue Strategic Acquisitions. The Company believes that consolidation in
the automotive supply industry will provide continued opportunities to acquire
companies that complement and expand its existing business. The Company seeks to
make strategic acquisitions that: (i) enhance its position as an international
supplier; (ii) provide additional manufacturing and technical capabilities;
(iii) increase the Company's content on existing models for which the Company
supplies products; and (iv) add new customers. Since 1989, Sofedit has made
acquisitions that have increased its engineering capability and manufacturing
expertise, added production capacity and expanded its product lines and its
geographic reach and customer base. In particular, the Combination has extended
the Company's presence in North America while strengthening its structural
underbody capabilities.
PRODUCTS
The Company's current products consist of a broad range of stamped, formed,
welded and assembled metal components, many of which are critical to the
structural integrity of a vehicle. The Company's principal product categories
are: (i) structural components and modules for chassis, suspension, floor pan
and engine cradle systems; (ii) large exterior door and body panel modules;
(iii) mechanical assemblies such as pedal systems and door check mechanisms; and
(iv) other complex components such as stamped pulleys and crankshaft pulley
dampers. To help protect its competitive position, the Company has patents for
certain products such as stamped pulleys, crankshaft pulley dampers and
door-check mechanisms.
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The following table sets forth the Company's principal product categories
as a percentage of pro forma net sales for 1997 and six months ended June 30,
1998.
PRINCIPAL PRODUCT CATEGORY AS A PERCENTAGE OF PRO FORMA NET SALES
<TABLE>
<CAPTION>
YEAR ENDED SIX MONTHS ENDED
PRODUCTS DEC. 31, 1997 JUNE 30, 1998
-------- ------------- ----------------
<S> <C> <C>
Structural Components....................................... 48.8% 50.0%
Large Exterior Door and Body Panel Modules.................. 17.6 13.3
Mechanical Assemblies....................................... 16.7 20.0
Pulleys and Others.......................................... 16.9 16.7
----- -----
TOTAL....................................................... 100.0% 100.0%
===== =====
</TABLE>
The following table presents an overview of the principal product
categories that the Company manufactures.
PRODUCT CATEGORIES AND CERTAIN REPRESENTATIVE PRODUCTS
<TABLE>
<CAPTION>
PRODUCT CATEGORY REPRESENTATIVE PRODUCTS
---------------- -----------------------
<S> <C>
Structural Components - Chassis
- Floor pans
- Engine cradles
- Radiator supports
- Front and rear-suspension assemblies
- Rail assemblies
- Control arms
Large Exterior Door and Body Panel Modules - Body panels
- Body pillars
- Doors
- Hoods
- Large bed-size assemblies
Mechanical Assemblies - Pedal systems
- Heat shields
- Door checks
- Arm hinges
- Oil pans
- Brake components
- Fuel filler assemblies
Pulley and Others - Steel stamped pulleys
- Aluminum stamped pulleys
- Crankshaft pulley dampers
- Torsional dampers
</TABLE>
CUSTOMERS
The Company is selected by its OEM customers to supply products several
years prior to starting production of a component. In accordance with industry
practice, the Company supplies products generally on a sole-source basis for the
life of a vehicle model, which typically ranges from three to five years.
Management believes that the Company's long-standing industry relationships
are based on its reputation for quality, low cost products and on-time service.
In Europe, the Company has developed strong relationships with many of the major
OEMs. In particular, the Company has developed significant relationships with
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<PAGE> 53
Peugeot-Citroen and Renault, which are among the leading car manufacturers in
the European passenger and light commercial vehicles market. Sales to Renault
and Peugeot-Citroen accounted for 22.4% and 17.1%, respectively, of the
Company's pro forma 1997 net sales. The Company's products are supplied for use
on a wide range of vehicles produced by Peugeot-Citroen and Renault.
In North America, the Company's primary customers are Chrysler and GM,
which accounted for approximately 19.3% and 7.2% of the Company's pro forma 1997
net sales, respectively. Aetna has been a direct supplier to Chrysler and GM
since its founding in 1941 and has had long-standing relationships with buying
and engineering personnel at both companies. For both Chrysler and GM, the
Company has been designated a "strategic supplier" for stamping and assembly
work, making the Company one of a preferred group of suppliers invited to bid
for platform work.
The following table sets forth the percentage of net sales derived from the
sales of products by the Company in 1997 to its four largest customers in 1997,
after giving the pro forma effect to the Combination:
SALES BREAKDOWN BY TOP FOUR CUSTOMERS
(U.S. DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
APPROXIMATE
PRO FORMA PERCENTAGE OF PRO
NET SALES FORMA NET SALES
CUSTOMER 1997 1997
-------- --------- -----------------
<S> <C> <C>
Renault..................................................... $155.1 22.4%
Chrysler.................................................... 133.9 19.3%
Peugeot-Citroen............................................. 118.9 17.1%
GM.......................................................... 49.6 7.2%
------ -----
Total....................................................... $457.5 66.0%
====== =====
</TABLE>
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The following table presents an overview of the major models for which the
Company supplies products:
<TABLE>
<CAPTION>
CUSTOMER PASSENGER CARS LIGHT TRUCK AND UTILITY VEHICLES
-------- -------------- --------------------------------
<S> <C> <C>
Renault Twingo, Clio, Megane, Laguna, Kangoo, Trafic, Master
Safrane, Espace, Scenic
Chrysler Chrysler Sebring Jeep Wrangler, Jeep Cherokee,
Chrysler Cirrus, Dodge Stratus, and Jeep Grand Cherokee
Plymouth Breeze Dodge Ram Van
Dodge Ram Pickup
Plymouth Voyager
Dodge Caravan
Chrysler Town & Country
Peugeot-Citroen 106, Saxo, 206, 306, Xsara, 406, Berlingo
Xantia, 605, XM, 806, Evasion
GM Oldsmobile Delta 88 Chevy VanExpress, GMC Savana
Buick LeSabre Chevy Astro, GMC Safari
Pontiac Bonneville Chevy S10/S15, GMC Sonoma
Buick Riviera Chevy Pickup, GMC Sierra
Oldsmobile Aurora Chevy Blazer, GMC Jimmy
Cadillac Seville
Buick Park Avenue
Chevrolet Cavalier
Pontiac Sunbird/Sunfire
Toyota Carina, Corolla, Avensis
Volkswagen Audi A6, Seat Octavia, Seat Ibiza
and Volkswagen Golf, Lupo
Mercedes-Benz Smart, C, E, S
Porsche Boxster, 911 Carrera
Mitsubishi Carisma, ST-41
Volvo S80, S40, S70, V70, C70
CAMI J II-Platform
</TABLE>
SALES AND MARKETING
In North America, the Company's marketing efforts are concentrated on the
light-truck sector (consisting of sport utility vehicles, mini-vans, utility
vans and light pick-up trucks), one of the fastest growing sectors in vehicle
sales in North America. In the European market, the Company is focused
principally on the passenger vehicle market. To meet OEMs' increasing preference
for suppliers with global capabilities, the Company plans to expand its
manufacturing operations into new geographic markets through strategic
acquisitions and joint alliances. The Company believes that increased geographic
diversification of its sales will allow the Company to mitigate the effects of
cyclical downturns in a given geographic region and further diversify the
Company's OEM customer base. In addition, the Company believes that expanding
into new regions will provide a competitive advantage in the pursuit of global
platform supply opportunities.
The Company competes for work both at the beginning of the development of
new model platforms and upon the redesign of existing models. New model
development generally begins two to four years prior to the marketing of these
models to the public. Module, subassembly and stamping programs are generally
awarded one to three years prior to the initial production period. Once a
producer has been designated to supply parts to a new program, it will generally
continue to be a sole source supplier for these parts for the life of the
program.
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<PAGE> 55
Typically, these arrangements remain in place for the production life of a car
or truck platform and continue through a platform's redesign period. Production
generally runs three to five years, but on occasion can be substantially longer
or shorter, and then ceases with the discontinuance of the respective model.
The Company has increasingly been partnering with OEMs during the early
stages of platform development. OEMs have focused on shortening design cycles
and reducing design and production costs, and have involved component suppliers
earlier in the process of designing a vehicle. The Company has been increasingly
given the opportunity to participate in the design of subassemblies, such as the
floor-pan and ladder subassembly, radiator supports and cross-member assemblies,
which are designed at an early stage in the development of new vehicles or model
revisions. This has resulted in opportunities to add additional value by
furnishing engineering and process-design services and managing the subassembly
process for the manufacturer. It also creates opportunities for early
identification of a broad range of components and related subassemblies which
could be manufactured by the Company. Partnering also involves sharing the OEMs'
tooling, design and other start-up costs.
Tooling and Prototype Sales
In accordance with industry practice, the Company is responsible for
managing the production of the tooling used to manufacture its products, with
such tooling typically being produced by a third party. The Company generally
finances production of the tooling until the time it is delivered. At this time
the Company is reimbursed by its customer based on a previously agreed price and
the transaction is booked as tooling sales. Once the Company commences
production with a set of tooling, it typically is assured sole-source status on
the related products because of the cost and inefficiency to the customer of
creating a duplicate set of tooling or removing and relocating the existing set
of tooling from the Company's facility. However, as is typical in the automotive
industry, the determination to designate the Company as a sole-source supplier
and the continuing sales relationship takes place almost entirely on the basis
of non-binding oral understandings between the Company and its customers, and
there can be no assurance such relationships will continue on the same terms.
The Company's prototype stamping operation greatly enhances its capability
to provide one-stop engineering solutions to its customers. Full-service
suppliers are responsible for managing not only the prototype manufacturing of
parts and assemblies, but also the tool development process that results in
improved competitive pricing and efficient part designs. Having this capability
in-house significantly improves the Company's ability to manage these activities
with the rapid response times required by the customer.
The Company believes its level of tooling and prototype sales in relation
to its overall sales are important indicators of future business. The Company's
tooling sales have represented approximately 6% to 9% of total pro forma sales
since 1995 and the Company's prototype sales have represented approximately 3%
to 5% of total pro forma sales over the same period. The following table sets
forth tooling and prototype sales as a percentage of net sales for the periods
indicated.
<TABLE>
<CAPTION>
TOOLING AND PROTOTYPE PRO FORMA SALES
IN U.S. DOLLARS AND AS A PERCENTAGE OF PRO FORMA NET SALES
------------------------------------------------------------
DECEMBER 31, SIX MONTHS ENDED
1997 JUNE 30, 1998
---------------------------- ----------------------------
PERCENTAGE OF PERCENTAGE OF
NET SALES NET SALES NET SALES NET SALES
---------- -------------- ---------- --------------
<S> <C> <C> <C> <C>
Tooling..................................... $59.5 8.6% $22.2 6.8%
Prototype................................... 17.0 2.5 11.0 3.4
----- ---- ----- ----
Total....................................... $76.5 11.1% $33.2 10.2%
===== ==== ===== ====
</TABLE>
MANUFACTURING
In response to increasingly stringent demands by OEMs, the Company has
adopted a manufacturing system which focuses on optimum streamlining throughout
the entire production system to eliminate waste and non-added value and build
quality into the manufacturing process while reducing costs.
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<PAGE> 56
The Company has a progressive production strategy based on a lean
manufacturing process specifically designed to promote efficient production and
eliminate various unnecessary costs. Lean production is characterized by
flexible work center scheduling as well as vendor scheduling and quality "in
place". These productivity improvements in the manufacturing process have helped
lower indirect labor costs associated with setup time.
All of the Company's manufacturing facilities are ISO 9001 certified and
the majority are QS 9000 certified. In addition, all of its European facilities
are certified by either VDA of Germany or EAQF of France, two key European
quality certification agencies.
New Manufacturing Technologies
In addition to the conventional bending, stamping, welding and
metal-forming technologies used in the Company's manufacturing process, the
Company uses new technologies to improve the manufacturing process and expand
product lines offered to its customers such as hydroforming, hot stamping and
aluminum products.
Hydroforming. Hydroforming is an advanced metal-forming manufacturing
process used by the Company to produce lighter, more complex, higher-quality
components with a low initial capital investment. In hydroforming, a piece of
stock metal tubing is placed in a die and sealed at both ends. High pressure is
then applied to the inside of the tube to force it into the shape of the die.
The main benefits of hydroforming over conventional metal-forming processes are:
lighter weight products, significant cost reductions; reduced initial capital
investment; the capability to form complex shapes; and a finished product with
improved strength. Products for which hydroforming is applicable include frames,
engine cradles and cross-members.
The Company recently started production on high-pressure hydroformed
crossmembers for the new Volvo S80 and the Company believes that hydroforming
has potential for significant further applications in the Company's existing and
future markets.
Hot Stamping. Hot stamping is an innovative new production technology
involving heating stock metal at a temperature between 800-900 degrees Celsius
immediately prior to stamping. The primary benefits of hot stamping are
obtaining the same mechanical characteristics with a considerably reduced metal
thickness and weight, a finished product with improved strength and no built-up
heat stress. This technology is useful in manufacturing structural components
requiring strength with less weight. Products for which hot stamping is
applicable include impact beams, pillars, reinforcement members in door
assemblies and roof reinforcements.
The Company has built a substantial pipeline of products that will be
manufactured utilizing hot-stamping technology. The Company expects to commence
manufacturing these products for certain of its European and North American
customers in 1999.
COMPETITION
The Company operates in a highly competitive, fragmented market segment of
the automotive supply industry in which only a limited number of competitors
generate revenues in excess of $300 million. The number of the Company's
competitors has decreased in recent years as a result of suppler consolidation
and is expected to continue to decrease as a result of further supplier
consolidation driven by changing OEM policies.
The Company currently competes for large-scale production work with a
limited group of independent suppliers that have the physical assets and
technical skills to produce large bed-size stampings and assemblies. Competitors
in North America with wide bed-size presses (i.e., over 150 inches) and
substantial technical resources include mainly The Budd Company, Oxford
Automotive, Inc., Magna International Inc., Active Tool & Manufacturing Co.,
Inc., Tower Automotive, Inc., AG Simpson and Mayflower, plc. European
competitors include mainly Hoesch-Krupp, Benteler, Mac-Magnetto,
Gonvarri-Biskaia, MGI-Coutier, Aries, Etscha, Allgauer and Lunke & Sohn.
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<PAGE> 57
SUPPLIERS AND RAW MATERIALS
The primary raw material used to produce the majority of the Company's
products is steel. The Company purchases hot and cold-rolled, galvanized,
organically coated, stainless and aluminum coated steel from a variety of
suppliers. The Company employs lean production and sourcing systems enabling it
to meet customer requirements for faster delivery while minimizing the need to
carry significant inventory levels. The Company has not experienced any
significant shortages of raw materials and normally does not carry inventories
of raw materials or finished products in excess of those reasonably required to
meet production and shipping schedules. On a pro forma basis giving effect to
the Combination, raw material and component costs represented approximately
47.8% of the Company's net sales in 1997, with steel representing approximately
53.7% of raw material costs in 1997 or 28.4% of pro forma net sales. The Company
believes that it has developed good business relations with its steel suppliers.
In North America, the Company currently participates in steel-buying
programs with Chrysler and GM, which have the effect of substantially mitigating
the effects of steel price volatility and providing a steady source of steel.
These arrangements currently cover approximately 38% of the Company's steel
purchases (based on pro forma 1997 volume and sales). The Company believes that
North American OEMs will continue these arrangements. In Europe, no steel-buying
programs exist with any of its existing OEMs customers.
PRODUCTION FACILITIES
The Company operates major manufacturing facilities in North America and
Europe and has its principal executive offices in St. Quentin en Yvelines,
France (which include certain of the Company's design and engineering functions
and are ISO 9001 certified). The Company continually seeks to reduce its costs
and increase the efficiency of its operations through maximizing utilization of
its facilities. All of the Company's production facilities are ISO 9000
certified and the majority are QS 9000 certified. In addition, all the Company's
European production facilities are certified by EAQF in France and the VDA in
Germany. Management believes that the Company's facilities and equipment are in
good condition and are adequate for the Company's present and anticipated future
operations.
European Production Facilities
<TABLE>
<CAPTION>
LOCATION SQUARE METERS OWNED, CAPITAL-LEASED OR RENTED
-------- ------------- -------------------------------
<S> <C> <C>
Aubecq -- Auxi-Le-Chateaux, France.................. 27,000 Owned
Bonin -- Vendome, France............................ 17,325 Capital-Leased
Cabrit -- Pithiviers, France........................ 15,218 Capital-Leased
Coventry Presswork -- Coventry, Great Britain....... 31,379 Owned
CTAA -- Giromagny, France........................... 14,679 Owned
Laprade Emboutissage -- Arudy, France............... 3,800 Owned
2,200 Rented
59,432 Owned
Lebranchu -- Le Theil sur Huisne, France............ 720 Capital-Leased
5,200 Capital-Leased
20,923 Capital-Leased
Lebranchu Prototypes -- Beauchamp, France........... 3,700 Capital-Leased
1,200 Capital-Leased
Serte -- Gouxeaucout, France........................ 4,152 Capital-Leased
Sofedit Iberica -- Valladolid, Spain................ 4,432 Rented
Sofedit Polska -- Wroclaw, Poland................... 3,760 Rented
Sotramex -- Amilly, France.......................... 10,333 Owned
20,757 Capital-Leased
</TABLE>
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<PAGE> 58
North American Production
Facilities
<TABLE>
<CAPTION>
LOCATION SQUARE FOOTAGE OWNED OR RENTED
-------- -------------- ---------------
<S> <C> <C>
Aetna Industries, Inc., Plant 1 -- Centerline, MI, United
States.................................................... 72,000 Owned
Aetna Industries, Inc., Plant 2 -- Centerline, MI, United
States.................................................... 67,000 Owned
Aetna Industries, Inc., Plant 3 -- Centerline, MI, United
States.................................................... 32,500 Rented
Aetna Industries, Inc., Plant 4 -- Centerline, MI, United
States.................................................... 100,000 Rented
Aetna Industries, Inc., Plant 5 -- Centerline, MI, United
States.................................................... 20,000 Rented
27,000 Rented
Aetna Industries, Inc., Plant 6 -- Warren, MI, United
States.................................................... 57,000 Rented
Aetna Industries, Inc., Plant 7 -- Warren, MI, United
States.................................................... 96,158 Owned
Aetna Industries, Inc., Plant 8 -- Sterling Heights, MI,
United States............................................. 110,000 Rented
Aetna Industries, Inc., Plant 9 -- Warren, MI, United
States.................................................... 35,000 Rented
Aetna Industries, Inc., Plant 10 -- Centerline, MI, United
States.................................................... 70,350 Owned
Aetna Industries, Inc. -- London, Ontario, Canada........... 54,527 Rented
</TABLE>
EMPLOYEES
The Company had approximately 4,825 employees as at December 31, 1997. In
Europe, the Company had approximately 3,400 employees as at December 31, 1997.
As is common in many European countries, substantially all of the Company's
employees in Europe are covered by country-wide collective bargaining
agreements. In particular, European employees are covered by the Metallurgic
Industry Collective Bargaining Agreement. The salaried employees are covered by
the National Collective Bargaining Agreement of Metallurgic Salaried Employees
and the hourly wage workers are covered by the Regional Collective Bargaining
Agreement of Metallurgic Workers, Employees and Agents. In Europe, collective
bargaining agreements are often made on a local basis. Additional agreements are
often made with the facility Works Council on an individual basis covering
miscellaneous topics of local concern.
In North America, the Company had approximately 1,425 employees as at
December 31, 1997, most of whom are covered by six collective bargaining
agreements with two locals of the UAW. Of the six collective bargaining
agreements, two will expire within one year and are thus subject to
renegotiation at the option of the Company or the UAW. The Company considers its
employee relations to be satisfactory.
ENVIRONMENTAL MATTERS
The Company believes it conducts its operations in substantial compliance
with applicable environmental and occupational health and safety laws. The
Company does not expect to incur material capital expenditures for environmental
compliance during its current or succeeding fiscal year. However, as is the case
with manufacturers in general, if a release of hazardous substances occurs on or
from the Company's properties or at any associated off-site disposal location,
if contamination from prior activities is discovered at any of the Company's
properties or if non-compliance with environmental regulations or permits is
discovered, the Company may be held liable and the amount of such liability
could be material.
The Company is subject to a wide range of evolving foreign, federal, state
and local environmental laws and regulations relating to the protection of the
environment, worker health and safety and the emission, discharge, storage,
treatment and disposal of hazardous materials. In the United States, the
Company's facilities are subject to the Clean Air Act, the Resource Conservation
and Recovery Act, the Federal Water Pollution Control Act and the Comprehensive
Environmental Response, Compensation and Liability Act ("Superfund" or
"CERCLA"). In France, the Company's facilities are subject to the French laws of
July 10, 1976 and of July 19, 1976 regulating classified installations in France
and of July 15, 1975 concerning waste.
The American CERCLA regulation imposes strict, joint and several liability
upon owners or operators of facilities at, from or to which a release of
hazardous substances has occurred, upon parties who generated hazardous
substances that were released at such facilities and upon parties who arranged
for the transportation or disposal of hazardous substances to such facilities. A
majority of American states have adopted Superfund statutes similar to and, in
some cases, more stringent than CERCLA. Due to the Company's current and
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<PAGE> 59
historic use, generation and disposal of hazardous substances and petroleum
products, the possibility exists that spills and releases of such substances may
have occurred at certain of the Company's facilities with respect to which the
Company could incur liability under CERCLA or similar state laws. The Company
could also be subject to liability under CERCLA or similar state laws as a
result of its generation and off-site disposal of such substances. To date, the
Company's liability under CERCLA and similar state laws has not had a material
adverse effect on the Company's financial condition or results of operations.
However, the effect of any such liabilities on the Company in the future cannot
be determined at present.
Pursuant to French environmental laws, operators of facilities engaged in
activities that present a significant risk to the environment ("installations
classees") must, depending on the risk presented by on-site activities, either
obtain regulatory authorization or give prior notification as a condition to
their activities. To the extent required by law, all of the facilities in France
in which the Company has an interest are in substantial compliance with this
requirement. In addition, certain French law provisions require the occupier of
a polluted site to bear the remediation costs on a no-fault basis
notwithstanding the fact that the activities giving rise to such pollution were
in compliance with provisions in effect at that time.
In addition to general environmental laws and regulations, all such
facilities must comply with their operating permits and are subject to regular
administrative inspections and review by the French environmental authorities.
The Company believes that it is materially in compliance with these
requirements.
The Company believes that it is in material compliance with applicable
federal, state and local environmental laws and regulations in North America and
France. Compliance with these laws and regulations has not in the past had any
material adverse effect on the Company's financial condition or results of
operations; however, the effect of such compliance in the future cannot be
determined at present.
LEGAL PROCEEDINGS
The Company is from time to time involved in routine litigation incidental
to its operations. The Company has no pending or threatened litigation which it
believes will have a material adverse impact upon it. The Company is subject to
the risk of exposure to product liability claims in the event that the failure
of any of its products causes personal injury or death to users of the Company's
products, and there can be no assurance that the Company will not experience any
material product liability losses in the future. In addition, if any of the
Company's products prove to be defective, the Company may be required to
participate in a government-imposed or OEM-instituted recall involving such
products. The Company maintains insurance against such liability claims believed
to be adequate for such purposes.
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<PAGE> 60
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth the name, age and position of each of the
directors and senior officers of the Company. Each director of the Company will
hold office until the next annual meeting of stockholders of the Company or
until his successor has been elected and qualified. Officers of the Company and
its subsidiaries serve at the discretion of their respective Boards of
Directors.
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Francis Barge................ 59 Director; Chairman, President and Chief Executive Officer
Felix Domenech............... 55 Director; Group Executive Vice-President Finance
Jean-Rene Hergoualc'h........ 55 Director; Group Executive Vice-President Product Development
David Howe................... 34 Director
Michael Delaney.............. 43 Director
Gery Edouard Lanthier........ 49 Director
Jean-Philippe Larramendy..... 53 Director
Jean-Claude Garolla.......... 33 Chief Financial Officer; Vice-President
Ueli Spring.................. 47 Director; Executive Vice-President North America(1)
Harold Brown................. 48 Secretary; Vice-President North America
Gary Easterly................ 49 Vice-President North America
David Thal................... 39 Vice-President North America
Roger James.................. 55 Vice-President Europe
Paul Rodrigues............... 52 Vice-President Europe
Michael Gillett.............. 47 Vice-President; Chief Operating Officer United Kingdom
</TABLE>
- ---------------
(1) To be designated for election as director of the Company after the
consummation of the Offering.
The Company intends to add two new independent directors to its Board of
Directors after the consummation of the Offering. Also after completion of the
Offering, the Company intends to create an Audit Committee and an Executive
Committee. It is expected that the Audit Committee will be composed of a
majority of independent directors.
MR. FRANCIS BARGE founded Sofedit in February 1989 and has been Sofedit's
Chairman, President and Chief Executive Officer since its creation. From 1986 to
1989, Mr. Barge was employed by Groupe Arbel where he founded Cofimeta and
served as a Director and its Chief Executive Officer. He was also then President
of Somenor, Ecrim and Aubry. From 1966 to 1986, Mr. Barge served as Director of
Special Industrial Projects, Director of North Africa and the Middle East,
Director of Africa for Renault and President and Chief Executive Officer of
Renault Norway. Mr. Barge also served as a judge in the Commercial Court of
Paris between 1992 and 1997. Mr. Barge currently serves on the Board of
Directors of Euralcom. Mr. Barge is a graduate of l'Ecole des Hautes Etudes
Commerciales de Paris.
MR. FELIX DOMENECH is one of the cofounders of Sofedit and has been a
Director and Vice-President of Finance since 1989. From 1988 to 1989, Mr.
Domenech was employed by Groupe Cofimeta serving as Vice-President to its
subsidiaries Aubry, Ecrim and Somenor, President and Chief Executive Officer of
Davum TP and a Director and Chief Financial Officer of the Groupe Cofimeta. From
1974 to 1987, Mr. Domenech was an executive of Renault. He served as the Chief
Financial Officer of Renault Tunisia, Chief Financial Officer of Renault Mexico
and Vice-President of imports for Renault Europe. Mr. Domenech is a graduate of
l'Ecole Superieure de Commerce et d'Administration des Entreprises in Dijon.
MR. JEAN-RENE HERGOUALC'H is one of the cofounders of Sofedit and has been
a Director and Vice President of Research and Product Development since 1989.
From 1988 through February 1989, Mr. Hergoualc'h was employed at Groupe Cofimeta
as Director of Research and Development. From 1969 through 1988, he was an
executive of Renault, where he served as Engineer of Motor Studies, Engineer of
Antipollution Systems Studies, New Vehicles Programs Manager and Studies
Department Manager of
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<PAGE> 61
Renault Mexico, Project Manager of Renault 9 and Renault 11 vehicles. Mr.
Hergoualc'h is a graduate of l'Ecole Nationale Superieure de Mecanique de
Nantes, where he obtained a degree in mechanical engineering.
MR. DAVID HOWE has been a director of Aetna and MS Acquisition since 1996
and a Vice President of Citicorp Venture Capital, Ltd. since 1993. Mr. Howe
serves on the board of directors of America-Italian Pasta Company, Formica
Corporation, IPC Information Systems, Inc., Pen-Tab Industries, Inc. and several
private companies. Mr. Howe is a graduate of Harvard College and Harvard
Business School.
MR. MICHAEL DELANEY has been a director of Aetna and MS Acquisition since
August 1996. Since 1989, Mr. Delaney has been a Vice President of CVC. Mr.
Delaney serves on the board of directors of Delco Remy International, Inc., JAC
Holdings, Sybron Chemicals, Inc., Palomar Technologies, Inc., Farm Fresh Inc.,
AmeriSource Health Corporation, GVC Holdings, Cort Business Services, Inc.,
Enterprise Media Inc., FF Holdings Corporation, SC Processing, Inc. and Triumph
Holdings, Inc. Mr. Delaney is a graduate of Penn State University and The
Wharton School.
MR. GERY EDOUARD LANTHIER has been a director of Sofedit and Cogepa and
D.F. Synergies Group since 1994. Since 1994, Mr. Lanthier has served as Chief
Executive Officer of Cogepa France. In 1993, he served as CEO assistant of
Compagnie Financiere de Valois and, from 1989 to 1992, as Vice President Finance
of Sucden. Mr. Lanthier served as Directeur des Affaires Financieres
Internationales (Vice President International Finance) of Renault from 1984 to
1989. Mr. Lanthier is a graduate of EDHEC in Lille and INSEAD Business School in
Fontainebleau, France.
MR. JEAN-PHILIPPE LARRAMENDY founded Tocqueville International in 1986 and
has been its Managing Partner since its foundation. Mr. Larramendy is President
of ElectroPar France and Advisor to the Chairman of EDF-Capital Investissement.
Mr. Larramendy is also the President of the Institut France-Euzkadi. Mr.
Larramendy serves on the Board of Directors of Sofedit and several other private
companies. Mr. Larramendy is a graduate of the Ecole des Hautes Etudes
Commerciales de Paris and the Wharton School.
MR. JEAN-CLAUDE GAROLLA joined the Company in August 1998 as its Chief
Financial Officer. Between 1986 and July 1998, Mr. Garolla was a principal with
Arthur Andersen in Paris, where he specialized in access to the U.S. capital
markets by European companies. Mr. Garolla is a graduate of the Ecole des Hautes
Etudes Commerciales de Paris.
MR. UELI SPRING has served as Chief Executive Officer and President of
Aetna since 1994. From 1990 to 1994, Mr. Spring served as Executive Vice
President and Chief Operating Officer of Aetna. Mr. Spring has been a director
of Aetna since September 1990. From 1986 to 1987, he served as President of the
Cosma International Group of Magna International Inc. ("Magna") and then served
as Chief Operating Officer of the group from 1987 to 1990. From 1984 to 1986, he
served as Director of Manufacturing with Magna. In 1972, Mr. Spring joined the
Oetiker operations and later became a Vice President from 1980 to 1984. Mr.
Spring received his degree in tool and die engineering from the Universita
Ticinese di Trevano, Switzerland.
MR. HAROLD BROWN has served as Vice President Finance of Aetna since
joining Aetna in 1992 and has been a director of Aetna since August 1996. From
1990 to 1992, he was Controller in charge of U.S. operations at AVX Kyocera
Corp. From 1985 to 1989, Mr. Brown served as Vice President of Finance at APV
Baker Perkins plc after serving as Manager of Financial Analysis from 1982 to
1985. From 1977 to 1982, Mr. Brown held various planning, marketing and sales
positions with Cooper Industries Inc. Mr. Brown received an AB in Economics from
the University of North Carolina and an MBA from Duke University. From 1972 to
1975, he served as a Lieutenant, Supply Corps in the United States Naval
Reserves.
MR. GARY EASTERLY has served as Executive Vice President and Chief
Operating Officer of Aetna since March 1997. He served as Vice President of
Manufacturing of Aetna from 1988 to 1997 and has been employed by Aetna since
1987. From 1966 to 1987, Mr. Easterly served as Director of Quality Assurance,
Quality Engineering and Production Superintendent for GM's Buick Motor Division.
Mr. Easterly received a BS degree in Industrial Engineering from GMI Institute
and an MA degree in Administration from Central Michigan University.
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<PAGE> 62
MR. DAVID THAL has served as Vice President Product Development of Aetna
since 1995. From 1993 to 1995, Mr. Thal served as Project Manager of Aetna's
Production System and has been employed by Aetna since 1980 serving as Sherwood
Plant Manager, Quality Assurance Manager, Manufacturing Project Engineer,
Engineering Manager and Sales Manager. Mr. Thal received a BGS degree in
Psychology and Computer Science from the University of Michigan.
MR. ROGER JAMES has served as Chief Operating Officer of Lebranchu Le Theil
since 1994. From 1989 to 1994, Mr. James served as Chief Operating Officer of
Sotramex, a subsidiary of Sofedit. From 1969 to 1989, Mr. James was employed by
Ecrim, serving as Maintenance Manager, Logistics and Purchase Manager. Mr. James
is expected to graduate from the CPA (Centre de Perfectionnement des Affaires)
in Paris.
MR. PAUL RODRIGUES has served as Chief Operating Officer of Bonin (a
subsidiary of Sofedit) since 1994. From 1990 to 1994, Mr. Rodrigues served as
Technical Director of Bonin. From 1967 to 1990, Mr. Rodriguez was an executive
of Renault, serving as Assembly Manager in the Flins Plant, and as Research and
Development Engineer. Mr. Rodrigues received a degree in engineering from the
Institut Superieur de Mecanique et Construction Mecanique.
MR. MICHAEL GILLETT has served as Managing Director of Coventry Presswork
Ltd. since 1998. In 1997, Mr. Gillett served as Managing Director of Britax
Vega. From 1987 to 1996, Mr. Gillett served as Plant Director and Manufacturing
Director of Coventry Presswork Ltd. From 1985 to 1986, he served as
Manufacturing Manager and Purchase & Supplies Manager of Armstrong Presswork.
From 1973 to 1984, Mr. Gillett served as Production Control Manager, Production
Manager, Assistant Spares Manager and Customer Liaison Officer of Burman & Sons.
Mr. Gillett received a degree in mechanical engineering from Matheus Boulton
Technical College in England.
COMMITTEES OF THE BOARD OF DIRECTORS
The Company's Board of Directors has a Compensation Committee and intends
to create an Executive Committee and an Audit Committee prior to the Offering.
Compensation Committee. The Company's Compensation Committee reviews
employment, development, reassignment and compensation matters involving
corporate officers and other executive level employees, including issues
relating to salary, bonus and incentive arrangements and the supervision of the
stock option plans of the Company. In 1997, the Compensation Committee was
composed of Messrs. Ueli Spring, David Howe and Michael Delaney. Members of the
Compensation Committee serve at the discretion of the Board.
Audit Committee. The Company's Audit Committee will make recommendations
concerning the engagement of independent public accountants, review with the
independent public accountants the plans and result of the audit engagement,
approve professional services provided by the independent public accountants,
review the independence of the independent public accountants, consider the
range of audit and nonaudit fees, review the independent public accountants'
management letters and the Company's responses, review the adequacy of the
Company's internal accounting controls, and review major accounting or reporting
changes.
Executive Committee. The Company's Executive Committee will have the
authority to manage the Company except for those powers expressly reserved to
the Board of Directors and its other committees.
COMPENSATION OF DIRECTORS
Directors who are officers or employees of the Company do not receive
compensation other than reimbursement for out-of-pocket expenses incurred by
them in connection with their travel to and attendance at meetings of the Board
of Directors or committees thereof. Directors of the Company who are not also
officers or employees of the Company receive an annual fee of $25,000 in
addition to reimbursement of out-of-pocket expenses. In addition, the Company
expects to grant to outside directors options to acquire a maximum of
shares of Common Stock at an exercise price equal to its fair market value.
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<PAGE> 63
A stock option plan for non-employee directors of the Company is expected
to be adopted by the Board and to become effective after the completion of the
Offering. The purpose of such plan is to promote the interests of the Company
and its stockholders by increasing the proprietary interest of non-employee
directors in the growth and performance of the Company. Directors of the Company
who are not officers or employees of the Company will be eligible to participate
in such plan.
COMPENSATION OF OFFICERS
The following table sets forth certain information regarding the cash
compensation paid by the Company, as well as certain other compensation paid or
accrued for such fiscal years, to the CEO and the four most highly compensated
executive officers of the Company in office on June 30, 1998 for each of the
last three fiscal years.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
------------------
NUMBER OF
SHARES OF
COMMON STOCK
UNDERLYING GRANTED
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS OPTIONS(1)
- --------------------------- ---- -------------------- ---------------------- ------------------
<S> <C> <C> <C> <C> <C> <C>
Francis Barge 1997 FF965,619 $165,345 FF1,106,431 $189,457 0
Chairman, President and 1996 965,619 189,967 1,851,669 362,362 0
CEO 1995 965,619 193,511 1,395,715 279,702 0
Felix Domenech 1997 FF828,244 $141,823 FF 683,579 $117,051 0
Group Executive; 1996 828,244 162,083 1,131,941 221,515 0
Vice-President 1995 828,244 165,980 1,012,450 202,896 0
Finance
Jean-Rene Hergoualc'h 1997 FF772,495 $132,277 FF 298,868 $ 51,176 0
Group Executive; 1996 772,495 151,173 593,960 116,234 0
Vice-President 1995 772,495 154,809 519,829 104,174 0
Product Development
Ueli Spring 1997 -- $225,002 -- $135,000
Executive Vice-President 1996 -- 225,976 -- 274,000
North America 1995 -- 222,117 -- 200,000 0
Harold Brown 1997 -- $133,147 -- $ 32,000
Secretary; Vice-President 1996 -- 113,355 -- 169,000
North America 1995 -- 104,755 -- 65,000 0
</TABLE>
BONUS PROGRAM
The Company annually awards discretionary bonuses to members of its
management and certain of its salaried employees. Such bonuses, which are
typically paid in February of each year in respect of services rendered by
recipients during the preceding year, are awarded based on a variety of factors,
including individual and Company performance.
STOCK OPTION PLAN
Prior to the Combination, executive officers, directors, employees and
other key persons of the Company were eligible to participate in the Company's
Executive Stock Option Plan (the "Stock Option Plan"). Options granted under the
Stock Option Plan were non-qualified stock options. Options to purchase an
aggregate of shares of Common Stock, par value $0.01 per share, of MS
Acquisition were issued under
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<PAGE> 64
the Stock Option Plan, of which options to purchase shares of Common
Stock ( shares after giving effect to the Common Stock split that the
Company intends to implement prior to the Offering) are currently outstanding.
All options granted under the Stock Option Plan have vested and become
exercisable pursuant to individual stock option agreements executed by the
Company and each option recipient at an exercise price of $0.75 per share.
1998 EQUITY INCENTIVE PLAN
The Company is currently planning to adopt a new omnibus equity plan (the
"1998 Equity Incentive Plan") for its executive officers, directors, employees
and consultants. It is expected that the 1998 Equity Incentive Plan will
authorize the grant of awards in aggregate of up to approximately 10% of the
Common Stock outstanding prior to the Offering, representing shares of
Common Stock. Such awards may consist of qualified or non-qualified stock
options, restricted shares, stock appreciation rights or other equity-based
interests. The Company anticipates that the initial awards under the Plan will
be in the form of stock options having an exercise price equal to the fair
market value of the underlying shares of Common Stock on the date of grant. The
Company expects the 1998 Equity Incentive Plan to be adopted by the Board and
the Company's shareholders prior to the completion of the Offering.
OPTION GRANTS UNDER THE STOCK OPTION PLAN
No options were granted under the Stock Option Plan during fiscal year
1997.
EXECUTIVE EMPLOYMENT AGREEMENTS
Fourteen of the executive officers of Sofedit and its subsidiaries have
employment agreements pursuant to which an indemnity of approximately 30 months'
salary (representing a minimum payment of FF2,000,000 (approximately $300,000)
per executive officer) would be payable by Sofedit in the event of a termination
without cause.
The Company and Aetna have jointly entered into employment agreements with
each of Messrs. Brown, Easterly and Spring. These employment agreements set
forth the basic terms of employment for each executive, including base salary,
bonus and benefits, as well as the benefits to which each executive will be
entitled if his employment is terminated for certain reasons. These employment
agreements have initially been concluded for a period of three years, ending in
August 1999. Mr. Spring has not waived his right to terminate his employment
agreement as a result of the appointment of Mr. Francis Barge as the CEO of the
Company following the Combination. If Mr. Spring elected to so terminate his
employment agreement, Mr. Spring would be entitled to receive a termination
payment in an aggregate amount equal to the sum of: (i) his annual salary; and
(ii) the greater of (x) the amount of his bonus for fiscal year 1997, or (y) an
amount equal to 50% of Mr. Spring's base salary for fiscal year 1998. For a
period of 12 months, Mr. Spring would also be entitled to participate in the
current benefit plans of the Company.
The Company intends to enter into employment agreements having a term of
five years and renewable by additional periods of two years, with Messrs. Barge,
Domenech and Hergoualc'h. These employment agreements will provide for an annual
base salary of $350,000 for Mr. Barge and $225,000 for Messrs. Domenech and
Hergoualc'h. Such salaries may be revised by the Board of Directors or its
Compensation Committee and increased at their discretion. In addition, these
employment agreements will provide for annual bonuses. These employment
agreements will also provide for participation of these employees in the
Company's 1998 Equity Incentive Plan after adoption of the latter by the Board
or its Compensation Committee, as well as employee benefits such as pension
plans, long term disability benefit and life insurance. See "-- 1998 Equity
Incentive Plan".
These employees will perform their duties without geographic limitation and
any cost of employee relocation outside France shall be borne by the Company.
In case of termination of any of these employment agreements by the Company
without cause, or by the employee for good reason, the employee will be entitled
to a lump sum payment equal to the product of three
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<PAGE> 65
multiplied by the sum of the annual base salary and the highest annual bonus
paid to the employee. In addition, in such circumstances, the employee will be
entitled to payment of the pro rata portion of his bonus and the Company will
provide medical, dental and life insurance benefits for a period of 12 months
following termination, ceasing immediately upon the employee entering into a new
employment agreement with any other person. Also, upon termination by the
Company without cause, or by the employee for good reason, all stock options
granted to the employee shall vest and become exercisable immediately.
These contemplated employment agreements will be terminable by the Company
in case of employee incapacity, if such incapacity is not cured within 180 days
of its first incurrence. The Company may also terminate the employment of these
employees without further obligation to them in case of any act of dishonesty,
gross incompetence or intentional misconduct.
These employment agreements will contain confidentiality provisions, as
well as non-competition provisions applicable for a period of three years
following the date of termination of the employment agreement.
OPTION EXERCISES AND YEAR-END OPTION VALUES
The following table sets forth certain information concerning stock options
exercised during the year ended December 28, 1997 and the number and value of
unexercised stock options held by each of the executive officers named below as
of December 28, 1997, under the Stock Option Plan. See "-- Stock Option Plan".
AGGREGATED OPTIONS EXERCISED IN THE LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES(1)
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
SHARES OPTIONS AT FISCAL AT FISCAL
ACQUIRED ON YEAR-END(2) YEAR-END (IN $)
EXERCISE VALUE --------------------------- ---------------------------
NAME (#) REALIZED ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ------------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Francis Barge.......... 0 $0 0 0 $ 0 $ 0
Felix Domenech......... 0 0 0 0 0 0
Jean-Rene
Hergoualc'h.......... 0 0 0 0 0 0
Ueli Spring............ 0 0
Harold Brown........... 0 0
</TABLE>
- ---------------
(1) Options are for shares of Common Stock of the Company.
(2) Year-end value based on the consideration paid for a share of Common Stock
in connection with the August 1996 recapitalization and financing
transactions (which the Company believes approximates the fair market value
of Common Stock as of December 28, 1997) less the option exercise price of
$0.75 per share.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Compensation of the executive officers of Aetna and the Company has
historically been determined by their Boards of Directors. Messrs. Ueli Spring,
Michael Delaney and David Howe participated in deliberations of the Boards of
Directors of Aetna and the Company concerning executive officer compensation
during the fiscal year 1997. Compensation of Messrs. Francis Barge, Felix
Domenech and Jean-Rene Hergoualc'h in their capacity of executive officers of
Sofedit has historically been determined by Sofedit's Board of Directors.
Messrs. Francis Barge, Felix Domenech and Jean-Rene Hergoualc'h participated in
deliberations of Sofedit's Board of Directors concerning executive officer
compensation in 1997.
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<PAGE> 66
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information regarding the equity
ownership of the Company as of August 10, 1998 by: (i) each person or entity who
owns 5% or more of any class of voting securities of the Company; (ii) the
directors and executive officers of the Company as of August 10, 1998 and (iii)
the directors and executive officers of the Company as a group. Except as
otherwise indicated below, each of the persons named in the table has sole
voting and investment power with respect to all shares of Common Stock and
investment power with respect to Non-Voting Common Stock beneficially owned by
such person as set forth opposite such person's name, and the address of each
person named in the table is the Company's address. No shares of Non-Voting
Common Stock were outstanding as of August 10, 1998. Each share of Common Stock
is convertible into one share of Non-Voting Common Stock at the option of its
holder, if such holder determines that it (or any of its affiliates other than
the Company) might be subject to a legal requirement making it illegal or unduly
burdensome for it to continue to own or control shares of Common Stock.
<TABLE>
<CAPTION>
AFTER OFFERING AND
CONVERSION OF
BEFORE OFFERING PREFERRED STOCK
---------------------------------------------- --------------------
COMMON STOCK PREFERRED STOCK COMMON STOCK
--------------------- ---------------------- --------------------
SHARES SHARES SHARES
OWNED(1) PERCENT(2) OWNED PERCENT(2) OWNED PERCENT(3)
-------- ---------- --------- ---------- ------- ----------
<S> <C> <C> <C> <C> <C> <C>
CEFI SA %
28 rue Marie Therese
L 2132 Luxembourg......... 25.1% 86,713(B) 21.4%
Citicorp Venture Capital, %
Ltd.(4)
399 Park Avenue
New York, NY 10043........ 18.7% 105,757(A) 26.1%
David Howe(5) %
Citicorp Venture Capital,
Ltd.
399 Park Avenue
New York, NY 10043........ 18.7% 105,757(A) 26.1%
Michael Delaney(5) %
Citicorp Venture Capital,
Ltd.
399 Park Avenue
New York, NY 10043........ 18.7% 105,757(A) 26.1%
YACESE S.A. %
1 rue Thomas Edison
78280 Guyancourt.......... 11.0% 46,768(B) 11.5%
H.H.A. WAY S.A. %
1 rue Thomas Edison
78280 Guyancourt.......... 7.3% 25,422(B) 6.3%
Francis Barge(6)............ 25.1% 86,713(B) 21.4% %
Felix Domenech(7)........... 11.0% 46,768(B) 11.5% %
Jean-Rene Hergoualc'h(8).... 7.3% 25,422(B) 6.3% %
Jerome Barge(6) %
CEFI S.A.
28, rue Marie Therese
L 2132 Luxembourg......... 25.1% 86,713(B) 21.4%
Ueli Spring(9).............. 1.2% 764(A) * %
</TABLE>
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<PAGE> 67
<TABLE>
<CAPTION>
AFTER OFFERING AND
CONVERSION OF
BEFORE OFFERING PREFERRED STOCK
---------------------------------------------- --------------------
COMMON STOCK PREFERRED STOCK COMMON STOCK
--------------------- ---------------------- --------------------
SHARES SHARES SHARES
OWNED(1) PERCENT(2) OWNED PERCENT(2) OWNED PERCENT(3)
-------- ---------- --------- ---------- ------- ----------
<S> <C> <C> <C> <C> <C> <C>
Harold A. Brown(10)......... * 275(A) * %
Jean-Philippe %
Larramendy(11)............ 3.0% 10,449(B) *
Gery-Edouard Lanthier(12)... 3.5% 12,277(B) 3.0% %
Gary Easterly(13)........... * 148(A) * %
All directors and executive %
officers as a group (10
persons)(14).............. 70.0% 288,425 71.2%
</TABLE>
- ---------------
* Less than one percent.
(1) Includes shares of Common Stock subject to options exercisable
within 60 days of , 1998. The Company intends to proceed with a
split of the Common Stock prior to the Offering. Consequently, the number
of shares of Common Stock held by the Company's stockholders have not been
included.
(2) Based on shares of Common Stock and 405,095 shares of Preferred
Stock outstanding as of , 1998. Shares of Common Stock subject to
options exercisable within 60 days of , 1998 are considered
held by the holder of such options, for purposes of determining the
percentage of the class, but not for the purpose of computing the
percentage held by others.
(3) Based on shares of Common Stock outstanding after conversion of all
the shares of Preferred Stock into shares of Common Stock. No
shares of Preferred Stock will be outstanding after the completion of the
Offering.
(4) Taking into account shares of Common Stock owned by Citicorp Venture
Capital, Ltd. ("CVC"), CCT Partners III, L.P. and certain employees of CVC
including the directors referred to in the next sentence. CVC has
transferred beneficial ownership of a portion of its Common Stock set forth
above to a group comprised of certain individual officers of CVC, including
Michael Delaney and David Howe, which shares are included in the aggregate
total shown.
(5) Consists of shares held by CVC, CCT Partners III, L.P. and certain
employees of CVC, which may be deemed to be beneficially owned by Messrs.
Delaney and Howe, shares of Common Stock owned by Mr. Delaney and
shares of Common Stock owned by Mr. Howe. Messrs. Delaney and
Howe disclaim beneficial ownership of such shares (except for the
and shares of Common Stock respectively owned by them.
(6) Includes shares of Common Stock held by CEFI, which may be deemed
to be beneficially owned by Mr. Francis Barge and Mr. Jerome Barge. Mr.
Francis Barge and Mr. Jerome Barge disclaim beneficial ownership of shares
held by CEFI.
(7) Includes shares of Common Stock held by YACESE S.A, which may be
deemed to be beneficially owned by Mr. Felix Domenech. Mr. Felix Domenech
disclaims beneficial ownership of shares held by YACESE S.A.
(8) Includes shares of Common Stock held by H.H.A. WAY S.A., which
may be deemed to be beneficially owned by Mr. Hergoualc'h. Mr. Hergoualc'h
disclaims beneficial ownership of shares held by H.H.A. WAY S.A.
(9) Includes shares of Common Stock held by Mr. Spring and options to
purchase shares of Common Stock issued to Mr. Spring.
(10) Includes shares of Common Stock held by Mr. Brown and options to
purchase shares of Common Stock issued to Mr. Brown.
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<PAGE> 68
(11) Includes shares of Common Stock held by Tocqueville Europe L.P.
and shares of Common Stock held by Bidassoa Investissements S.A.,
which may be deemed to be beneficially owned by Mr. Larramendy. Mr.
Larramendy disclaims beneficial ownership of the shares held by Tocqueville
Europe L.P. and Bidassoa Investissements S.A.
(12) Includes shares of Common Stock held by COGEPA S.A., which may be
deemed to be beneficially owned by Mr. Lanthier. Mr. Lanthier disclaims
beneficial ownership of the shares held by COGEPA S.A.
(13) Includes shares of Common Stock held by Mr. Easterly and options to
purchase shares of Common Stock issued to Mr. Easterly.
(14) Includes options to purchase shares of Common Stock. Includes
shares held by CVC and CCT Partners III, L.P. and certain other employees,
that may be deemed to be beneficially owned by Messrs. Howe and Delaney,
who disclaim beneficial ownership of shares. Includes shares of
Common Stock held by Tocqueville Europe L.P. and shares of Common
Stock held by Bidassoa Investissements S.A., that may be deemed to be
beneficially owned by Mr. Larramendy, who disclaims beneficial ownership of
such shares. Includes shares of Common Stock held by COGEPA S.A.,
which may be deemed to be beneficially owned by Mr. Lanthier. Mr. Lanthier
disclaims beneficial ownership of the shares held by COGEPA S.A. Messrs.
Barge, Domenech and Hergoualc'h disclaim beneficial ownership of shares
held by CEFI, YACESE S.A. and H.H.A.WAY S.A..
STOCK PURCHASE AGREEMENT
On April 14, 1998, pursuant to the terms of a stock purchase agreement
among the Company, Sofedit and the stockholders of Sofedit (the "Stock Purchase
Agreement"), the outstanding capital stock of Sofedit, held by its stockholders
both directly and indirectly through certain holding companies (the capital
stock of which was also transferred) was transferred to the Company in
consideration of: (i) Promissory Notes of the Company in an aggregate principal
amount of $40.9 million; (ii) a portion of Sofedit's profits for fiscal year
1997 amounting to $1.0 million, consistent with the past dividend policy of
Sofedit, to be paid to the former stockholders of Sofedit; (iii) 270,000 shares
of Series B Preferred Stock of the Company, par value $0.01, stated value of
$100; and (iv) shares of Common Stock of the Company. Immediately after
the Combination, the former stockholders of Sofedit owned approximately 75% of
the Common Stock of the Company on a fully diluted basis (prior to the
conversion of the Preferred Stock of the Company). The Stock Purchase Agreement
has been filed as an exhibit to the Registration Statement that includes this
prospectus.
STOCKHOLDERS' AGREEMENT
In connection with the Combination, the Company and the current
stockholders of the Company entered into a stockholders' agreement dated as of
April 9, 1998 (the "Stockholders' Agreement"). The Stockholders' Agreement will
automatically terminate upon the consummation of the Offering. The Stockholders'
Agreement has been filed as an exhibit to the Registration Statement that
includes this Prospectus.
REGISTRATION RIGHTS AGREEMENT
On April 9, 1998, the Company and its stockholders entered into a
registration rights agreement (the "Registration Rights Agreement"). The
Registration Rights Agreement has been filed as an exhibit to the Registration
Statement that includes this Prospectus.
Subject to certain agreements with the Underwriters and except as described
below, ninety-one days after the closing of the Offering, the current
stockholders of the Company will have the right, exercisable in one or more
times, to require the Company to file one or more registration statements with
the U.S. Securities and Exchange Commission registering all or a portion of the
shares of Common Stock held by them, as well as shares of Common Stock that are
issuable upon conversion or exchange of shares of Preferred Stock, options, or
any other securities giving rights to receive Common Stock of the Company.
However, prior to the date that is one year and 91 days after the closing of the
Offering, certain former institutional stockholders of Sofedit,
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<PAGE> 69
which collectively own shares of the fully diluted Common Stock of the
Company, are not entitled to request registration of more than 35% of the
registrable securities held by them a group as of April 14, 1998; prior to the
date that is two years and 91 days after the closing of the Offering, these
former institutional stockholders of Sofedit are not entitled to request
registration with respect to more than 70% of the registrable securities held by
them as a group on April 14, 1998. Notwithstanding the foregoing, such former
institutional stockholders of Sofedit may request inclusion in any registration
demanded by stockholders affiliated to Citicorp Venture Capital, Ltd. or former
stockholders of Sofedit that are not institutional stockholders.
In addition to the demand registration rights described above, the
Registration Rights Agreement confers piggyback registration rights to the
stockholders of the parties thereto.
The Company has agreed to pay certain expenses relating to any registration
of shares effected pursuant to the Registration Rights Agreement and to
indemnify the former stockholders of Sofedit against certain liabilities in
connection with any such registration.
REPURCHASE BY THE COMPANY OF THE SHARES OF COMMON STOCK AND PREFERRED STOCK HELD
BY AETNA HOLDINGS
On August , 1998, the Company repurchased shares of Common
Stock and 220,704 shares of Preferred Stock held by Aetna Holdings, at the par
value ($.01 per share) for the shares of Common Stock and at the stated value
($100 per share) for the shares of Preferred Stock. The Company intends to keep
these shares in treasury and to reissue these shares upon exercise of options
under its stock option plans.
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<PAGE> 70
CERTAIN TRANSACTIONS
THE COMBINATION
In April 1998, in connection with the Combination, Messrs. Francis Barge
(Chairman and Chief Executive Officer of the Company and Sofedit), Felix
Domenech (Director and Executive Vice President of the Company and Sofedit) and
Jean-Rene Hergoualc'h (Director and Executive Vice President of the Company and
Sofedit) sold their equity interests in Sofedit to the Company, through CEFI
(Barge), YACESE S.A. (Domenech) and H.H.A.WAY S.A. and JRMH (Hergoualc'h), their
respective family-owned holding companies. As consideration, CEFI received
shares of Common Stock and 86,713 shares of Preferred Stock of the
Company and Mr. Francis Barge, Ms. Colette Barge and Mr. Jerome Barge, members
of Mr. Francis Barge's immediate family, received 11% Promissory Notes issued by
the Company in an aggregate amount of approximately $10.5 million. YACESE S.A.
received shares of Common Stock and 46,768 shares of Preferred Stock
of the Company, and Mr. Domenech, Ms. Josette Domenech, Mr. Sebastien Domenech
and Ms. Cecile Domenech, members of Mr. Felix Domenech's immediate family,
received 11% Promissory Notes issued by the Company in an aggregate amount of
approximately $5.6 million. H.H.A.WAY S.A. received shares of Common
Stock and 25,422 shares of Preferred Stock of the Company, and JRMH received 11%
Promissory Notes issued by the Company in an aggregate amount of approximately
$3.1 million . Furthermore, in connection with the Combination, the
Company assumed approximately $12.0 million of the debt of the controlling
shareholders of Sofedit and wholly-owned subsidiary of the Company after the
Combination. For information regarding the beneficial ownership of Common Stock
and Preferred Stock by Messrs. Barge, Domenech and Hergoualc'h, acquired as a
result of the Combination, see "Principal Stockholders".
In connection with the Combination, Tocqueville Europe L.P. and Bidassoa
Investissements S.A., two stockholders of the Company of which Mr. Jean-Philippe
Larramendy (Director of the Company) is a manager, sold their shares of Sofedit
to the Company. As consideration, Tocqueville Europe L.P. received 55,494 shares
of Common Stock and 4,995 shares of Preferred Stock of the Company, in addition
to an 11% Promissory Note issued by the Company in an amount of approximately $1
million. Bidassoa Investissements S.A. received shares of Common Stock
and 5,454 shares of Preferred Stock of the Company, in addition to an 11%
Promissory Note issued by the Company in an aggregate amount of approximately
$1.1 million. COGEPA S.A., a stockholder of the Company of which Mr. Gery
Edouard Lanthier (Director of the Company) is a manager, sold its shares of
Sofedit to the Company in connection with the Combination. As consideration
therefor, COGEPA S.A. received shares of Common Stock and 12,277
shares of Preferred Stock of the Company, in addition to 11% Promissory Notes
issued by the Company in an amount of approximately $2.4 million. For
information regarding the beneficial ownership of Common Stock and Preferred
Stock by Messrs. Larramendy and Lanthier acquired as a result of the
Combination, see "Principal Shareholders".
REPURCHASE OF SHARES HELD BY CERTAIN EMPLOYEES
In 1990, the founding stockholders of Sofedit sold 1,500 of their own
shares to three employees of Sofedit, who contributed these shares to SOFEDICI,
a French company formed for that purpose. Pursuant to the terms of an agreement
of December 12, 1990, Messrs. Barge, Domenech and Hergoualc'h agreed to cause
Sofedit to repurchase the employees' shares of Sofedit at a fair market value
upon exercise of an option to sell granted to the employees under such
agreement. In April 1998, pursuant to the Combination, these shares of Sofedit
were exchanged for shares of Common Stock and shares Preferred
Stock of the Company and 11% Promissory Notes issued by the Company in an amount
of approximately . In April 1998, following the Combination, the
employees exercised their option to sell the shares of Sofedit held by SOFEDICI
upon completion of the Offering. Sofedit made a payment to these employees in an
amount of $1.5 million, in advance of the contemplated purchase of SOFEDICI's
shares of Common Stock and Preferred Stock of the Company by Sofedit.
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<PAGE> 71
ISSUANCE OF JUNIOR NOTES AND UNFUNDED CONTRACTUAL OBLIGATIONS OF AETNA HOLDINGS
In connection with its recapitalization of August 1996, Aetna Holdings
purchased from the former stockholders of MS Acquisition approximately 61% of
their MS Acquisition stock in exchange for: (i) $11.1 million in cash; (ii) $8.7
million in principal amount of Junior Notes; (iii) $0.5 million in unfunded
contractual obligations of Aetna Holdings to certain former MS Acquisition
option holders; and (iv) $11.1 million cash. The former stockholders of MS
Acquisition retained: (i) $2.36 million in stated value of preferred stock; and
(ii) shares of MS Acquisition common stock representing 20.6% of the total
number of shares of MS Acquisition common stock then outstanding on a fully
diluted basis. Messrs. Ueli Spring, Harold Brown and Gary Easterly are the
beneficiaries of unfunded contractual obligations of Aetna Holdings amounting to
$0.2 million, $0.1 million and $0.1 million, respectively, as of August 13,
1998. The Company intends to cause the prepayment of these unfunded contractual
obligations by Aetna Holdings with the proceeds of the Offering. See "Use of
Proceeds".
TRANSFER OF CERTAIN SHARES OF PREFERRED STOCK
In connection with the Combination, former financial stockholders of
Sofedit agreed to transfer all of their shares of Series B Preferred
Stock, representing % of the total number of shares of Preferred Stock,
to CEFI, YACESE S.A. and H.H.A.WAY S.A. for no additional consideration, upon
the closing of an underwritten public offering of the Common Stock of the
Company for which the Price to Public implies an equity valuation of the Company
prior to the application of the proceeds of the Offering equal to or higher than
$250.0 million.
DEMAND LOAN TO UELI SPRING
Aetna has outstanding from Ueli Spring, President of Aetna, a demand loan
in the aggregate principal amount of $0.1 million, in addition to accumulated
interest. The loan bears interest at the prime rate plus 1.0%. As of June 30,
1998, the aggregate amount owed to Aetna by Mr. Spring in respect of the loan
was $0.1 million.
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DESCRIPTION OF CAPITAL STOCK
The following description of the capital stock of the Company is derived
from the Company's Amended and Restated Certificate of Incorporation (the
"Certificate of Incorporation") and the Amended and Restated By-Laws (the
"By-Laws"), which have been filed as exhibits to the Registration Statement that
includes this Prospectus, as well as from certain provisions of Delaware law.
The Company is authorized to issue shares of Common Stock, divided into two
classes consisting of shares of Common Stock, par value $.01 per share, and
shares of Non-Voting Common Stock, par value $.01 per share, convertible into
shares of Common Stock.
The Company has three series of voting common stock, two series of
nonvoting common stock convertible into voting common stock and two series of
preferred stock. Upon closing of the Offering, there will be one series of
(voting) Common Stock and one series of Non-Voting Common Stock convertible into
Common Stock on a one-for-one basis. The currently outstanding shares of each of
the three series of voting common stock will be automatically converted into
shares of the sole series of Common Stock, the shares of each of the two series
of Non-Voting Common Stock will be automatically converted into shares of a
single series of Non-Voting Common Stock and the two series of Preferred Stock
will be converted into Common Stock.
As of June 30, 1998, shares of Common Stock were outstanding and
held of record by 52 stockholders and no shares of Non-Voting Common Stock were
outstanding. In addition, shares of voting Common Stock were reserved
to be issued pursuant to the Stock Option Plan.
COMMON STOCK
Holders of Common Stock are entitled to one vote for each share held of
record on all matters submitted to a vote of the stockholders and do not have
cumulative voting rights. Holders of Common Stock do not currently have
preemptive rights pursuant to the Certificate of Incorporation and By-Laws.
Holders of Common Stock are entitled to receive ratably such dividends, if any,
as may be declared from time to time by the Company's Board of Directors out of
legally available funds therefor; provided, however, that, if dividends are
payable in shares of Common Stock or Non-Voting Common Stock, dividends must be
declared and payable at the same rate on each class of Common Stock. All
outstanding shares of Common Stock are fully-paid and non-assessable. Shares of
Common Stock are convertible at any time at the election of the holder thereof
into shares of Non-Voting Common Stock on a one-for-one basis, but only to the
extent that such record holder of Common Stock has determined that it (or any of
its affiliates of any other than the Company) might be subject to a legal
requirement making it illegal or unduly burdensome for it to continue to own or
control shares of Common Stock.
Upon liquidation, dissolution or winding up of the Company, holders of
Common Stock, together with holders of Non-Voting Common Stock, if any, are
entitled to a pro rata share of the distribution of assets remaining after the
payment of debts and expenses and after payment of the liquidation preference
accorded to the holders of any Preferred Stock of the Company. Each share of
Common Stock has the same rights, privileges and preferences as every other
share of Common Stock.
NON-VOTING COMMON STOCK
Holders of shares of Non-Voting Common Stock may elect at any time to
convert any and all of such shares into Common Stock, on a share-for-share
basis, to the extent the holder thereof is permitted pursuant to applicable law
to hold the total number of shares of voting securities such holder would hold
after giving effect to such conversion.
PREFERRED STOCK
Immediately after the determination of the Price to Public, all outstanding
shares of Preferred Stock will be converted into Common Stock, after which no
shares of Preferred Stock will be issued or outstanding. The Company has no plan
to issue any new Preferred Stock.
71
<PAGE> 73
Existing Convertible Preferred Stock. As of June 30, 1998, the Company had
135,096 shares of Series A Preferred Stock and 270,000 shares of Series B
Preferred Stock issued and outstanding. All of these shares of Preferred Stock
will be converted into Common Stock concurrent with the determination of the
Price to the Public of the Offering. The number of shares of Common Stock into
which each share of Preferred Stock is convertible is determined by dividing:
(i) the sum of (x) $100, plus (y) all accrued but unpaid dividends thereon
through the date of conversion, by (ii) the Price to Public.
Authority to Issue New Preferred Stock. The Board of Directors has the
authority to issue, in one or more series, 2,000,000 shares of new Preferred
Stock, par value $.01, having voting powers, full or limited, or no voting
powers, and such designations, preferences and relative participating, optional
or other special rights, as shall be stated and expressed by the Board of
Directors.
DIVIDENDS
The holders of the Company's Common Stock and Non-Voting Common Stock are
entitled to share ratably in dividends declared by the Board of Directors of the
Company out of funds legally available therefor. The Company's ability to pay
dividends is dependent on the ability of the Company's subsidiaries to pay
dividends to the Company. The ability of the Company's subsidiaries to pay
dividends and make other payments are subject to certain statutory, contractual
and other restrictions. The terms of various of the Company's indebtedness
restrict the payment of dividends by the Company. The Company does not expect to
declare or pay cash dividends to holders of its Common Stock or Non-Voting
Common Stock in the future. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Liquidity and Capital
Resources".
DELAWARE ANTI-TAKEOVER LAW
Section 203 of the Delaware General Corporate Law ("DGCL") provides, with
certain exceptions, that a Delaware corporation may not engage in certain
business combinations with a person or affiliate or associate of such person who
is an "interested stockholder" for a period of three years from the date such
person became an interested stockholder unless: (i) the Combination resulting in
the acquiring person's becoming an interested stockholder, or the business
combination, is approved by the board of directors of the corporation before the
person becomes an interested stockholder; (ii) the interested stockholder owned
at least 85% of the voting stock of the corporation outstanding at the time the
Combination commenced, excluding for purposes of determining the number of
shares outstanding those shares owned (a) by persons who are directors and also
officers; and (b) employee stock plans in which employee participants do not
have the right to determine confidentially whether shares held subject to the
plan will be tendered in a tender or exchange offer; or (iii) on or after the
date the person becomes an interested stockholder, the business combination is
approved by the corporation's board of directors and by the holders of at least
66 2/3% of the corporation's outstanding voting stock at an annual or special
meeting, excluding shares owned by the interested stockholders. An "interested
stockholder" is defined as a person that is (x) the owner of 15% or more of the
outstanding voting stock of the corporation; or (y) an affiliate or associate of
the corporation and was the owner of 15% or more of the outstanding voting stock
at any time within the three-year period immediately prior to the date on which
it is sought to be determined whether such person is an interested stockholder.
LIMITATION OF LIABILITY AND INDEMNIFICATION
To the fullest extent permitted by the DGCL, as amended, the Company's
Restated Certificate of Incorporation and By-Laws provide that directors and
officers of the Company shall not be personally liable to the Company or its
stockholders for monetary damages for breach of fiduciary duty as a director or
officer.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the Common Stock is .
72
<PAGE> 74
SHARES ELIGIBLE FOR FUTURE SALE
Prior to this Offering, there has been no public market for the Common
Stock. No predictions can be made with respect to the effect, if any, that
public sales of shares of the Common Stock or the availability of shares for
registered sale will have on the market price of the Common Stock after this
Offering. Sale of substantial amounts of the Common Stock in the public market
following this Offering, or the perception that such sales may occur, could
adversely affect the market price of the Common Stock, or the ability of the
Company to raise capital through a sale of its equity securities.
Upon completion of the Offering, shares of the Company's Common
Stock and no shares of Preferred Stock of the Company will be outstanding. The
Company is currently planning the introduction of the "1998 Equity Incentive
Plan" for its executive officers, directors, employees and other key persons.
The Company expects the 1998 Equity Incentive Plan to be in place prior to
completion of the Offering. The shares of Common Stock sold in this
Offering ( shares if the Underwriters' Over-Allotment Option is exercised
in full) will be freely transferable without restriction or further registration
under the Securities Act, unless acquired by an "affiliate" of the Company (an
"affiliate" is defined in Rule 144 promulgated by the U.S. Securities and
Exchange Commission under the Securities Act ("Rule 144"), generally as a person
who by equity ownership or otherwise, controls, is controlled by, or is under
control with the Company). The remaining outstanding shares of Common Stock of
the Company will be "restricted securities" as defined in Rule 144 and may not
be sold unless registered under the Securities Act or sold in accordance with an
applicable exemption therefrom, such as Rule 144.
In general, Rule 144 permits an affiliate or a person who has held
restricted shares for more than one year to sell within any three-month period a
number of shares that does not exceed the greater of 1% of the then outstanding
shares of Common Stock or the average weekly trading volume of such stock during
the four calendar weeks preceding such sale; provided that the Company has
either filed certain periodic reports with the Commission or made publicly
available certain information concerning itself, and; provided further sales are
made in normal "brokers' transactions" or in transactions directly with a
"market maker" without the solicitation of buy orders by the brokers or such
affiliates. A person who is deemed not to be an affiliate of the Company at any
time during the three months preceding a sale and who has held restricted shares
for more than two years may sell such shares under Rule 144 without regard to
the volume or manner of sale limitations or information requirements described
above. Of the outstanding shares of Common Stock not being sold in this
Offering, shares have been owned by the holders thereof for more than
two years.
The Common Stock has been approved for listing on the New York Stock
Exchange, subject to official notice of issuance, under the symbol " ".
Sales of substantial amounts of Common Stock in the public market under Rule 144
could have a depressing effect on the price of the Common Stock. See "Principal
Stockholders -- Registration Rights Agreement" and "Underwriting".
73
<PAGE> 75
UNDERWRITING
Under the terms and subject to the conditions contained in an Underwriting
Agreement dated , 1998 (the "Underwriting Agreement"), the underwriters
named below (the "Underwriters"), for whom Credit Suisse First Boston
Corporation and Bear, Stearns & Co. Inc. are acting as representatives
(together, the "Representatives"), have severally, but not jointly, agreed to
purchase from the Company the following respective numbers of shares of Common
Stock:
<TABLE>
<CAPTION>
NUMBER OF SHARES
OF COMMON
UNDERWRITER STOCK
----------- ----------------
<S> <C>
Credit Suisse First Boston Corporation......................
Bear, Stearns & Co. Inc.....................................
Total.....................................................
=======
</TABLE>
The Underwriting Agreement provides that the obligations of the
Underwriters are subject to certain conditions precedent and that the
Underwriters will be obligated to purchase all of the shares of Common Stock
offered hereby (other than those shares of Common Stock covered by the
over-allotment option described below if any are purchased). The Underwriting
Agreement provides that, in the event of a default by an Underwriter, in certain
circumstances the purchase commitments of the non-defaulting Underwriters may be
increased or the Underwriting Agreement may be terminated.
The Company has granted the Underwriters an option, expiring at the close
of business on the 30th day after the date of this Prospectus, to purchase up to
additional Common Stock at the initial public offering price, less the
underwriting discounts and commissions, all as set forth on the cover page of
this Prospectus. Such option may be exercised only to cover over-allotments in
the sale of shares of Common Stock. To the extent that such option is exercised,
each Underwriter will become obligated, subject to certain conditions, to
purchase approximately the same percentage of such additional shares of Common
Stock as it was obligated to purchase pursuant to the Underwriting Agreement.
The Company has been advised by the Representatives that the Underwriters
propose to offer the shares of Common Stock to the public initially at the
public offering price set forth on the cover page of this Prospectus and,
through the Representatives, to certain dealers at such price less a concession
of $ per share of Common Stock, and the Underwriters and such dealers
may allow a discount of $ per share of Common Stock on sales to certain
other dealers. After the Offering, the Price to Public and concession and
discount to dealers may be changed by the Representatives.
[The Company and certain of its executive officers, directors and
stockholders have agreed that it will not offer, sell, contract to sell,
announce its intention to sell, pledge or otherwise dispose of, directly or
indirectly, or file with the Securities and Exchange Commission a registration
statement under the Securities Act of 1933 (the "Securities Act") relating to,
any additional shares of its Common Stock or securities convertible into or
exchangeable or exercisable for any shares of Common Stock of the Company,
without the prior written consent of the Representative for a period of 180 days
after the date of this Prospectus except issuances of Common Stock pursuant to
the exercise of warrants or options, in each case outstanding on the date of
this Prospectus, grants of employee stock options pursuant to the terms of a
plan in effect on the date of this Prospectus and issuance of Common Stock
pursuant to the exercise of such options.] Application will be made to list the
shares of Common Stock on the New York Stock Exchange.
The Company has agreed to indemnify the Underwriters against certain
liabilities, including civil liabilities under the Securities Act, or contribute
to payments which the Underwriters may be required to make in respect thereof.
In addition, the Company will agree to pay the Underwriters as
reimbursement for certain of their expenses.
74
<PAGE> 76
Prior to the Offering, there has been no public market for the shares of
Common Stock of the Company. Consequently, the initial public offering price for
the shares of Common Stock offered hereby will be determined by negotiation
between the Company and the Representatives. Among the factors to be considered
in making such determination will be the market conditions for initial public
offerings, the earnings and certain other financial and operating information of
the Company in recent periods, the market capitalizations and stages of
development of other companies which the Company and the Representatives believe
to be comparable to the Company, estimates of the business potential of the
Company, the present state of the Company's development and other factors deemed
relevant. There can be no assurance that the Price to Public price corresponds
to the price at which the shares of Common Stock offered hereby will trade in
the public market subsequent to the Offering or that an active market for such
shares will develop and continue after the Offering.
The Representatives, on behalf of the Underwriters, may engage in
over-allotment, stabilizing transactions, syndicate covering transactions,
penalty bids and "passive" market making in accordance with Regulation M under
the Securities Exchange Act of 1934 (the "Exchange Act"). Over-allotment
involves syndicate sales in excess of the offering size, which creates a
syndicate short position. Stabilizing transactions permit bids to purchase the
underlying security so long as the stabilizing bids do not exceed a specified
maximum. Syndicate covering transactions involve purchase of the shares of
Common Stock in the open market after the distribution has been completed in
order to cover syndicate short positions. Penalty bids permit the
Representatives to reclaim a selling concession from a syndicate member when the
shares of Common Stock originally sold by such syndicate members are purchased
in a syndicate covering transaction to cover syndicate short positions. In
"passive" market making, market makers in the shares of Common Stock who are
Underwriters or prospective underwriters may, subject to certain limitations,
make bids for or purchases of the Common Stock until the time, if any, at which
a stabilizing bid is made. Such stabilizing transactions, syndicate covering
transactions and penalty bids may cause the price of the shares of Common Stock
to be higher than it would otherwise be in the absence of such transactions.
These transactions may be effected on the New York Stock Exchange or otherwise
and, if commenced, may be discounted at any time.
[It is expected that delivery of the shares of Common Stock offered hereby
will be made against payment therefor on or about that date specified in the
last paragraph of the cover page of this Prospectus, which will be the third
business day following the date of pricing of the Common Stock] [hereof]. Under
Rule 15C 6-1 of the U.S. Securities and Exchange Commission under the Exchange
Act, trades in the secondary market generally are required to settle in three
business days, unless the parties to any such trade expressly agree otherwise.
Accordingly, purchasers who wish to trade the Common Stock on the date of
pricing or the next succeeding business day[s] will be required, by
virtue of the fact that the Common Stock initially will settle in T+3 to specify
an alternate settlement cycle at the time of any such trade to prevent a failed
settlement. Purchasers of Common Stock who wish to trade the Common Stock on the
date of pricing or the next succeeding business day[s] should consult
their own advisor.
75
<PAGE> 77
LEGAL MATTERS
Certain legal matters regarding the issuance of the Common Stock offered
hereby have been passed upon for the Company by Shearman & Sterling. The
validity of the Common Stock will be passed upon for the Underwriters by
Sullivan & Cromwell.
EXPERTS
The audited financial statements included in this Prospectus and elsewhere
in the Registration Statement, to the extent and for the periods indicated in
their reports, have been audited by Barbier Frinault & Autres (a member firm of
Arthur Andersen), independent public accountants, and PricewaterhouseCoopers
LLP, independent accountants, as indicated in their reports with respect
thereto, and are included herein in reliance upon the authority of said firms as
experts in accounting and auditing.
AVAILABLE INFORMATION
The Company has filed with the U.S. Securities and Exchange Commission a
Registration Statement (the "Registration Statement", which term shall include
any amendments thereto) on Form S-1 under the Securities Act, with respect to
the Common Stock offered hereby. This Prospectus does not contain all the
information set forth in the Registration Statement and the exhibits and
schedules thereto, certain parts of which are omitted in accordance with the
rules and regulations of the Commission and to which reference is hereby made.
Summaries included in this Prospectus of any documents filed as an exhibit to
the Registration Statement describe all material provisions of such documents
but are not necessarily complete. With respect to each such document filed as an
exhibit to the Registration Statement, reference is made to the exhibit for a
more complete description of the matter involved and such statement shall be
deemed qualified in its entirety by such reference. The Registration Statement
may be inspected and copied at the public reference facilities maintained by the
Commission referred to below.
The Company is subject to the informational requirements of the Exchange
Act, and, in accordance therewith, files reports, proxy statements and other
information with the Commission. Such reports, proxy statements and information
filed by the Company with the Commission pursuant to the informational
requirements of the Exchange Act may be inspected and copies are available at
the public reference facilities maintained by the Commission at Room 1024,
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the
Commission's regional offices located at Seven World Trade Center, 13th Floor,
New York, New York 10048 and Citicorp Center, 500 West Madison Street, Suite
1400, Chicago, Illinois 60661. Copies of such material may be obtained at
prescribed rates by writing the Commission, Public Reference Section, 450th
Fifth Street, N.W., Washington, D.C. 20549. Such material may also be accessed
electronically by means of the Commission's home page on the Internet at
hhtp://www.sec.gov. Any reports, proxy statements and other information filed
with the Commission prior to February 10, 1997 can be inspected at the offices
of the National Association of Securities Dealers, Inc., 1735 K Street, N.W.,
Washington, D.C., 20006. Reports, proxy statements and other information filed
with the Commission after such date are available for inspection at the offices
of the New York Stock Exchange, 20 Broad Street, New York, New York 10005.
76
<PAGE> 78
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
THE COMPANY AND ITS CONSOLIDATED SUBSIDIARIES, INCLUDING
SOFEDIT AS PREDECESSOR
Report of Independent Accountants for the periods ended
December 31, 1995, 1996 and 1997....................... F-2
Limited Review Report for the six month periods ended June
30, 1997 and 1998...................................... F-3
Consolidated Income Statements for the years ended
December 31, 1995, 1996, and 1997 and for the six month
periods ended June 30, 1997 and 1998................... F-4
Consolidated Balance Sheets as of December 31, 1996 and
1997 and as of June 30, 1998........................... F-5
Consolidated Statement of Cash Flows for the years ended
December 31, 1995, 1996 and 1997 and for the six month
periods ended June 30, 1997 and 1998................... F-6
Consolidated Statement of Changes in Shareholders' Equity
for the years ended December 31, 1995, 1996 and 1997
and for the six month periods ended June 30, 1998...... F-8
Notes to Consolidated Financial Statements................ F-9
MS ACQUISITION CORP. AND ITS CONSOLIDATED SUBSIDIARIES
Report of Independent Accountants for the periods ended
December 31, 1995, December 28, 1996 and December 29,
1997................................................... F-28
Consolidated Balance Sheets as of December 28, 1996 and
December 29, 1997...................................... F-29
Consolidated Statement of Operations for the years ended
December 31, 1995, December 28, 1996 and December 29,
1997................................................... F-30
Consolidated Statement of Cash Flows for the years ended
December 31, 1995, December 28, 1996 and December 29,
1997................................................... F-31
Notes to Consolidated Financial Statements................ F-32
Consolidated Unaudited Balance Sheet as of December 28,
1997 and March 31, 1998................................ F-41
Consolidated Unaudited Statement of Operations for the
three month periods ended March 30, 1997 and March 29,
1998................................................... F-42
Consolidated Unaudited Statement of Cash Flows for the
three month periods ended March 30, 1997 and March 29,
1998................................................... F-43
Notes to Consolidated Financial Statements................ F-44
</TABLE>
F-1
<PAGE> 79
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and the Board of Directors of SOFEDIT SA:
We have audited the accompanying consolidated balance sheets of SOFEDIT SA
and subsidiaries (the Company) as of December 31, 1996 and 1997, and the related
consolidated statements of income, cash flows and changes in shareholders'
equity for each of the three years in the period ended December 31, 1997, all
expressed in U.S. dollars. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of SOFEDIT SA
and its subsidiaries as of December 31, 1996 and 1997, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1997, in conformity with generally accepted accounting principles
in the United States of America.
Barbier Frinault & Autres
Arthur Andersen
/s/ PHILIPPE TAUPIN
- ------------------------------
Philippe Taupin
June 15, 1998
F-2
<PAGE> 80
LIMITED REVIEW REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and the Board of Directors of MS Acquisition:
We have reviewed the accompanying consolidated balance sheet of MS
Acquisition as of June 30, 1998 and the related statements of income and cash
flows for the six-month periods ended June 30, 1998 and June 30, 1997. These
financial statements reflect the operations of SOFEDIT up until April 1, 1998
and the combined operations of SOFEDIT and MS Acquisition after that date as
defined in Note 1 of the Notes to the financial statements. These financial
statements are the responsibility of the Company's management.
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures to
financial data and making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an audit conducted in
accordance with generally accepted auditing standards, the objective of which is
the expression of an opinion regarding the financial statements taken as a
whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that
should be made to the financial statements referred to above for them to be in
conformity with generally accepted accounting principles in the United States.
Barbier Frinault & Autres
Arthur Andersen
/s/ PHILIPPE TAUPIN
- ------------------------------
Philippe Taupin
July 30, 1998
F-3
<PAGE> 81
THE COMPANY AND ITS SUBSIDIARIES
CONSOLIDATED INCOME STATEMENTS
<TABLE>
<CAPTION>
SOFEDIT THE COMPANY(A)
------------------------------------------------------- ----------------
YEAR ENDED DECEMBER 31,
---------------------------------- SIX MONTHS ENDED SIX MONTHS ENDED
NOTE 1995 1996 1997 JUNE 30, 1997 JUNE 30, 1998
---- -------- -------- -------- ---------------- ----------------
(UNAUDITED) (UNAUDITED)
(IN THOUSANDS OF U.S. DOLLARS EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
Net sales................ (23) 464,868 484,712 487,898 255,608 322,251
Cost of sales............ (397,254) (424,617) (429,414) (220,941) (285,951)
Selling, general & admin.
expenses............... (28,402) (29,234) (26,110) (14,004) (18,168)
Research & development
expenses............... (4,364) (7,602) (7,413) (4,042) (4,234)
Other expense, net....... (5) (2,084) 618 (6,097) (2,108) (1,560)
Operating income......... 32,764 23,877 18,864 14,513 12,338
Interest expense, net.... (4) (15,385) (12,871) (9,683) (5,415) (8,982)
-------- -------- -------- -------- --------
Pre-tax income........... 17,379 11,006 9,181 9,098 3,356
Income tax............... (6) (1,533) 326 (1,981) (2,593) (1,428)
-------- -------- -------- -------- --------
Income before share in
net income of equity
investees and minority
interests.............. 15,846 11,332 7,200 6,505 1,928
Share in net income of
equity investees....... 244 56 14 (12) 0
-------- -------- -------- -------- --------
Income before minority
interests.............. 16,090 11,388 7,214 6,493 1,928
Minority interests....... 126 27 0 (167) 0
-------- -------- -------- -------- --------
Net income before
discontinued
operations............. (7) 15,964 11,361 7,214 6,660 1,928
-------- -------- -------- -------- --------
Discontinued
operations............. (3,143) (3,968) (2,485) (1,374) (1,490)
Net income............... 12,821 7,393 4,729 5,286 438
======== ======== ======== ======== ========
Earnings per share:
before discontinued
operations............. 3.99 2.84 1.80 1.67 0.48
after discontinued
operations............. 3.21 1.85 1.18 1.32 0.11
</TABLE>
- ---------------
(a) The unaudited historical statement of operations data of the Company for the
six months ended June 30, 1998 represent the historical results of SOFEDIT,
as predecessor, and, from April 1, 1998, the effective date of the
Combination for accounting purposes, the consolidated results of MS
Acquisition and SOFEDIT.
The accompanying notes are an integral part of these Consolidated Financial
Statements.
F-4
<PAGE> 82
THE COMPANY AND ITS SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
SOFEDIT THE COMPANY(A)
------------------- ----------------
DECEMBER 31,
------------------- SIX MONTHS ENDED
NOTE 1996 1997 JUNE 30, 1998
---- -------- -------- ----------------
(UNAUDITED)
(IN THOUSANDS OF U.S. DOLLARS EXCEPT PER
SHARE DATA)
<S> <C> <C> <C> <C>
ASSETS
Cash and marketable securities...................... (8) 11,336 11,626 22,925
Trade receivables, net (b).......................... (9) 136,038 115,823 152,366
Other accounts receivables, net..................... (10) 35,945 27,916 36,281
Inventories and contracts in process, net........... (11) 67,462 64,013 66,020
Tooling............................................. -- -- 30,655
Deferred taxes...................................... (6) 11,418 8,910 7,268
-------- -------- --------
Total current assets................................ 262,199 228,288 315,515
Property, plant and equipment, net.................. (12) 135,621 122,028 183,012
Intangible assets, net.............................. 595 878 7,059
Goodwill, net....................................... (13) 7,876 6,166 65,795
Share in net assets of equity investments........... (14) 1,758 291 274
Other non-current assets, net....................... (15) 474 4,261 4,264
-------- -------- --------
Total other assets.................................. 10,703 11,596 77,392
-------- -------- --------
Total Assets........................................ 408,523 361,912 575,919
======== ======== ========
SHAREHOLDERS' EQUITY, PREFERRED STOCK AND
LIABILITIES
Short-term portion of financial debt and short-term
debt.............................................. (16) 45,756 43,778 55,537
Trade payables...................................... 125,964 109,876 154,793
Customers' deposits and advances.................... 18,838 8,448 7,614
Deferred taxes...................................... (6) 3,331 4,882 15,729
Other payables and accrued expenses................. (17) 49,296 52,849 78,873
-------- -------- --------
Total current liabilities........................... 243,185 219,833 312,546
Long-term portion of financial debt................. (16) 94,348 71,416 222,422
Accrued pension and retirement benefits............. (18) 4,049 3,476 3,653
Provisions for risks and charges.................... (19) 4,020 1,898 1,469
-------- -------- --------
Total long-term liabilities......................... 102,417 76,790 227,544
Preferred Stock (Series A, par value $.01; stated
value $100; authorized 363,128; issued 344,443;
outstanding 135,096. Series B, par value $.01;
stated value $100; issued and outstanding
270,000).......................................... (20) 0 0 41,059
Minority interests.................................. (21) 490 0 0
Capital stock: ($.01 nominal value; authorized
12,000,000; issued 5,294,489; outstanding
3,899,999)........................................ 39 39 39
Additional paid-in capital.......................... 33,913 41,654 39,601
Retained earnings................................... 25,710 28,138 -39,805
Cumulative translation adjustments.................. 2,769 -4,542 -5,065
-------- -------- --------
Shareholders' equity................................ (22) 62,431 65,289 -5,230
-------- -------- --------
Total liabilities, preferred stock and shareholders'
equity............................................ 408,523 361,912 575,919
======== ======== ========
Commitments and contingencies (See Note 24)
</TABLE>
- ---------------
(a) The unaudited historical statement of operations data of the Company for the
six months ended June 30, 1998 represent the historical results of SOFEDIT,
as predecessor, and, from April 1, 1998, the effective date of the
Combination for accounting purposes, the consolidated results of MS
Acquisition and SOFEDIT.
<TABLE>
<S> <C> <C> <C> <C>
(b) Allowances deducted from trade receivables...... (1,186) (1,293) (1,797)
</TABLE>
The accompanying notes are an integral part of these Consolidated Financial
Statements.
F-5
<PAGE> 83
THE COMPANY AND ITS SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
SOFEDIT THE COMPANY(A)
---------------------------------------------- ----------------
YEAR ENDED DECEMBER 31,
--------------------------- SIX MONTHS ENDED SIX MONTHS ENDED
1995 1996 1997 JUNE 30, 1997 JUNE 30, 1998
------- ------- ------- ---------------- ----------------
(UNAUDITED) (UNAUDITED)
(IN THOUSANDS OF U.S. DOLLARS)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income........................... 12,821 7,393 4,729 5,286 438
(Of which share of net income in
equity investees).................. (244) (56) (14) (12) 0
Non cash items
Amortization......................... 26,592 24,857 27,509 14,927 15,844
(Decrease) increase in other
provisions, net.................... (617) (901) (2,101) 1,300 (45)
Other................................ (22) (1,365) 298 64 0
Changes in operating working capital
(b)................................ (3,480) (16,205) 6,331 (2,158) 15,027
------- ------- ------- ------- -------
NET CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES............... 35,050 13,723 36,752 19,407 31,264
------- ------- ------- ------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to intangible assets....... (444) (224) (1,959) (260) (1,069)
Additions to property, plant and
equipment.......................... (28,594) (33,241) (15,056) (7,877) (18,864)
Proceeds from disposal of intangible
& tangible assets.................. 5,177 13,910 809 1,851 2,224
Additions to other assets............ (527) (144) (4,146) (4,080) (45)
Disposal of other assets............. 2 155 (631) 112 25
Business acquired (net of cash
acquired).......................... (8,473)
------- ------- ------- ------- -------
NET CASH PROVIDED BY (USED IN)
INVESTING ACTIVITIES............... (32,859) (19,544) (20,983) (10,254) (17,729)
------- ------- ------- ------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of share capital............ 71 70 127 0 0
Dividends paid....................... (2,122) (2,515) (2,288) (2,349) (2,377)
Increase in financial long-term
debt............................... 25,606 29,279 19,950 5,818 4,508
Reimbursement of financial long-term
debt............................... (16,012) (37,080) (31,188) (13,772) (14,975)
Variation in financial short-term
debt............................... 608 4,109 80 3,050 10,603
------- ------- ------- ------- -------
NET CASH PROVIDED BY (USED IN)
FINANCING ACTIVITIES............... 8,151 (6,137) (13,319) (7,253) (2,241)
------- ------- ------- ------- -------
Net effect of exchange rate changes
and others......................... 2,024 (1,368) (2,160) (1,330) 5
------- ------- ------- ------- -------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS................... 12,366 (13,326) 290 570 11,299
</TABLE>
- ---------------
(a) The unaudited historical statement of operations data of the Company for the
six months ended June 30, 1998 represent the historical results of SOFEDIT,
as predecessor, and, from April 1, 1998, the effective date of the
Combination for accounting purposes, the consolidated results of MS
Acquisition and SOFEDIT.
The accompanying notes are an integral part of these Consolidated Financial
Statements.
F-6
<PAGE> 84
THE COMPANY AND ITS SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
SOFEDIT THE COMPANY(A)
---------------------------------------------- ----------------
YEAR ENDED DECEMBER 31,
--------------------------- SIX MONTHS ENDED SIX MONTHS ENDED
1995 1996 1997 JUNE 30, 1997 JUNE 30, 1998
------- ------- ------- ---------------- ----------------
(UNAUDITED) (UNAUDITED)
(IN THOUSANDS OF U.S. DOLLARS)
<S> <C> <C> <C> <C> <C>
Cash and cash equivalents at
beginning of year.................. 12,296 24,662 11,336 11,336 11,626
------- ------- ------- ------- -------
CASH AND CASH EQUIVALENTS AT END OF
YEAR............................... 24,662 11,336 11,626 11,906 22,925
======= ======= ======= ======= =======
Cash paid during the year for
interest........................... 16,011 14,195 10,232
------- ------- -------
Cash paid (received) during the year
for income taxes................... 22,205 9,241 (13,513)
------- ------- -------
</TABLE>
- ---------------
(a) The unaudited historical statement of operations data of the Company for the
six months ended June 30, 1998 represent the historical results of SOFEDIT,
as predecessor, and, from April 1, 1998, the effective date of the
Combination for accounting purposes, the consolidated results of MS
Acquisition and SOFEDIT.
<TABLE>
<S> <C> <C> <C> <C> <C>
(b) of which:
change in inventories................... (7,069) (18,033) (5,143) (6,218) (6,247)
change in trade receivable.............. (20,698) (39,022) 13,066 (24,894) 33,217
change in trade payable................. 9,557 37,100 (14) 19,666 (34,500)
change in others........................ 14,730 3,750 (1,578) 9,288 22,557
</TABLE>
The accompanying Notes are an integral part of these Consolidated Financial
Statements.
F-7
<PAGE> 85
THE COMPANY AND ITS SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
RETAINED
NUMBER OF EARNINGS CUMULATIVE
SHARES CAPITAL AND ADDITIONAL TRANSLATION SHAREHOLDERS'
OUTSTANDING STOCK PAID-IN CAPITAL ADJUSTMENT EQUITY
----------- ------- --------------- ----------- -------------
(IN THOUSANDS OF U.S. DOLLARS)
<S> <C> <C> <C> <C> <C>
BALANCE AT DECEMBER 31, 1994.......... 4,000,000 39 43,829 2,008 45,876
Capital increase...................... -- -- 71 -- 71
Translation adjustment................ -- -- -- 3,697 3,697
Net income............................ -- -- 12,821 -- 12,821
Minimum liability adjustment.......... -- -- 70 -- 70
Dividends paid........................ -- -- (2,122) -- (2,122)
Other................................. -- -- (29) -- (29)
-------- ------- ------- ------- -------
BALANCE AT DECEMBER 31, 1995.......... 4,000,000 39 54,640 5,705 60,384
Capital increase...................... -- -- 70 -- 70
Translation adjustment................ -- -- -- (2,936) (2,936)
Net income............................ -- -- 7,393 -- 7,393
Minimum liability adjustment.......... -- -- 65 -- 65
Dividends paid........................ -- -- (2,515) -- (2,515)
Other................................. -- -- (30) -- (30)
-------- ------- ------- ------- -------
BALANCE AT DECEMBER 31, 1996.......... 4,000,000 39 59,623 2,769 62,431
Capital increase...................... -- -- 7,741 -- 7,741
Translation adjustment................ -- -- -- (7,311) (7,311)
Net income............................ -- -- 4,729 -- 4,729
Dividends paid........................ -- -- (2,288) -- (2,288)
Other................................. -- -- (13) -- (13)
-------- ------- ------- ------- -------
BALANCE AT DECEMBER 31, 1997.......... 4,000,000 39 69,792 (4,542) 65,289
Translation adjustment................ -- -- -- (523) (523)
Net income............................ -- -- 438 -- 438
Dividends paid........................ -- -- (70,434) -- (70,434)
-------- ------- ------- ------- -------
BALANCE AT JUNE 30, 1998
(UNAUDITED)......................... 4,000,000 39 (204) (5,065) (5,230)
======== ======= ======= ======= =======
</TABLE>
The accompanying notes are an integral part of these Consolidated Financial
Statements.
F-8
<PAGE> 86
THE COMPANY AND ITS SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
ALL AMOUNTS IN THOUSANDS OF U.S. DOLLARS UNLESS OTHERWISE STATED
NOTE 1 -- DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION
The company ("the Company") is the new name of the group formed by the
combination of the activities of SOFEDIT and MS Acquisition Corp.
MS Acquisition Corp., through Aetna Industries Inc., its wholly-owned
subsidiary, is a leading direct supplier of high quality modules, welded
subassemblies and chassis parts used as original equipment components in the
North American automobile industry.
SOFEDIT S.A., a direct and indirect wholly owned subsidiary of the Company,
is a leading direct supplier of welded subassemblies, body in white parts,
clutch, break and accelerator pedal modules, fuel tanks and crossmembers and
chassis parts used as original equipment components by manufacturers in the
European automobile industry.
SOFEDIT was formed in 1989. Since its formation and until April 1998, a
majority of SOFEDIT's outstanding capital stock was directly or indirectly owned
by its founders. On April 14, 1998, a combination was completed between SOFEDIT
and MS Acquisition (the "Combination"). In the Combination, SOFEDIT's former
stockholders transferred the outstanding capital stock of SOFEDIT to MS
Acquisition in exchange for: (i) promissory notes of MS Acquisition in the
principal amount of approximately $41 million; (ii) dividends in an amount of
approximately $1 million; (iii) 270,000 shares of Series B Preferred Stock ($27
million stated value) of MS Acquisition; (iv) three million shares of Common
Stock of MS Acquisition representing 75% of the fully diluted outstanding Common
Stock; and (v) the assumption of approximately $12 million of debt of former
SOFEDIT stockholders.
For accounting purposes, the combination of SOFEDIT and MS Acquisition was
effective on April 1, 1998. The Combination has been accounted for as a reverse
acquisition as the former owners of SOFEDIT owned approximately 75% of the fully
diluted outstanding Common Stock of the Company immediately after the
combination. Accordingly, SOFEDIT is considered to be the acquiror of MS
Acquisition and predecessor to the Company for accounting purposes. As a
consequence, the historical financial statements prior to April 1, 1998 are
those of SOFEDIT.
The Combination was accounted for using the purchase method. Therefore, the
purchase price was allocated to the identifiable tangible and intangible assets
of the acquiree (MS Acquisition). The excess of the purchase price over the fair
market value of MS Acquisition amounted to $60,091 and has been recorded as
goodwill.
Historical consolidated financial statements of SOFEDIT have been prepared
in accordance with US GAAP and are included as the predecessor's financial
statements in the accompanying financial statements. The six-month period ended
June 30, 1998 for the Company reflects the operations of MS Acquisition from
April 1, 1998 and of SOFEDIT for the whole six month period.
The historical equity section of SOFEDIT financial statements has been
restated retroactively for each period presented to reflect the exchange ratio
used in the Combination and, accordingly, SOFEDIT's historical share capital has
been replaced by MS Acquisition share capital. Per share data has been restated
using MS Acquisition number of shares after the Combination.
The financial statements are stated in U.S. dollars.
Interim financial information
The accompanying unaudited financial statements do not include all the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of the
F-9
<PAGE> 87
THE COMPANY AND ITS SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
ALL AMOUNTS IN THOUSANDS OF U.S. DOLLARS UNLESS OTHERWISE STATED
Company, all adjustments, consisting of only normal, recurring adjustments,
necessary to present the financial position of the Company at June 30, 1998 and
the result of its operations and its cash flows for the six month period ended
June 30, 1998 have been included. Operating results for the interim periods are
not necessarily indicative of results that may be expected for the year ending
December 31, 1998.
NOTE 2 -- SUMMARY OF ACCOUNTING POLICIES
The consolidated financial statements of the Company are prepared in
accordance with generally accepted accounting principles in the United States of
America.
(a) Consolidation methods
Investments over which the Company has direct or indirect control of more
than 50% of the outstanding voting shares, or over which it exercises effective
control, are fully consolidated, except for some companies, not significant in
aggregate, that were not consolidated for practical reasons.
Investments in which the Company has an equity interest of 20% to 50% over
which the Company exercises significant influence but not control are accounted
for under the equity method.
Sales and results of operations of consolidated subsidiaries acquired or
disposed of during the year are recognized in the consolidated income statements
from the date of acquisition, or up until the date of disposal, respectively.
All significant intercompany transactions are eliminated.
A list of the Company's consolidated subsidiaries and investments and the
applicable method of consolidation is provided in Note 3.
(b) Use of estimates
The preparation of the consolidated financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of the revenues and expenses during the
reporting period. Management reviews its estimates on an ongoing basis using
currently available information. Changes in facts and circumstances may result
in revised estimates and actual results could differ from those estimates.
(c) Revenue recognition
Revenues from the sale of finished goods are recognized at delivery date.
Certain development costs are contractually financed by the customers through an
identified increase in the selling price of the corresponding finished products.
Those costs are capitalized in work in process and reversed to income based on
deliveries.
(d) Translation of financial statements denominated in foreign currencies
The functional currency of the Company's subsidiaries is the applicable
local currency. Assets and liabilities of foreign subsidiaries are translated
into U.S. dollars at the year-end rate of exchange, and their income statements
and cash flow statements are converted at the average rate of exchange of the
period. The resulting translation adjustment is included in shareholders' equity
as the "Cumulative translation adjustment."
F-10
<PAGE> 88
THE COMPANY AND ITS SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
ALL AMOUNTS IN THOUSANDS OF U.S. DOLLARS UNLESS OTHERWISE STATED
Historical data of SOFEDIT, which had been prepared in French francs, has
been translated into U.S. dollars using the same rules.
(e) Foreign currency transactions
Gains and losses relating to foreign currency transactions not denominated
in the functional currency are recorded in the consolidated income statements.
Foreign currency transactions are translated into local currency at the rate of
exchange applicable to the transaction. At year-end, foreign currency assets and
liabilities to be settled are translated into local currency at the rate of
exchange prevailing at that date.
(f) Financial instruments
The Company does not use any off-balance sheet financial instruments for
any purpose.
(g) Goodwill
Goodwill represents the excess of purchase price over the fair value of the
assets and liabilities acquired in a business combination. Initial estimates of
fair values are finalized within a one-year allocation period. Subsequent to
this period, reversals of unneeded provisions resulting from the purchase price
allocation and the use of acquired, unrecognized tax loss carryforwards are
applied to goodwill. Goodwill is amortized on the straight-line basis over its
estimated useful life, over a maximum 40 year period. Amortization periods of up
to 40 years reflect the nature of the Company's business and the resulting
long-term relationships with its customers.
Whenever events or changes in the market indicate a potential impairment of
intangible assets and property, plant and equipment, a detailed review is
carried out based on the projected operating performance of the related
businesses. Whenever such review indicates that there is impairment, the
carrying amount of such assets is reduced to their recoverable value.
(h) Property, plant and equipment
Property, plant and equipment are recorded at historical cost for the
Company, less any provision for impairment. Depreciation is computed using the
straight-line method over the following estimated useful lives:
<TABLE>
<CAPTION>
ESTIMATED USEFUL
LIFE IN YEARS
----------------
<S> <C>
Buildings................................................ 10-30
Machinery and equipment.................................. 5-15
Tools, furniture and fixtures and other.................. 3-10
</TABLE>
(i) Other investments
Investments are recorded at the lower of historical cost or net realizable
value, assessed on an individual investment basis. For long-term investments,
the net realizable value is calculated using the following parameters: equity
value, profitability and expected cash flows from the investment.
F-11
<PAGE> 89
THE COMPANY AND ITS SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
ALL AMOUNTS IN THOUSANDS OF U.S. DOLLARS UNLESS OTHERWISE STATED
(j) Inventories
Raw materials and supplies, industrial work in progress, and finished
products are stated at the lower of cost, using the weighted average cost method
(which approximates FIFO) or market value. Inventory costs include direct costs
and applicable manufacturing overheads.
(k) Short-term investments, cash and cash equivalents
Marketable securities included in short-term investments and cash and cash
equivalents are classified as available for sale and recorded at fair market
value. Any changes in fair market value are accounted for through "Other
comprehensive income" in retained earnings.
Cash and cash equivalents consist of cash and liquid investments with an
initial maturity of less than three months.
(l) Deferred taxation
Deferred taxes are calculated for each taxable entity for temporary
differences arising between tax and financial reporting. A deferred tax
liability is recognized for taxes payable in each future year. Deferred tax
assets are recorded up to their expected recoverable amount. Deferred tax
amounts are adjusted for changes in the applicable tax rate upon enactment.
Deferred tax liabilities include non-recoverable withholding taxes payable
on the portion of the current year earnings of consolidated subsidiaries or
equity investees expected to be remitted to the parent company. No provision is
made for income taxes on accumulated earnings of consolidated subsidiaries or
equity method investees for which no distribution is planned.
(m) Research and development and preproduction costs
Research and development and preproduction costs are expensed as incurred.
(n) Employee benefits
The estimated cost of providing benefits to employees is accrued during the
years in which the employees render services.
For defined contribution plans and multi-employer pension plans, expenses
are recorded as incurred. For defined benefit indemnities, retirement plans, and
post-retirement benefit plans, liabilities and prepaid expenses are accrued over
the estimated term of service of the employee using actuarial methods.
Differences caused by actuarial gains or losses arising from changes in
actuarial assumptions are amortized over the residual working life of the
employees.
(o) Restructuring
Restructuring costs are accrued when management determines the need to
close facilities, or to reduce or relocate the workforce and when the decision
is communicated to the employees. Such costs may include estimated facility
closing costs, reductions in the useful lives of assets, and employees'
severance and termination benefits.
F-12
<PAGE> 90
THE COMPANY AND ITS SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
ALL AMOUNTS IN THOUSANDS OF U.S. DOLLARS UNLESS OTHERWISE STATED
NOTE 3 -- CONSOLIDATED SUBSIDIARIES AND INVESTMENTS
<TABLE>
<CAPTION>
COMPANY COUNTRY OWNERSHIP %
------- ------- -----------
<S> <C> <C>
M.S. ACQUISITION CORP...................................... United States
SOFEDIT S.A................................................ France 100%
AUBECQ S.A................................................. France 100%
BONIN S.A.................................................. France 100%
BDHI S.A................................................... France 100%
SERTE EURL................................................. France 100%
CABRIT S.A................................................. France 100%
CIBA S.A................................................... France 100%
LEBRANCHU PROTOTYPES S.A................................... France 100%
C.L.A. S.A................................................. France 100%
C.T.A.A. S.A............................................... France 100%
LAPRADE S.A................................................ France 100%
LEBRANCHU LE THEIL S.A..................................... France 100%
SAUFEDIT ASSURANCES SARL(1)................................ France 50%
BROUILLET S.A.(1).......................................... France 100%
SOTRAMEX S.A............................................... France 100%
SOFEDIT IBERICA S.A........................................ Spain 100%
COVENTRY PRESSWORK LTD..................................... United Kingdom 100%
LEBRANCHU UK LTD........................................... United Kingdom 100%
TOWERSTREAM LTD............................................ United Kingdom 100%
AETNA HOLDINGS, INC........................................ United States 100%
AETNA INDUSTRIES, INC...................................... United States 100%
AETNA EXPORT SALES CO...................................... US Virgin Islands 100%
AETNA MANUFACTURING CANADA LTD............................. Canada 100%
</TABLE>
- ---------------
(1) Consolidated as equity investments
NOTE 4 -- INTEREST EXPENSE, NET
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, SIX MONTHS ENDED
---------------------------- ------------------------------
1995 1996 1997 JUNE 30, 1997 JUNE 30, 1998
------- ------- ------ ------------- -------------
(UNAUDITED) (UNAUDITED)
(IN THOUSANDS OF U.S. DOLLARS)
<S> <C> <C> <C> <C> <C>
Interest income................... 197 458 263 114 104
Interest expense.................. (15,582) (13,329) (9,946) (5,529) (9,086)
------- ------- ------ ------ ------
Interest expense, net............. (15,385) (12,871) (9,683) (5,415) (8,982)
======= ======= ====== ====== ======
</TABLE>
F-13
<PAGE> 91
THE COMPANY AND ITS SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
ALL AMOUNTS IN THOUSANDS OF U.S. DOLLARS UNLESS OTHERWISE STATED
NOTE 5 -- OTHER EXPENSE, NET
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, SIX MONTHS ENDED
---------------------------- ------------------------------
1995 1996 1997 JUNE 30, 1997 JUNE 30, 1998
------- ------- ------ ------------- -------------
(UNAUDITED) (UNAUDITED)
(IN THOUSANDS OF U.S. DOLLARS)
<S> <C> <C> <C> <C> <C>
Net gain (loss) on disposal of
assets.......................... 156 1,489 (2,600) (1,332)
Restructuring costs............... (2,493) 78
Amortization of goodwill.......... (300) (362) (436) (123) (589)
Employee profit sharing........... (2,445) (1,278) (1,361) (808) (661)
Other, net........................ 505 769 793 155 (388)
------- ------- ------ ------ ------
Other expenses, net............... (2,084) 618 (6,097) (2,108) (1,560)
======= ======= ====== ====== ======
</TABLE>
NOTE 6 -- INCOME TAX
INCOME TAX EXPENSE:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, SIX MONTHS ENDED
------------------------ -----------------------------
1995 1996 1997 JUNE 30, 1997 JUNE 30, 1998
------ ------ ------ ------------- -------------
(UNAUDITED) (UNAUDITED)
(IN THOUSANDS OF U.S. DOLLARS)
<S> <C> <C> <C> <C> <C>
Current income tax expense............... (2,514) 1,260 742 (1,349) (2,643)
of which: US........................... -- -- -- -- (1,581)
non-US...................... (2,514) 1,260 742 (1,349) (1,062)
Deferred tax income/(expense)............ 981 (934) (2,723) (1,244) 1,215
------ ------ ------ ------ ------
of which: US........................... -- -- -- -- 3,160
non-US...................... 981 (934) (2,723) (1,244) (1,945)
Total income tax expense................. (1,533) 326 (1,981) (2,593) (1,428)
====== ====== ====== ====== ======
</TABLE>
The differences between the income tax provision and the statutory French
income tax rate are as follows:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
----------------
1996 1997
------ ------
(IN THOUSANDS OF
U.S. DOLLARS)
<S> <C> <C>
Pre-tax income.............................................. 11,006 9,181
Taxes computed at the statutory rate of 36.67% for 1996 and
41.67% for 1997........................................... (4,035) (3,825)
Increase resulting from:
Amortization of goodwill non-deductible for tax........... (133) (181)
Other permanent differences............................... (17) (716)
Variation in valuation allowance.......................... 319 (79)
Other taxes and tax credits............................... 4,192 2,820
------ ------
Income tax expense.......................................... 326 (1,981)
====== ======
</TABLE>
The Company consolidates most of its French operations for tax purposes. At
December 31, 1997 there were tax net operating loss carryforwards principally
related to taxing jurisdictions in France, which totaled
F-14
<PAGE> 92
THE COMPANY AND ITS SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
ALL AMOUNTS IN THOUSANDS OF U.S. DOLLARS UNLESS OTHERWISE STATED
approximately $2,730. Tax loss carryforwards amounting to $861 expire in 2000;
$1,869 have no expiration date.
All of the U.S. entities are consolidated for U.S. income tax purposes.
Tax credits relate mainly to income tax reductions based on research and
development expenses.
DEFERRED TAX BALANCES:
The principal deferred tax assets and liabilities in the balance sheets are
as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------
1996 1997
------- ------
(IN THOUSANDS OF
U.S. DOLLARS)
<S> <C> <C>
Employee benefits........................................... 1,781 1,663
Provisions and other expenses............................... 377 1,030
Tax loss carryforwards...................................... 1,142 1,407
R&D and start-up costs capitalized for tax purposes......... 5,016 3,023
Other....................................................... 4,037 2,702
------ -----
Total assets, gross......................................... 12,353 9,825
====== =====
Valuation allowance......................................... (935) (915)
Deferred tax assets......................................... 11,418 8,910
====== =====
Deferred tax on deferred expenses........................... 66 350
Deferred income related to leasing transactions............. 3,246 3,994
Other....................................................... 19 538
------ -----
Deferred tax liabilities.................................... 3,331 4,882
====== =====
</TABLE>
NOTE 7 -- DISCONTINUED OPERATIONS
The Company discontinued two operations during 1998, both of which have
been classified as discontinued operations for all the periods included in the
consolidated financial statements. These businesses consisted of cooking pan
production (the Company's only non-automotive component business) as well as a
non-core plastic automotive components business. For the years ended December
31, 1995, 1996 and 1997, these businesses contributed net sales of $17.4
million, $15.6 million, $14.0 million and operating losses of $3.4 million, $4.2
million and $2.4 million, respectively. For the six month periods ended June 30,
1997 and 1998, respectively net sales were $7.9 million and $6.0 million,
operating losses were $1.3 million and $1.4 million, respectively. The Company
expects to sell these operations by the end of 1998. If the Company is not able
to sell these operations, costs of up to $4.0 million could be incurred to cease
these operations.
The income tax charge (profit) of these operations were $(0.3), $(0.2) and
$0.1 for the years ended December 31, 1995, 1996 and 1997 respectively, and $0.1
for the two six month periods ended June 30, 1997 and 1998.
F-15
<PAGE> 93
THE COMPANY AND ITS SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
ALL AMOUNTS IN THOUSANDS OF U.S. DOLLARS UNLESS OTHERWISE STATED
NOTE 8 -- CASH AND MARKETABLE SECURITIES
<TABLE>
<CAPTION>
DECEMBER 31,
---------------- SIX MONTHS ENDED
1996 1997 JUNE 30, 1998
------ ------ ----------------
(UNAUDITED)
(IN THOUSANDS OF U.S. DOLLARS)
<S> <C> <C> <C>
Cash.................................................... 10,508 10,599 16,388
Marketable securities................................... 828 1,027 6,537
------ ------ ------
Total................................................... 11,336 11,626 22,925
====== ====== ======
</TABLE>
Cash and cash equivalents include cash at banks and cash on hand. The fair
value of the marketable securities is not materially different from their book
value.
NOTE 9 -- TRADE RECEIVABLES, NET
<TABLE>
<CAPTION>
DECEMBER 31,
------------------ SIX MONTHS ENDED
1996 1997 JUNE 30, 1998
------- ------- ----------------
(UNAUDITED)
(IN THOUSANDS OF U.S. DOLLARS)
<S> <C> <C> <C>
Trade receivables..................................... 137,224 117,116 154,163
Less valuation allowance.............................. (1,186) (1,293) (1,797)
------- ------- -------
Trade receivables, net................................ 136,038 115,823 152,366
======= ======= =======
</TABLE>
Sale of receivables with recourse:
The Company has sold trade receivables to financial institutions to finance
part of its working capital needs. Financial institutions have a full recourse
right in case of creditor's default. Accordingly, these receivables have been
taken out of the trade receivables amount. The Company had $70,116, $53,789 and
$55,482 sold receivables outstanding at December 31, 1996, December 31, 1997 and
June 30, 1998, respectively. The average level of financing obtained through
sale of trade receivables was $61,681 and $51,175 for the periods ended December
31, 1996, December 31, 1997 respectively.
NOTE 10 -- OTHER ACCOUNTS RECEIVABLE, NET
<TABLE>
<CAPTION>
DECEMBER 31,
---------------- SIX MONTHS ENDED
1996 1997 JUNE 30, 1998
------ ------ ----------------
(UNAUDITED)
(IN THOUSANDS OF U.S. DOLLARS)
<S> <C> <C> <C>
Income tax and other government receivables............. 19,659 17,750 17,280
Advances paids to suppliers............................. 8,802 2,163 2,903
Prepaid expenses........................................ 2,395 2,653 4,202
Other................................................... 5,089 5,350 11,896
------ ------ ------
Other accounts receivable............................... 35,945 27,916 36,281
====== ====== ======
</TABLE>
In 1990, the founder shareholders of SOFEDIT decided to grant 1,500 stock
options to 23 employees of the Company. These stock options had a vested period
of five years. The exercise price was FRF 675, which was the fair market value
of the stocks at grant date. The employees' shares resulting from the stock
options, as well as all other SOFEDIT shares were exchanged for MS Acquisition
common stock and other elements
F-16
<PAGE> 94
THE COMPANY AND ITS SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
ALL AMOUNTS IN THOUSANDS OF U.S. DOLLARS UNLESS OTHERWISE STATED
in April 1998 as described in Note 1. SOFEDIT has a commitment to repurchase
these common stock from the employees at first request at the higher of net book
value or a price used in the most recent transaction between SOFEDIT's
independent stockholders. In connection with the foreseen IPO, the employees
decided to sell their stock to SOFEDIT at the IPO date and at the IPO price.
SOFEDIT made a $1.5 million advance payment to these employees in April 1998.
The payment will be finalized immediately after the IPO. The $1.5 million
advance is recorded on the "Other" line of the Other accounts receivables.
NOTE 11 -- INVENTORIES AND CONTRACTS IN PROCESS, NET
<TABLE>
<CAPTION>
DECEMBER 31,
---------------- SIX MONTHS ENDED
1996 1997 JUNE 30, 1998
------ ------ ----------------
(UNAUDITED)
(IN THOUSANDS OF U.S. DOLLARS)
<S> <C> <C> <C>
Raw materials and supplies.............................. 18,525 19,189 21,855
Work in progress........................................ 33,993 30,214 29,150
Finished products....................................... 16,580 16,819 17,570
Inventories, gross.................................... 69,098.. 66,222 68,575
Less valuation allowance................................ (1,636) (2,209) (2,555)
------ ------ ------
Inventories and contracts in process, net............... 67,462 64,013 66,020
====== ====== ======
</TABLE>
NOTE 12 -- PROPERTY, PLANT AND EQUIPMENT, NET
(a) Changes in property, plant and equipment
(excluding fixed assets in process and advances paid)
<TABLE>
<CAPTION>
GROSS VALUE
-------------------------------------------------
MACHINERY
AND
LAND BUILDINGS EQUIPMENT OTHERS TOTAL
------ --------- --------- ------ -------
(IN THOUSANDS OF U.S. DOLLARS)
<S> <C> <C> <C> <C> <C>
BALANCE AT DECEMBER 31, 1995................. 7,943 59,081 200,271 15,313 282,608
Additions.................................... 7 9,752 19,903 2,137 31,799
Disposals.................................... (76) (10,357) (1,605) (12,038)
Effect of business acquired (sold)........... (2,176) 3,704 (1,214) (313) 1
Other movements (*).......................... (431) (2,704) (10,095) (830) (14,060)
------ ------ ------- ------ -------
BALANCE AT DECEMBER 31, 1996................. 5,343 69,757 198,508 14,702 288,310
Additions.................................... 44 9,949 18,291 1,410 29,694
Disposals.................................... (1,553) (2,536) (964) (5,053)
Effect of business acquired (sold)........... (1,505) (400) (1,905)
Other movements (*).......................... (623) (7,895) (23,049) (1,737) (33,304)
------ ------ ------- ------ -------
BALANCE AT DECEMBER 31, 1997................. 4,764 70,258 189,709 13,011 277,742
Effect of business acquired (sold)........... 2,404 4,565 35,204 5,383 47,556
Additions.................................... 701 4,620 902 6,223
Disposals.................................... (980) (1,451) (935) (3,366)
Other movements (*).......................... (26) (487) (1,263) 6 (1,770)
------ ------ ------- ------ -------
BALANCE AT JUNE 30, 1998..................... 7,142 74,057 226,819 18,367 326,385
====== ====== ======= ====== =======
</TABLE>
- ---------------
(*) Including translation adjustments
F-17
<PAGE> 95
THE COMPANY AND ITS SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
ALL AMOUNTS IN THOUSANDS OF U.S. DOLLARS UNLESS OTHERWISE STATED
Fixed assets in process amount to $6,121, $3,723, $1,494, $23,579 at
December 31, 1995, 1996, 1997 and June 30, 1998 respectively. Advances paid
total to $799, $1,685, $48, $135 at December 31, 1995, 1996, 1997 and June 30,
1998 respectively.
The gross value of fixed assets financed through finance lease transactions
amounted to $83,881, $81,954 and $81,038 as at December 31, 1996 and 1997 and
June 30, 1998, respectively.
(b) Changes in accumulated depreciation of property, plant and equipment
<TABLE>
<CAPTION>
ACCUMULATED DEPRECIATION
-----------------------------------------------
MACHINERY
AND
LAND BUILDINGS EQUIPMENT OTHERS TOTAL
---- --------- --------- ------ -------
(IN THOUSANDS OF U.S. DOLLARS)
<S> <C> <C> <C> <C> <C>
BALANCE AT DECEMBER 31, 1996.................. 981 30,620 116,942 9,430 157,973
Depreciation charge........................... 99 4,400 18,424 1,402 24,325
Writeoffs..................................... (303) (4,044) (430) (4,777)
Effect of business acquired (sold)............ (982) (286) (1,268)
Other movements(*)............................ (126) (3,887) (13,860) (1,124) (18,997)
BALANCE AT DECEMBER 31, 1997.................. 954 30,830 116,480 8,992 157,256
---- ------ ------- ------ -------
Effect of change in the scope of
consolidation............................... -- -- -- -- --
Depreciation charge........................... 47 2,397 11,116 1,002 14,562
Writeoffs..................................... (279) (2,252) (845) (3,376)
Effect of business acquired (sold)............ 11 203 15 229
Other movements(*)............................ (10) (315) (1,194) (92) (1,611)
BALANCE AT JUNE 30, 1998 (UNAUDITED).......... 991 32,644 124,353 9,072 167,060
==== ====== ======= ====== =======
</TABLE>
- ---------------
(*) Including translation adjustments
Depreciation on fixed assets in process amounted to $85, $124, $27 at
December 31, 1995, 1996 and June 30, 1998 respectively.
F-18
<PAGE> 96
THE COMPANY AND ITS SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
ALL AMOUNTS IN THOUSANDS OF U.S. DOLLARS UNLESS OTHERWISE STATED
NOTE 13 -- GOODWILL, NET
<TABLE>
<CAPTION>
NET VALUE
NET VALUE ADDITIONS NET VALUE JUNE 30,
DECEMBER 31, AND OTHER TRANSLATION DECEMBER 31, 1998
1996 CHANGES AMORTIZATION ADJUSTMENTS 1997 UNAUDITED
------------ --------- ------------ ----------- ------------ ---------
(IN THOUSANDS OF U.S. DOLLARS)
<S> <C> <C> <C> <C> <C> <C>
Bonin.................... 278 (10) (35) 233 225
C.L.A.................... 2,478 (301) (304) 1,873 1,709
Cabrit................... 2,098 (84) (262) 1,752 1,693
Aubecq................... 1,744 (59) (217) 1,468 1,425
Brouillet................ 91 (3) (12) 76 74
Lebranchu................ 666 (22) (82) 562 545
Laprade.................. 20 (1) (2) 17 16
CTAA..................... 101 (2) (12) 87 83
Coventry................. 106 13 (4) (17) 98 96
Emairel.................. -- -- -- -- -- --
Blondiaux................ 294 (257) -- (37) -- --
MS Acquisition........... -- -- -- -- -- 59,929
----- ---- ---- ---- ----- ------
Goodwill, net............ 7,876 (244) (486) (980) 6,166 65,795
===== ==== ==== ==== ===== ======
</TABLE>
The gross value of goodwill is $13,706, $10,837 and $70,817 as at December
31, 1996, 1997 and June 30, 1998 respectively. The MS Acquisition goodwill at
June 30, 1998 results from the reverse acquisition described in Note 1.
NOTE 14 -- EQUITY INVESTMENTS
<TABLE>
<CAPTION>
DECEMBER 31,
-------------- SIX MONTHS ENDED
1996 1997 JUNE 30, 1998
----- ----- ----------------
(UNAUDITED)
(IN THOUSANDS OF U.S. DOLLARS)
<S> <C> <C> <C>
Emairel................................................... 1,429 -- --
Other..................................................... 329 291 274
----- ----- -----
Total..................................................... 1,758 291 274
===== ===== =====
</TABLE>
The Company's major equity investment at December 31, 1996 was an
investment of 50% in Emairel, a non-core subsidiary specialized in intra-door
panels. This investment was sold in 1997.
F-19
<PAGE> 97
THE COMPANY AND ITS SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
ALL AMOUNTS IN THOUSANDS OF U.S. DOLLARS UNLESS OTHERWISE STATED
NOTE 15 -- OTHER NON-CURRENT ASSETS, NET
<TABLE>
<CAPTION>
DECEMBER 31,
------------- SIX MONTHS ENDED
1996 1997 JUNE 30, 1998
---- ----- ----------------
(UNAUDITED)
(IN THOUSANDS OF U.S. DOLLARS)
<S> <C> <C> <C>
Unconsolidated companies:
Investments at cost, net of valuation provisions......... 19 3,859 3,859
Loans...................................................... 132 165 180
Other...................................................... 323 237 225
--- ----- -----
Other financial fixed assets, net.......................... 474 4,261 4,264
=== ===== =====
</TABLE>
In 1997, the Company purchased 15% of Euralcom for $3,859. Euralcom is a
Dutch company which specializes in aluminium parts and components for the
automotive industry.
NOTE 16 -- FINANCIAL DEBT
(a) Analysis by nature
<TABLE>
<CAPTION>
DECEMBER 31,
------------------ SIX MONTHS ENDED
1996 1997 JUNE 30, 1998
------- ------- ----------------
(UNAUDITED)
(IN THOUSANDS OF U.S. DOLLARS)
<S> <C> <C> <C>
Bonds and notes issued............................... 8,629 0 85,000
Promissory notes..................................... 0 0 39,093
Borrowings........................................... 78,950 63,348 82,246
Other financial debts................................ 4,321 4,999 25,123
Bank overdrafts...................................... 13,203 11,711 15,302
Debts related to leases.............................. 35,001 35,136 31,195
------- ------- -------
Total................................................ 140,104 115,194 277,959
======= ======= =======
Of which Long-term portion........................... 94,348 71,416 222,422
Short-term portion......................... 45,756 43,778 55,537
</TABLE>
On August 13, 1996, Aetna, a wholly owned subsidiary of MS Acquisition,
issued $85,000 of 11 7/8% Senior Notes due 2006 in a private placement offering.
Subsequent to this date, such Notes were registered with the Securities and
Exchange Commission. The Senior Notes have been fully and unconditionally
guaranteed by MS Acquisition, Aetna Holdings, and Aetna Export Sales Co. These
Senior notes also have certain restrictive covenants including limitations on
the following matters: (i) the incurrence of additional indebtedness, (ii) the
issuance of preferred stock by subsidiaries, (iii) the creation of liens, (iv)
sale and leaseback transactions, (v) restricted payments, (vi) the sales of
assets and subsidiary stock, (vii) mergers and consolidations, (viii) payment
restrictions affecting subsidiaries and (ix) transactions with affiliates.
In May 1996, Aetna executed a new credit agreement (the Senior Revolving
Credit Facility) whereby it may borrow, based upon available collateral as
defined in the agreement (principally inventory, tooling, and accounts
receivable), up to $56,500 at either (i) a Floating Rate, defined as the greater
of the Prime Rate or the sum of 1% plus the Federal Funds Rate, or (ii) a
Eurodollar Rate plus a margin agreed to by the banks. Aetna is also charged a
monthly fee equal to 0.5% per annum of the daily average unused amount of the
credit agreement.
F-20
<PAGE> 98
THE COMPANY AND ITS SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
ALL AMOUNTS IN THOUSANDS OF U.S. DOLLARS UNLESS OTHERWISE STATED
The Amended and Restated Senior Revolving Credit Facility of April 10, 1998
contains, among other provisions, covenants relating to the ratios of (i) debt
to earnings before income taxes, interest and depreciation and amortization
(EBITDA) and (ii) interest expense to EBITDA. At June 30, 1998, Aetna had
borrowed $25,981 under the Senior Revolving Credit Facility.
Debt issue costs related to the issuance of the 11 7/8% Senior Notes
aggregated $5,204, and are being amortized over the term of the notes. Costs
associated with the new credit agreement totaled $199 and are being amortized
over the five-year term.
In August 1996, Aetna Holdings issued Junior Subordinated Promissory Notes
due August 13, 2007 in the aggregate principal amount of $8,731 and unfunded
contractual obligations to pay to certain former option holders, a total of
$498, (collectively, the Junior Notes). Such Junior Notes accrue interest at the
rate of 11% per annum and interest is payable semi-annually in February and
August of each year.
The Company, at its option, may prepay all or a portion of the outstanding
principal amount of the Junior Notes, provided that such payments are permitted
under the Company's Senior Notes Indenture and revolving credit facility.
Other financial debts include the $41.0 million promissory note issued and
the $12.0 million debt assumed in the Combination discussed in Note 1. The
promissory note is non-interest bearing for an initial period of 12 months from
the date of the Combination; it has been discounted by the Company at 6.5%. The
assumed debt of former shareholders described in Note 1 bears interest at 6.05%.
Interest rates on substantially all European short-term debt are based on
LIBOR and PIBOR for relevant European currencies. Long-term debt includes
borrowings primarily denominated in French francs. Interest rates on long-term
debt ranges from 4.6% to 12.8% depending on the currency.
No interest charge paid has been capitalized in any of the periods
presented.
(a) Repayment schedule
As of December 31, 1997, the repayment schedule of borrowings and capital
leases is as follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1997
------------------------------------------------
OTHER FINANCIAL DEBTS DEBTS RELATED TO LEASES
--------------------- -----------------------
<S> <C> <C>
1998.............................. 23,336 6,649
1999.............................. 18,414 5,625
2000.............................. 10,685 5,275
2001.............................. 5,109 3,620
2002.............................. 5,152 2,379
thereafter........................ 11,225
Total............................. 62,696 34,773
</TABLE>
F-21
<PAGE> 99
THE COMPANY AND ITS SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
ALL AMOUNTS IN THOUSANDS OF U.S. DOLLARS UNLESS OTHERWISE STATED
NOTE 17 -- OTHER PAYABLES AND ACCRUED EXPENSES
<TABLE>
<CAPTION>
DECEMBER 31,
----------------
1996 1997 JUNE 30, 1998
------ ------ -------------
(UNAUDITED)
(IN THOUSANDS OF U.S. DOLLARS)
<S> <C> <C> <C>
Payroll, sales and other taxes............................. 24,530 29,113 31,020
Employee profit sharing.................................... 3,792 3,912 4,907
Restructuring accrual...................................... 428 2,430 0
Accrued expenses........................................... 12,327 10,489 28,483
Other...................................................... 8,219 6,905 14,463
------ ------ ------
Total other payables and accrued expenses.................. 49,296 52,849 78,873
====== ====== ======
</TABLE>
As part of the Company's commercial strategy, it has taken a number of
restructuring measures to adapt the scale of its industrial operations to
changes in the market place.
At December 31, 1996, accrued provisions for closing and severance costs
totaling $428 were reflected on the balance sheet. Such severance costs related
to approximately 12 individuals. The majority of the severance provisions
related to operations in France. During the year ended December 31, 1997,
expenditures for restructuring payments were approximately $380, which included
payments associated with 12 employees. At December 31, 1997, accrued
restructuring totaled $2,430, which included provisions for employee severance
of $1,940 for 62 individuals and fixed assets write-off of $500. During the
first half of 1998, 58 out of 62 individuals left the Company and approximately
$2,200 was expensed. The remaining four individuals, who are employee
representatives, are expected to terminate employment within the next four
months.
NOTE 18 -- RETIREMENT, TERMINATION AND POST-RETIREMENT BENEFITS
The Company provides various types of retirement and termination benefits
to its employees. The type of benefits offered to an individual employee group
is related to local legal requirements as well as the historical operating
practices of the specific business unit.
Termination benefits are generally lump-sum payments based upon an
individual's years of credited service and annualized salary at retirement or
termination of employment. Pension benefits are generally determined using a
formula which uses the employee's years of credited service and average final
earnings. Certain defined-benefit pension liabilities are funded through
separate pension funds. Pension plan assets related to funded plans are invested
mainly in equities and debt securities. Other supplemental defined-benefit
pension plans sponsored by the Company for certain employees are funded from the
Company's assets as they become due.
The actuarial assumptions used vary by business unit and country, based
upon local considerations, with the following averages:
<TABLE>
<S> <C>
Benefit obligation discount rate............................ 7%
Estimated annual rate of increase in future compensation
increase.................................................. 4%
Expected rate of return on plan............................. 7%
</TABLE>
F-22
<PAGE> 100
THE COMPANY AND ITS SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
ALL AMOUNTS IN THOUSANDS OF U.S. DOLLARS UNLESS OTHERWISE STATED
The funded status of pension plans is as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------
1996 1997
------ ------
(IN THOUSANDS OF
U.S. DOLLARS)
<S> <C> <C>
Actuarial present value of benefit obligations:
Vested benefit obligation
Non-vested benefit obligation............................. (4,701) (2,925)
------ ------
Accumulated benefit obligation.............................. (4,701) (2,925)
Effect of salary increase................................... -- (818)
------ ------
Projected benefit obligation................................ (4,701) (3,743)
Plan assets at fair value................................... 649 551
------ ------
Funded status............................................... (4,052) (3,192)
Unrecognized net transition amount.......................... 459 334
Unrecognized prior service cost............................. -- --
Unrecognized net actuarial gain (losses).................... -- (618)
------ ------
Net pension asset (liability)............................... (3,593) (3,476)
====== ======
</TABLE>
The net pension asset (liability) is analyzed as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------
1996 1997
------ ------
(IN THOUSANDS OF
U.S. DOLLARS)
<S> <C> <C>
Minimum liability adjustment................................ (456) --
Prepaid asset............................................... -- --
Accrual..................................................... 4,049 3,476
------ ------
Net pension asset (liability)............................... (3,593) (3,476)
====== ======
</TABLE>
MULTI-EMPLOYER PLANS
Certain employees of the Company participate on a co-mingled basis with
other (non-group) companies in defined benefit pension plans. Such co-mingled
plans are known as multi-employer pension plans. Pension expense for
multi-employer pension plans is recorded based upon the agreed funding
requirements, and was $3,468 thousand, and $3,267 thousand for the years ended
December 31 1996, and 1997, respectively.
NOTE 19 -- PROVISIONS FOR RISKS AND CHARGES
<TABLE>
<CAPTION>
DECEMBER 31,
--------------
1996 1997 JUNE 30, 1998
----- ----- -------------
(UNAUDITED)
(IN THOUSANDS OF U.S. DOLLARS)
<S> <C> <C> <C>
Tax provision............................................... 894 -- --
Tax on asset revaluation.................................... 3,126 1,898 1,469
----- ----- -----
Total....................................................... 4,020 1,898 1,469
===== ===== =====
</TABLE>
F-23
<PAGE> 101
THE COMPANY AND ITS SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
ALL AMOUNTS IN THOUSANDS OF U.S. DOLLARS UNLESS OTHERWISE STATED
NOTE 20 -- PREFERRED STOCK
The authorized preferred stock, which has been issued by MS Acquisition, is
composed of:
-- 293,123 authorized shares of Series A Preferred Stock of which 135,096
are outstanding, 198,292 are held by a wholly-owned subsidiary, Aetna
Holdings. Each share of Series A Preferred Stock has a stated value of
$100 per share. Dividends accrue on each share at a rate per annum equal
to 11% of the stated value thereof and are payable, when declared by the
Board of Directors and to the extent funds are legally available,
semi-annually in February and August.
-- 270,000 shares of Series B Preferred Stock, issued in connection with
the Combination, all of which are outstanding at June 30, 1998. Each
share has a stated value of $100 per share. No dividends accrue during
the first 18 months following the issuance.
Each Preferred share is entitled to liquidation preference over all other
classes of capital stock. Series A Preferred Stock are non-voting and are
redeemable by both the Company and the holder under certain circumstances.
NOTE 21 -- MINORITY INTERESTS
<TABLE>
<CAPTION>
DECEMBER 31,
------------ SIX MONTHS ENDED
1996 1997 JUNE 30, 1998
---- ---- ----------------
(UNAUDITED)
(IN THOUSANDS OF U.S. DOLLARS)
<S> <C> <C> <C>
Balance, beginning of year.................................. 496 490 0
Share of net income......................................... 27 -- --
Translation adjustment...................................... (33) (51) --
Other changes............................................... -- (439) --
--- ---- ----
Balance, end of year........................................ 490 0 0
=== ==== ====
</TABLE>
NOTE 22 -- SHAREHOLDERS' EQUITY
Capital stock and additional paid-in capital
At December 31, 1996, SOFEDIT had 7,402 convertible bonds outstanding, each
allowing the subscription of one share. All were exercised during the second
half of 1997.
Under French law, the net profits, if any, related to the French legal
entities are allocated at a rate of 5% each year to a legal reserve (restricted
retained earnings) until the legal reserve is equal to 10% of the nominal share
capital of each entity. The legal reserve is distributable only upon liquidation
of the entity. At December 31, 1997, the aggregate legal reserve of such French
legal entities was $154.
As described in Note 1, for accounting purposes, the combination of SOFEDIT
and MS Acquisition was effective on April 1, 1998. As a result of this
combination, the Company's capital stock and shareholders' equity accounts were
substantially affected. The Combination was accounted for as a reverse
acquisition, and accordingly, SOFEDIT is considered to be the acquiror of MS
Acquisition.
As required under reverse acquisition accounting, except for the 3,899,999
outstanding shares of Common Stock of MS Acquisition, the capital structure of
the acquiror is carried over and becomes the historical basis of accounting.
F-24
<PAGE> 102
THE COMPANY AND ITS SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
ALL AMOUNTS IN THOUSANDS OF U.S. DOLLARS UNLESS OTHERWISE STATED
Additionally, the historical equity section of SOFEDIT financial statements
has been restated retroactively for each of the periods presented to reflect the
exchange ratio and in the Combination and, accordingly, SOFEDIT's historical
share capital has been replaced by MS Acquisition's share capital.
NOTE 23 -- SEGMENT INFORMATION:
The Company operates in only one business segment. The management is
organized in two geographic business units. The historical geographic
information has been restated to take into account this new organization.
<TABLE>
<CAPTION>
NORTH
EUROPE AMERICA TOTAL
------- ------- -------
<S> <C> <C> <C>
1995
Net sales................................................... 464,868 -- --
Long-lived assets........................................... 150,415 -- --
1996
Net sales................................................... 484,712 -- --
Long-lived assets........................................... 146,324 -- --
1997
Net sales................................................... 487,898 -- --
Long-lived assets........................................... 133,623 -- --
1998 (6 MONTHS)
Net sales................................................... 275,028 47,223 322,251
Long-lived assets........................................... 128,942 131,463 260,405
</TABLE>
For the period ended June 30, four major customers accounted for a total of
61.2% of net sales, with sales penetrations of 29.9%, 19.0%, 9.1% and 3.2%
respectively.
For the years ended December 31, 1995, 1996 and 1997, two major customers
accounted for a total of 58.1%, 54.1% and 56.1% of net sales respectively. Sales
penetration of the two customers was respectively 36.7% and 21.4% in 1995, 30.7%
and 22.6% in 1996, 31.8% and 24.3% in 1997.
NOTE 24 -- COMMITMENTS AND CONTINGENCIES
(a) Commitments
<TABLE>
<CAPTION>
DECEMBER 31,
----------------
1996 1997
------ ------
(IN THOUSANDS OF
U.S. DOLLARS)
<S> <C> <C>
Fixed assets pledged........................................ 21,803 17,134
Investments pledged......................................... 7,867 4,793
Other....................................................... 289 --
------ ------
Total....................................................... 29,959 21,927
====== ======
</TABLE>
F-25
<PAGE> 103
THE COMPANY AND ITS SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
ALL AMOUNTS IN THOUSANDS OF U.S. DOLLARS UNLESS OTHERWISE STATED
(b) Contingencies
Litigation: The Company is the defendant in several legal proceedings
incidental to the normal conduct of its business. The Company believes that the
outcome of these proceedings will not have a material effect on its consolidated
financial position or its results of operations.
Environmental: The Company's operations are subject to numerous
environmental regulations in each of the jurisdictions in which it operates,
including local, national and international laws and regulations for the
protection of the environment relating to the handling, transport, disposal and
emission of hazardous materials. Compliance with environmental regulations has
not had a material effect on its results of operations.
(c) Credit risk
The Company has sales mainly with large international car and equipment
manufacturers. Management believes the risk of counterparty failure from these
customers, which would have a material impact on the company's operations and
financial position, is remote due to the high credit rating of the
counterparties.
NOTE 25 -- PAYROLL, STAFF, AND EMPLOYEE PROFIT SHARING
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------
1995 1996 1997
------ ------ ------
(IN THOUSANDS OF U.S.
DOLLARS, EXCEPT NUMBER OF
EMPLOYEES)
<S> <C> <C> <C>
Total wages and salaries.................................... 70,727 75,233 72,674
Social security taxes and other benefits.................... 28,532 29,531 27,163
Employee profit sharing..................................... 2,445 1,278 1,361
Total employees............................................. 3,015 3,119 3,587
</TABLE>
NOTE 26 -- CHANGE IN ACCOUNTING PRINCIPLES
Effective January 1, 1998, the Company adopted Statement of Financial
Accounting Standards No. 130, "Reporting Comprehensive Income." This Statement
requires that all items recognized under accounting standards as components of
comprehensive earnings be reported in an annual financial statement that is
displayed with the same prominence as other annual financial statements. This
Statement also requires that an entity classify items of other comprehensive
earnings by their nature in an annual financial statement. For example, other
comprehensive earnings may include foreign currency translation adjustments,
minimum pension liability adjustments, and unrealized gains and losses on
marketable securities classified as available-for-sale. Annual financial
statements for prior periods will be reclassified, as required.
The Company's total comprehensive earnings were as follows:
<TABLE>
<CAPTION>
TWELVE MONTHS ENDED SIX MONTHS ENDED
DECEMBER 31, 1997 JUNE 30, 1998
------------------- ----------------
<S> <C> <C>
Net earnings............................................ 4,729 438
Other comprehensive earnings (losses)................... (7,324) (523)
------ ----
Total comprehensive earnings............................ (2,595) (85)
</TABLE>
Other comprehensive losses include currency translation adjustments of
$7,311 for the 12 month period ended December 31, 1997 and $523 for the 6 month
period ended June 30, 1998.
F-26
<PAGE> 104
THE COMPANY AND ITS SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
ALL AMOUNTS IN THOUSANDS OF U.S. DOLLARS UNLESS OTHERWISE STATED
NOTE 27 -- RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
In February, 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 132 ("SFAS 132") "Employers'
Disclosure about Pension and Other Postretirement Benefits." SFAS 132 revises
employers' disclosures about pension and other post-retirement benefit plans but
does not change the measurement or recognition of those plans.
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133 ("SFAS 133") "Accounting for Derivative
Instruments and Hedging Activities". SFAS 133 established accounting and
reporting standards for hedging activities. This statement will become effective
for quarters beginning after June 15, 1999. This statement is not expected to
have any effect on the Company's financial position or results of operations.
NOTE 28 -- PRO FORMA FINANCIAL INFORMATION (unaudited)
The pro forma summarized consolidated income statement for the year ended
December 31, 1997 gives pro forma effect to the Combination described in Note 1,
as if it had occurred on January 1, 1997. The pro forma consolidated income
statements for the six months ended June 30, 1997 and 1998 give pro forma effect
to the Combination described in Note 1, as if it had occurred on January 1, 1997
and 1998, respectively.
The earnings per share have been calculated as described in Note 1.
SUMMARIZED PRO FORMA INCOME STATEMENTS
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31 SIX MONTHS ENDED JUNE 30
----------- ------------------------
1997 1997 1998
----------- ---------- ----------
(IN THOUSANDS OF U.S. DOLLARS)
(UNAUDITED)
<S> <C> <C> <C>
Net sales............................................... 693,639 359,398 375,337
Cost of sales........................................... (611,478) (310,993) (331,107)
Selling, general and administrative expenses............ (42,925) (21,441) (22,279)
Research and development expenses....................... (7,413) (4,042) (4,233)
Other income (expenses)................................. (7,611) (2,865) (2,117)
-------- -------- --------
Operating income........................................ 24,212 20,057 15,601
Net interest expense.................................... (24,113) (12,746) (12,885)
-------- -------- --------
Pre-tax income.......................................... 99 7,311 2,716
Net income before discontinued operations............... 905 5,028 1,472
Net income.............................................. (1,566) 3,809 (18)
Earnings per share:
Before discontinued operations.......................... 0.23 1.26 0.37
After discontinued operations........................... (0.39) 0.95 0.00
</TABLE>
F-27
<PAGE> 105
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders of
MS ACQUISITION CORP.
In our opinion, the accompanying consolidated balance sheets and the
related consolidated statements of operations and of cash flows present fairly,
in all material respects, the financial position of MS Acquisition Corp. and its
subsidiaries at December 29, 1996 and December 28, 1997, and the results of
their operations and their cash flows for each of the three years in the period
ended December 28, 1997, in conformity with generally accepted accounting
principles. These financial statements are the responsibility of the Company's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these statements in
accordance with generally accepted auditing standards which require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for the opinion expressed
above.
/s/ Price Waterhouse LLP
- ------------------------------
Bloomfield Hills, Michigan
February 6, 1998
F-28
<PAGE> 106
MS ACQUISITION CORP.
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 29, DECEMBER 28,
1996 1997
------------ ------------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash........................................................ $ 4,011 $ 23
Accounts receivable (less allowance for doubtful accounts of
$510 and $359, respectively).............................. 32,113 40,439
Inventories................................................. 8,756 7,276
Tooling..................................................... 1,592 11,410
Prepaid expenses............................................ 651 446
Deferred income taxes....................................... 318 1,215
-------- --------
TOTAL CURRENT ASSETS........................................ 47,441 60,809
-------- --------
PROPERTY, PLANT AND EQUIPMENT
Land........................................................ 2,104 2,405
Buildings and improvements.................................. 12,548 13,556
Machinery and equipment..................................... 63,906 66,765
Construction-in-progress.................................... 3,944 10,211
-------- --------
TOTAL PROPERTY, PLANT AND EQUIPMENT......................... 82,502 92,937
Less -- accumulated depreciation............................ (33,068) (41,365)
-------- --------
Net property, plant and equipment........................... 49,434 51,572
-------- --------
OTHER ASSETS
Deferred costs and other assets............................. 5,769 5,489
Goodwill.................................................... 25,774 24,973
-------- --------
TOTAL OTHER ASSETS.......................................... 31,543 30,462
-------- --------
$128,418 $142,843
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable............................................ $ 24,958 $ 33,485
Accrued expenses............................................ 12,361 9,848
Short-term borrowings....................................... 2,427 13,530
-------- --------
TOTAL CURRENT LIABILITIES................................... 39,746 56,863
-------- --------
Long-term debt, less current portion........................ 85,000 85,000
-------- --------
Junior subordinated notes................................... 6,802 7,789
-------- --------
Deferred income taxes....................................... 8,136 7,432
-------- --------
Commitments and contingencies (Note 11)
Redeemable preferred stock
Series A -- $100 stated value; 293,123 shares authorized;
114,967 and 127,962 shares issued and outstanding,........ 11,979 13,328
STOCKHOLDERS' EQUITY (DEFICIT)
Class A, common stock -- $.01 par value; 5,000,000 shares
authorized; 383,409 shares issued and outstanding......... 4 4
Class B, common stock -- $.01 par value; 5,000,000 shares
authorized: 516,590 shares issued and outstanding......... 5 5
Additional paid-in capital.................................. 15,509 14,159
Accumulated deficit......................................... (31,487) (34,461)
Fair market value in excess of historical cost of net assets
acquired from entities partially under common control..... (7,276) (7,276)
-------- --------
(23,245) (27,569)
-------- --------
$128,418 $142,843
======== ========
</TABLE>
See accompanying notes to Consolidated Financial Statements.
F-29
<PAGE> 107
MS ACQUISITION CORP.
CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED
--------------------------------------------
DECEMBER 31, DECEMBER 29, DECEMBER 28,
1995 1996 1997
------------ ------------ ------------
<S> <C> <C> <C>
Net sales........................................... $211,905 $211,462 $205,741
Cost of sales....................................... 183,542 180,998 181,336
Selling, general and administrative expenses........ 12,531 14,850 16,815
Other (income) expense.............................. 800 800 800
-------- -------- --------
Operating income.................................... 15,032 14,814 6,790
-------- -------- --------
Net interest expense................................ 8,579 9,406 11,148
-------- -------- --------
Income (loss) before extraordinary item and income
taxes............................................. 6,453 5,408 (4,358)
Income tax provision (credit)....................... 1,877 1,972 (1,384)
-------- -------- --------
Income (loss) before extraordinary item............. 4,576 3,436 (2,974)
Extraordinary item (net of income taxes of $594).... -- 1,153 --
-------- -------- --------
Net income (loss) before preferred stock dividend... $ 4,576 2,283 (2,974)
----------- ----------- -----------
-----------
Preferred stock dividend requirements............... (482) (1,350)
-------- --------
Net income (loss) available for common
stockholders...................................... $ 1,801 $ (4,324)
======== ========
</TABLE>
See accompanying notes to Consolidated Financial Statements.
F-30
<PAGE> 108
MS ACQUISITION CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED
--------------------------------------------
DECEMBER 31, DECEMBER 29, DECEMBER 28,
1995 1996 1997
------------ ------------ ------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)................................... $ 4,576 $ 2,283 $ (2,974)
Adjustments to reconcile net income (loss) to net
cash provided by (used for) operating activities -
Depreciation and amortization..................... 6,579 7,965 9,917
Deferred interest................................. 1,281 -- --
Deferred income taxes............................. (860) (588) (705)
Changes in assets and liabilities
Accounts receivable............................... 116 (4,231) (8,326)
Inventories....................................... 750 (97) 1,480
Tooling........................................... (1,790) 1,066 (9,818)
Prepaid expenses.................................. 54 (149) (739)
Accounts payable.................................. 2,954 (6,608) 8,527
Accrued expenses.................................. 904 2,252 (2,513)
-------- -------- --------
NET CASH PROVIDED BY (USED FOR) OPERATING
ACTIVITIES........................................ 14,564 1,893 (5,151)
-------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to property, plant and equipment.......... (10,103) (7,023) (10,725)
Disposals of property, plant and equipment.......... -- 493 79
Other, net.......................................... (149) 83 43
-------- -------- --------
NET CASH USED FOR INVESTING ACTIVITIES.............. (10,252) (6,447) (10,603)
-------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of debt...................... -- 85,000 --
Dividends paid...................................... -- (21,082) --
Debt issuance costs................................. -- (5,403) (323)
Equity contributions................................ -- 10,000 --
Principal payments on long-term debt................ (5,400) (49,192) (1,441)
Net change in line of credit........................ 1,216 (11,049) 13,530
-------- -------- --------
NET CASH PROVIDED BY (USED FOR) FINANCING
ACTIVITIES........................................ (4,184) 8,274 11,766
-------- -------- --------
Net increase (decrease) in cash..................... 128 3,720 (3,988)
Cash -- beginning of year........................... 163 291 4,011
-------- -------- --------
Cash -- end of year................................. $ 291 $ 4,011 $ 23
======== ======== ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the year for interest.............. $ 4,480 $ 19,475 $ 12,984
======== ======== ========
Cash paid during the year for income taxes.......... $ 2,750 $ 1,959 $ 1,209
======== ======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
F-31
<PAGE> 109
MS ACQUISITION CORP.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(ALL AMOUNTS IN THOUSANDS OF U.S. DOLLARS)
1. ORGANIZATION AND BASIS OF PRESENTATION
MS Acquisition Corp. ("MS Acquisition" or the "Company") is a holding
company that was formed for the sole purpose of purchasing Aetna Industries,
Inc. ("Aetna") and does not have any significant operations, other than its
investment in its subsidiaries, assets or liabilities, other than preferred
stock, junior subordinated debentures and accruals resulting from the
transactions described below. The Company has four direct and indirect
subsidiaries, Aetna, Aetna Holdings, Inc. ("Aetna Holdings"), Aetna Export Sales
Corp. ("Export") and Aetna Manufacturing Canada Ltd. ("Aetna Canada"). It does
not have any other direct or indirect subsidiaries. The Company has not
presented separate financial statements or other disclosures relative to Aetna
Holdings or Export as management has determined that such information is not
material to investors.
Transactions
On August 13, 1996, the Company completed a recapitalization. MS
Acquisition amended its charter to provide for the reclassification of its
capital stock into two new classes of common stock (voting and non-voting)
(together, New Common) and two new classes of preferred stock (New Preferred).
Existing MS Acquisition stockholders exchanged their existing MS Acquisition
shares, pro rata, for New Preferred and New Common. Citicorp Venture Capital,
Ltd. and related parties purchased shares of New Common and New Preferred for
$10,000 in cash from the existing MS Acquisition stockholders. MS Acquisition
formed Aetna Holdings, and contributed to Aetna Holdings all of the capital
stock of Aetna. Aetna Holdings then purchased from existing stockholders
approximately 61% of their existing MS Acquisition stock in exchange for (i)
$11,082 in cash (Holdings consideration) and (ii) $8,731 in principal amount of
11.0% junior subordinated debentures of Aetna Holdings due in 2007. The former
stockholders retained (i) $2.36 million in stated value of new Preferred and
(ii) shares of New Common representing 20.6% of the New Common on a fully
diluted basis.
Also, on August 13, 1996, Aetna issued $85,000 of 11 7/8% Senior Notes due
2006 (the Notes) in a private placement. The Notes have been fully and
unconditionally guaranteed by MS Acquisition, Aetna Holdings and Export, on a
joint and several basis. The proceeds of this issuance were used (i) to repay
all of the outstanding indebtedness, accrued interest and prepayment penalties
of Aetna, (ii) to fund the $11,082 cash component of the Holdings consideration,
(iii) to pay approximately $651 to terminate certain outstanding employee
options, (iv) to pay fees and expenses of approximately $5,000 in connection
with the transactions, (v) to pay approximately $570 of bonuses and accrued
compensation to certain directors and officers of Aetna, (vi) to pay $250 in
accrued management fees and (vii) for general corporate purposes.
The prepayment penalty relating to Aetna's subordinated debt, which
aggregated $1,153 (net of $594 of taxes), has been shown as an extraordinary
item in the statement of operations.
2. SUMMARY OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES
Fiscal year
The Company's fiscal year ends on the Sunday closest to December 31. Fiscal
years 1995, 1996 and 1997 consisted of 52 weeks and ended on December 31, 1995,
December 29, 1996 and December 28, 1997, respectively.
Description of operations and major customers
The Company's primary business operations are, through its wholly owned
subsidiary Aetna, the manufacture of automotive stampings and assemblies used as
original equipment components by North
F-32
<PAGE> 110
MS ACQUISITION CORP.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(ALL AMOUNTS IN THOUSANDS OF U.S. DOLLARS)
American automotive manufacturers in the production of sport utility vehicles,
mini-vans, other light trucks and passenger cars.
The Company's financial condition and results of operations depend
significantly on two major automotive manufacturers, Chrysler Corporation
(Chrysler) and General Motors Corporation (GM). Following is a summary of net
production sales to such key customers, as a percentage of net production sales:
<TABLE>
<CAPTION>
1995 1996 1997
---- ---- ----
<S> <C> <C> <C>
Chrysler.................................................... 60% 61% 66%
GM.......................................................... 36 33 25
Other....................................................... 4 6 9
--- --- ---
100% 100% 100%
=== === ===
</TABLE>
Principles of consolidation
The consolidated financial statements include the accounts of the Company,
Aetna Holdings, Aetna Export and Aetna Canada. The financial condition and
results of operations of Export, Aetna Holdings and Aetna Canada are not
significant. All significant intercompany transactions and account balances have
been eliminated in consolidation.
Use of estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect reported assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates.
Cash and cash equivalents
The Company considers cash on hand, deposits in banks and short-term
marketable securities with maturities of 90 days or less as cash and cash
equivalents for the purpose of the statement of cash flows.
Financial instruments
The Company records all financial instruments, including accounts
receivable and accounts payable, at cost, which approximates market value.
Revenue recognition
Revenue from sales and the corresponding receivables are recorded upon
shipment of product to the customer.
Inventories
Inventories of stampings and assemblies are valued at the lower of cost,
determined by the last-in, first-out (LIFO) method, or market. Inventories of
purchased parts and purchased labor are valued at the lower of cost, as
determined by the first-in, first-out (FIFO) method, or market.
F-33
<PAGE> 111
MS ACQUISITION CORP.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(ALL AMOUNTS IN THOUSANDS OF U.S. DOLLARS)
Property, plant and equipment
Property, plant and equipment are stated at cost, less any impairment loss.
The Company provides for depreciation principally using the straight-line method
over the following estimated useful lives:
<TABLE>
<CAPTION>
YEARS
-------
<S> <C>
Buildings and improvements.................................. 20-30
Machinery and equipment..................................... 5-15
</TABLE>
Upon retirement or disposal, the asset cost and related accumulated
depreciation is removed from the accounts and the net amount, less proceeds, is
charged or credited to income. Expenditures for renewals and betterments are
capitalized. Expenditures for maintenance and repairs are charged against income
as incurred. The Company adopted Statement of Financial Accounting Standard No.
121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of" (FAS 121) in the first quarter of 1996. The adoption
of this new standard did not have a material impact on the Company?s financial
statements for the year ended December 29, 1996.
Goodwill
Goodwill is amortized over forty years using the straight-line method. The
amortization of such costs are included in other (income) expense. Accumulated
amortization aggregated $6,276 and $7,077 at December 29, 1996 and December 28,
1997, respectively. The Company periodically evaluates the eventual
recoverability of the cost in excess of net assets acquired based on estimated
future operating results and cash flows.
Income taxes
Deferred tax assets and liabilities are provided for the expected future
tax consequence of temporary differences between the carrying amounts and the
tax basis of the Company's assets and liabilities.
Reclassifications
Certain amounts have been reclassified to conform to the presentation
adopted in the current year.
F-34
<PAGE> 112
MS ACQUISITION CORP.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(ALL AMOUNTS IN THOUSANDS OF U.S. DOLLARS)
3. INVENTORIES
Inventories are comprised of the following:
<TABLE>
<CAPTION>
DECEMBER 29, DECEMBER 28,
1996 1997
------------ ------------
<S> <C> <C>
Inventories valued at LIFO
Raw materials........................................ $1,758 $ 483
Work-in-process...................................... 3,458 3,134
Finished goods....................................... 2,195 1,500
------ ------
7,411 5,117
LIFO reserve........................................... (335) (200)
------ ------
7,076 4,917
------ ------
Inventories valued at FIFO
Purchased parts and purchased labor.................. 1,680 2,359
------ ------
Total inventories.................................... $8,756 $7,276
====== ======
</TABLE>
4. ACCRUED EXPENSES
Accrued expenses are comprised of the following:
<TABLE>
<CAPTION>
DECEMBER 29, DECEMBER 28,
1996 1997
------------ ------------
<S> <C> <C>
Accrued workers' compensation expense.................. $ 3,155 $3,770
Accrued interest....................................... 4,271 2,900
Taxes other than income................................ 2,357 1,809
Other.................................................. 2,578 1,369
------- ------
$12,361 $9,848
======= ======
</TABLE>
5. RELATED PARTY TRANSACTIONS
Aetna leases certain real property from a stockholder at less than fair
market value rates under lease agreements expiring in 2006. Approximately
$2,425, which represents the present value at the date of acquisition of the
favorable lease terms using a 13.0% interest rate, has been recorded as
property, plant and equipment and is being amortized on a straight-line basis
over the lease terms. Rent expense under these lease agreements aggregated $965,
$1,013 and $1,061 during 1995, 1996 and 1997, respectively. Future minimum
rental payments due under these lease agreements are as follows:
<TABLE>
<S> <C>
YEAR ENDING
1998........................................................ $ 1,114
1999........................................................ 1,170
2000........................................................ 1,163
2001........................................................ 1,085
2002........................................................ 1,139
Thereafter.................................................. 5,154
-------
$10,825
=======
</TABLE>
F-35
<PAGE> 113
MS ACQUISITION CORP.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(ALL AMOUNTS IN THOUSANDS OF U.S. DOLLARS)
The Company had a management agreement with a related party whereby it paid
an annual fee of $250 for management services during 1995. During 1996, the
Company paid $154 of management fees. Such fees were eliminated in connection
with the recapitalization of the Company (see Note 1).
6. STOCKHOLDERS' EQUITY
The changes in stockholders' equity were as follows:
<TABLE>
<CAPTION>
FAIR MARKET
RETAINED EXCESS OF
CLASS A CLASS B CAPITAL EARNINGS HISTORICAL TOTAL
COMMON COMMON IN EXCESS ACCUMULATED COST OF NET STOCKHOLDERS'
STOCK STOCK OF PAR (DEFICIT) ASSETS EQUITY
------- ------- --------- ------------ ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE AT JANUARY 1, 1995........ $ 5 $ 4 $14,991 $ (6,996) $ (7,276) $ 728
Net income........................ 4,576 4,576
Preferred dividends............... (310) (310)
------- ------- ------- -------- -------- --------
BALANCE AT DECEMBER 31, 1995...... 5 4 14,991 (2,730) (7,276) 4,994
Net income........................ 2,283 2,283
Dividends......................... (21,082) (21,082)
Capital contribution.............. 1,000 1,000
Issuance of junior subordinated
notes........................... (9,229) (9,229)
Exercise of stock options and
exchange of old common stock to
new common...................... (1) 1 (729) (729)
Preferred dividends............... (482) (482)
------- ------- ------- -------- -------- --------
BALANCE AT DECEMBER 29, 1996...... 4 5 15,509 (31,487) (7,276) (23,245)
Net loss.......................... (2,974) (2,974)
Preferred dividends............... (1,350) (1,350)
------- ------- ------- -------- -------- --------
BALANCE AT DECEMBER 28, 1997...... $ 4 $ 5 $14,159 $(34,461) $ (7,276) $(27,569)
======= ======= ======= ======== ======== ========
</TABLE>
Certain stockholders of the Aetna were also stockholders of the predecessor
company prior to the acquisition by MS Acquisition Corp. Due to this partial
continuation of control, the acquisition was recorded by the Company using a
combination of (1) the historical basis to the extent of continuing ownership
and (2) the purchase method of accounting for the remaining portion of assets
and liabilities. The purchase method requires that assets and the liabilities be
recorded at their estimated fair market value. The amount by which the fair
market value exceeded this historical cost of the net assets acquired
attributable to the stockholders with continuing interests of $7,276 is recorded
as a reduction of stockholders' equity in the accompanying consolidated balance
sheets.
Stock option plan
Executive officers, directors, employees and other key persons of the
Company are eligible to participate in the MS Acquisition Corp. Executive Stock
Option Plan (the Plan). Options granted under the Plan are nonqualified stock
options. Options to purchase an aggregate of 100,000 shares of Class A Common
Stock of MS Acquisition may be issued under the Plan. The Plan is administered
by a committee of not less than three directors appointed by the Board of
Directors of MS Acquisition.
All options granted under the Plan are granted pursuant to individual stock
option agreements executed by MS Acquisition and each option recipient. In
general, options granted under the Plan are exercised in such
F-36
<PAGE> 114
MS ACQUISITION CORP.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(ALL AMOUNTS IN THOUSANDS OF U.S. DOLLARS)
installments and at such times as are designated by the Option Committee, but in
no event may the term of an option exceed the tenth anniversary of the date on
which the option was granted. No option may be granted under the Plan after the
tenth anniversary of the effective date of the Plan, August 13, 1996.
The purchase price per share of Class A Common Stock subject to options is
determined by the Board of Directors on the date such options are granted.
Options granted under the Plan may not be transferred.
Immediately after the consummation of the Transactions discussed in Note 1,
certain employees were granted new options under the Plan to purchase shares
that in the aggregate represent up to 10% of the total number of shares on a
fully diluted basis. These options have an exercise price of $0.75 per
underlying share and become exercisable in equal installments over five years of
continued employment, subject to acceleration upon a change in control of the
Company. At December 28, 1997, 100,000 options have been granted. None of the
shares were exercisable at December 29, 1996 and all of the options expire in
2006.
The Company has elected to account for its stock-based compensation under
the guidance provided by APB No. 25, "Accounting for Stock Issued to Employees"
and its related interpretations. The effect on net income for the difference
between compensation cost determined based on APB No. 25 and the fair value
method determined in accordance with Statement of Financial Accounting Standard
No. 123, "Accounting for Stock-Based Compensation" is not material to the
financial statements.
7. PREFERRED STOCK
The authorized preferred stock of MS Acquisition consists of 293,123
authorized shares of Series A Preferred Stock of which 127,962 are outstanding,
198,292 are held by Aetna Holdings, and 2,000,000 additional shares of
authorized preferred stock which may be issued in one or more series.
Each share of Series A Preferred Stock has a stated value of $100 per
share. Dividends accrue on each share at a rate per annum equal to 11% of the
stated value thereof and are payable, when declared by the Board and to the
extent funds are legally available, semi-annually on the 13th of February and
August of each year. Dividends are cumulative from August 13, 1996, the date of
issuance. At December 28, 1996 and December 29, 1997, the Company has accrued
$482 and $532 for preferred dividends.
Each Preferred Share is entitled to liquidation preference over all other
classes of MS Acquisition Capital Stock. Series A Preferred Stock are non-voting
and are redeemable by both the Company and the holder under certain
circumstances.
8. JUNIOR SUBORDINATED NOTES
As part of the transactions discussed in Note 1, Aetna Holdings issued
Junior Subordinated Notes due August 13, 2007 in the aggregate principal amount
of $8,731 and $498 as unfunded contractual obligations to certain former option
holders. The Junior Subordinated Debentures accrue interest at the rate of 11%
per annum and interest is payable semi-annually on February 13 and August 13 of
each year, commencing on February 13, 1997.
The Company, at its option, may prepay all or a portion of the outstanding
principal amount of the Junior Subordinated Debentures and unfunded contractual
obligations, provided such payments are permitted under the Company's Senior
Notes Indenture and working capital facility. Additionally, cash interest
payments to Junior Subordinated Debentures holders are permitted under certain
circumstances. To the extent such payments are permitted, they will be funded by
dividends from Aetna to Aetna Holdings. Aetna is prohibited from making
distributions to either Aetna Holdings or MS Acquisition if (i) it is in default
under its Note Indenture, (ii) the total of the distributions would exceed 50%
of the cumulative net income (or if there is a cumulative net loss, minus 100%
of the cumulative net loss) that Aetna earned subsequent to the issuance of
F-37
<PAGE> 115
MS ACQUISITION CORP.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(ALL AMOUNTS IN THOUSANDS OF U.S. DOLLARS)
the Notes on August 13, 1996, adjusted for the sale of any capital stock of
Aetna and, (iii) under certain other circumstances.
There were no amounts accrued as of December 28, 1997 for expected payments
to holders of Junior Subordinated Debentures and unfunded contractual
obligations during 1998.
9. EMPLOYEE BENEFIT PLANS
Aetna has four defined benefit pension plans covering the majority of its
hourly employees. Aetna's funding policy is to fund costs as required under the
Employee Retirement Income Security Act of 1974, as amended. The plans' assets
are invested in a master trust.
The following table sets forth the plans' funded status and amounts
recognized in the Company's consolidated balance sheets at December 29, 1996 and
December 28, 1997:
<TABLE>
<CAPTION>
DECEMBER 29, DECEMBER 28,
1996 1996
------------ ------------
<S> <C> <C>
Actuarial present value of benefit obligations:
Accumulated benefit obligation, including vested benefits of
$1,400 and $1,223, respectively........................... $1,528 $1,572
====== ======
Plan assets at fair value................................... $1,709 $2,047
Projected benefit obligation for service rendered to date... 1,528 1,572
------ ------
Plan assets in excess of projected benefit obligation....... 181 475
Unrecognized loss from prior experience..................... 419 142
------ ------
Prepaid pension cost included in deferred costs and other
assets.................................................... $ 600 $ 617
====== ======
Weighted average discount rate.............................. 7.50% 7.25%
====== ======
Estimated long-term rate of return on assets................ 9.50% 9.50%
====== ======
</TABLE>
<TABLE>
<CAPTION>
1995 1996 1997
----- ----- -----
<S> <C> <C> <C>
Pension cost includes:
Service cost.............................................. $ 102 $ 158 $ 198
Interest cost............................................. 88 102 100
Actual return on assets................................... (262) (217) (313)
Net amortization.......................................... 164 100 156
----- ----- -----
$ 92 $ 143 $ 141
===== ===== =====
</TABLE>
Aetna also maintains a 401(k) plan for all eligible nonunion employees, and
a 401(k) plan for certain union employees not covered by the defined benefit
plans above. During fiscal years 1995, 1996 and 1997, the Company incurred $130,
$140 and $153, respectively, of expense related to 401(k) plans.
F-38
<PAGE> 116
MS ACQUISITION CORP.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(ALL AMOUNTS IN THOUSANDS OF U.S. DOLLARS)
10. INCOME TAXES
The income tax provision comprises the following:
<TABLE>
<CAPTION>
1995 1996 1997
------- ------- -------
<S> <C> <C> <C>
Current income taxes payable............................... $ 2,782 $ 2,671 $ 314
Deferred income taxes...................................... (905) (699) (1,698)
------- ------- -------
$ 1,877 $ 1,972 $(1,384)
======= ======= =======
</TABLE>
Deferred tax assets and liabilities are comprised of the following:
<TABLE>
<CAPTION>
DECEMBER 29, DECEMBER 28,
1996 1997
------------ ------------
<S> <C> <C>
DEFERRED TAX ASSETS
Workers' compensation....................................... $1,046 $1,255
Other....................................................... 896 1,513
------ ------
Gross deferred tax assets................................. 1,942 2,768
------ ------
DEFERRED TAX LIABILITIES
Depreciation................................................ 7,999 7,590
Inventory................................................... 1,647 1,243
Deferred costs and other.................................. 114 521
------ ------
Gross deferred tax liabilities............................ 9,760 9,354
------ ------
Net deferred tax liability................................ $7,818 $6,586
====== ======
</TABLE>
A reconciliation of the U.S. federal statutory rate to the Company's
effective rate is as follows:
<TABLE>
<CAPTION>
1995 1996 1997
----- ----- -----
<S> <C> <C> <C>
U.S. federal statutory rate................................. 35.0% 35.0% (35.0)%
Effect of graduated rates................................... (1.0) (1.0) 1.0
Non-deductible goodwill..................................... 4.2 7.2 5.9
Reversal of tax reserves no longer required................. (2.7) -- --
Effect of 1% increase (decrease) in federal rate............ (3.9) -- --
Research and development credit refunds..................... -- (3.0) --
Foreign sales corporation commission........................ -- -- (1.0)
Other....................................................... (2.6) (1.7) (2.7)
----- ----- -----
29.0% 36.5% (31.8)%
===== ===== =====
</TABLE>
11. CONTINGENCIES AND LEASE COMMITMENT
Aetna leases a production facility under a lease agreement accounted for as
an operating lease. The lease agreement calls for annual rent of approximately
$593 through December 1998 and annual rent of approximately $495 through October
1999 and provides for three five-year renewal options. Additionally, Aetna
leases certain machinery and equipment under operating leases. Future minimum
rental payments on the machinery and equipment are as follows: 1998 -- $337;
1999 -- $208; 2000 -- $137; 2001 -- $36.
F-39
<PAGE> 117
MS ACQUISITION CORP.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(ALL AMOUNTS IN THOUSANDS OF U.S. DOLLARS)
12. LONG-TERM DEBT
On August 13, 1996, Aetna issued $85,000 of its 11 7/8% Senior Notes due
2006 (Old Notes) in a private placement offering. On December 13, 1996, the Old
Notes were exchanged for new $85,000 11 7/8% Senior Notes due 2006 (New Notes).
The New Notes have substantially the same terms as the Old Notes except with
respect to certain transfer restrictions and registration rights relating to the
Old Notes. The New Notes have been fully and unconditionally guaranteed by MS
Acquisition, Aetna Holdings and Export, on a joint and several basis. These
notes also have certain restrictive covenants including limitations on the
following matters: (i) the incurrence of additional indebtedness, (ii) the
issuance of preferred stock by subsidiaries, (iii) the creation of liens, (iv)
sale and leaseback transactions, (v) restricted payments, (vi) the sales of
assets and subsidiary stock, (vii) mergers and consolidations (viii) payment
restrictions affecting subsidiaries and (ix) transactions with affiliates. At
December 28, 1997, the fair market value of Senior Notes approximated its
carrying value.
In May 1996, Aetna executed a new credit agreement whereby it may borrow,
based upon available collateral as defined in the agreement (principally
inventory, tooling, and accounts receivable), up to $35,000 at either (i) a
Floating Rate, defined as the greater of the Prime Rate or the sum of 1% plus
the Federal Funds Rate, or (ii) a Eurodollar Rate plus a margin agreed to by the
banks. The Company is also charged a monthly fee equal to 0.5% per annum of the
daily average unused amount of the credit agreement.
The new credit agreement contains, among other provisions, covenants
relating to the ratios of (i) debt to earnings before income taxes, interest and
depreciation and amortization (EBITDA) and (ii) interest expense to EBITDA.
In August 1996, in connection with the recapitalization of MS Acquisition,
its parent (see Note 1), Aetna amended and restated this working credit
facility. The terms and covenants remained substantially unchanged.
Debt issuance costs related to the issuance of the 11 7/8% Senior Notes
aggregated $5,204, and are being amortized over the term of the notes. Costs
associated with the new credit agreement totaled $199 and are being amortized
over the five year term. Accumulated amortization for these costs aggregated
$853 at December 28, 1997.
F-40
<PAGE> 118
MS ACQUISITION CORP.
CONDENSED CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
MARCH 29, DECEMBER 28,
1998 1997
--------- ------------
(UNAUDITED)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash........................................................ $ 264 $ 23
Accounts receivable (less allowance for doubtful accounts of
$372 and $359, respectively).............................. 46,832 40,439
Inventories................................................. 7,539 7,276
Tooling..................................................... 19,332 11,410
Other current assets........................................ 2,186 1,661
-------- --------
TOTAL CURRENT ASSETS........................................ 76,153 60,809
-------- --------
Property, plant and equipment, net.......................... 53,194 51,572
Deferred costs and other assets............................. 5,341 5,489
Cost in excess of net assets acquired....................... 24,773 24,973
-------- --------
$159,461 $142,843
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable............................................ $ 40,348 $ 33,485
Accrued expenses............................................ 13,522 9,848
Line of credit.............................................. 18,805 13,530
-------- --------
TOTAL CURRENT LIABILITIES................................... 72,675 56,863
-------- --------
Long-term debt.............................................. 85,000 85,000
Junior subordinated notes................................... 7,789 7,789
Deferred interest, junior subordinated notes................ 432 --
Deferred income taxes....................................... 7,432 7,432
Redeemable preferred stock
Series A -- $100 stated value; 293,123 shares authorized;
135,096 and 127,962 shares issued and outstanding,
respectively........................................... 13,689 13,328
Series B -- $100 stated value; 2,000,000 shares
authorized............................................. -- --
STOCKHOLDERS' EQUITY
Class A, common stock -- $.01 par value, 5,000,000 shares
authorized, 383,409 shares issued and outstanding...... 4 4
Class B, common stock -- $.01 par value, 5,000,000 shares
authorized, 516,590 shares issued and outstanding...... 5 5
Additional paid-in capital................................ 13,799 14,159
Accumulated deficit....................................... (34,088) (34,461)
Fair market value in excess of historical cost of net
assets acquired from entities partially under common
control................................................ (7,276) (7,276)
-------- --------
(27,556) (27,569)
-------- --------
$159,461 $142,843
======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
F-41
<PAGE> 119
MS ACQUISITION CORP.
CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
----------------------
MARCH 30, MARCH 29,
1997 1998
--------- ---------
(UNAUDITED)
<S> <C> <C>
Net sales................................................... $55,097 $53,085
Cost of sales............................................... 46,975 44,974
Selling, general and administrative expenses................ 3,633 4,289
Other expense............................................... 200 200
------- -------
Operating income............................................ 4,289 3,622
Net interest expense,....................................... 2,800 3,082
------- -------
Income before income taxes.................................. 1,489 540
Income tax provision........................................ 576 167
------- -------
Net income before preferred stock dividend.................. 913 373
------- -------
Preferred stock dividend requirements....................... (324) (360)
------- -------
Net income available for common stockholders................ $ 589 $ 13
======= =======
</TABLE>
See accompanying notes to consolidated financial statements.
F-42
<PAGE> 120
MS ACQUISITION CORP.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
----------------------
MARCH 30, MARCH 29,
1997 1998
--------- ---------
(UNAUDITED)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income.................................................. $ 913 $ 373
Adjustments to reconcile net income to net cash used for
operating activities
Depreciation and amortization............................. 1,823 1,941
Deferred interest......................................... -- 432
Deferred income taxes..................................... 10 --
Changes in other assets and liabilities................... (5,672) (4,566)
------- -------
NET CASH USED FOR OPERATING ACTIVITIES...................... (2,926) (1,820)
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to property, plant and equipment.................. (3,005) (3,214)
Increase in other assets.................................... (117) --
------- -------
NET CASH USED FOR INVESTING ACTIVITIES...................... (3,122) (3,214)
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES
Repayment of junior subordinated notes...................... (1,045) --
Net increase in line of credit.............................. 3,117 5,275
------- -------
NET CASH PROVIDED BY FINANCING.............................. 2,072 5,275
------- -------
Net increase (decrease) in cash............................. (3,976) 241
Cash -- beginning of year................................... 4,011 23
------- -------
Cash -- end of period....................................... $ 35 $ 264
======= =======
</TABLE>
See accompanying notes to consolidated financial statements.
F-43
<PAGE> 121
MS ACQUISITION CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
(UNAUDITED)
1. BASIS OF PRESENTATION
MS Acquisition Corp. (MS Acquisition) was formed primarily for the purpose
of purchasing Aetna Industries, Inc. (Aetna). It does not have any significant
operations, other than its investments in its subsidiaries assets or
liabilities, other than preferred stock, junior subordinated debentures and
accruals.
The accompanying unaudited condensed consolidated financial statements of
MS Acquisition have been prepared in accordance with Rule 10-01 of Regulation
S-X and do not include all the information and notes required by generally
accepted accounting principles for complete financial statements. All
adjustments, which include only normal recurring adjustments that are, in the
opinion of management, necessary for a fair presentation of the results of the
interim periods, have been made. The results of operations for such interim
periods are not necessarily indicative of results of operations for a full year.
The unaudited condensed consolidated financial statements should be read in
conjunction with MS Acquisition's consolidated financial statements and notes
thereto for the year ended December 28, 1997.
2. SUBSEQUENT EVENT
On April 14, 1998, the outstanding capital stock of Societe Financiere de
Developpement Industriel et Technologique, a French societe anonyme (Sofedit)
was transferred to MS Acquisition Corp., the holding company for Aetna, in
consideration of (i) promissory notes of MS Acquisition in an aggregate
principal amount of approximately $41 million; (ii) a portion of Sofedit's
profits for fiscal year 1997 to be paid to the former stockholders of Sofedit
consistent with the past dividend policy of Sofedit; (iii) $27 million in Series
B Preferred Stock of MS Acquisition; and (iv) 3,000,000 shares of Class A Common
Stock of MS Acquisition (representing approximately 75% of MS Acquisition's
common stock ownership). In addition, MS Acquisition assumed approximately $12
million of debt of the Sofedit group in connection with the transaction.
3. INVENTORIES
Inventories are comprised of the following:
<TABLE>
<CAPTION>
MARCH 29, DECEMBER 28,
1998 1997
--------- ------------
<S> <C> <C>
Inventories valued at LIFO
Raw materials............................................. $1,603 $ 483
Work-in-process........................................... 2,505 3,134
Finished goods............................................ 1,701 1,500
------ ------
5,809 5,117
LIFO reserve.............................................. (200) (200)
------ ------
5,609 4,917
------ ------
Inventories valued at FIFO
Purchased parts and purchased labor....................... 1,930 2,359
------ ------
Total inventories......................................... $7,539 $7,276
====== ======
</TABLE>
F-44
<PAGE> 122
MS ACQUISITION CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
4. STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
FAIR MARKET
VALUE IN
EXCESS OF
HISTORICAL
CLASS A CLASS B ADDITIONAL COST OF TOTAL
COMMON COMMON PAID-IN ACCUMULATED NET ASSETS STOCKHOLDERS'
STOCK STOCK CAPITAL DEFICIT ACQUIRED EQUITY
------- ------- ---------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE AT DECEMBER 28,
1997.................. $4 $5 $14,159 $(34,461) $(7,276) $(27,569)
Net income.............. 373 373
Dividends on redeemable
preferred stock....... (360) (360)
-- -- ------- -------- ------- --------
BALANCE AT MARCH 29,
1998.................. $4 $5 $13,799 $(34,088) $(7,276) $(27,556)
== == ======= ======== ======= ========
</TABLE>
F-45
<PAGE> 123
- ---------------------------------------------------------
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS AND,
IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY UNDERWRITER. THIS PROSPECTUS DOES
NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY OF THE
SECURITIES OFFERED HEREBY IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS
UNLAWFUL TO MAKE SUCH OFFER IN SUCH JURISDICTION. NEITHER THE DELIVERY OF THIS
PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE
ANY IMPLICATION THAT THE INFORMATION HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT
TO THE DATE HEREOF OR THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE
COMPANY SINCE SUCH DATE.
------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary....................... 4
Risk Factors............................. 12
The Company.............................. 18
Use of Proceeds.......................... 19
Exchange Rate Information................ 19
Dividend Policy.......................... 19
Dilution................................. 20
Capitalization........................... 21
Selected Unaudited Pro Forma Combined
Condensed Financial Data............... 23
Selected Historical Consolidated
Financial Information of the Company
and Sofedit as Predecessor............. 28
Selected Historical Consolidated
Financial Information of MS
Acquisition............................ 30
Management's Discussion and Analysis of
Financial Condition and Results of
Operations............................. 31
Business................................. 47
Management............................... 59
Principal Stockholders................... 65
Certain Transactions..................... 69
Description of Capital Stock............. 71
Shares Eligible for Future Sale.......... 73
Underwriting............................. 74
Legal Matters............................ 76
Experts.................................. 76
Available Information.................... 76
Index to Financial Statements............ F-1
</TABLE>
UNTIL , 1998 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL DEALERS
EFFECTING TRANSACTIONS IN THE COMMON STOCK, WHETHER OR NOT PARTICIPATING IN THIS
DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS DELIVERY REQUIREMENT
IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING
AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
- ---------------------------------------------------------
---------------------------------------------------------
MS ACQUISITION CORP.
[Logo]
Shares of Common Stock
------------------
PROSPECTUS
------------------
CREDIT SUISSE FIRST BOSTON
BEAR, STEARNS & CO. INC.
---------------------------------------------------------
<PAGE> 124
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the estimated expenses, other than
underwriting discounts and commissions, to be borne by the Company in connection
with the offering of the securities being hereby registered.
<TABLE>
<CAPTION>
ITEM
----
<S> <C>
SEC Registration Fee........................................ $27,140
National Association of Securities Dealers, Inc. Filing
Fee....................................................... $ 9,700
NYSE Listing Fee............................................ *
Transfer agent and Registrar Fees........................... *
Accounting Fees and Expenses................................ *
Legal Fees and Expenses..................................... *
Printing and Mailing Expenses............................... *
Miscellaneous............................................... *
-------
TOTAL..................................................... $ *
=======
</TABLE>
- ---------------
* To be provided by amendment
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the Delaware General Corporation Law ("DGCL") provides that
a corporation may indemnify any person who was or is a party or is threatened to
be made a party to any threatened, pending or completed action, suit or
proceeding whether civil, criminal or investigative (other than an action by or
in the right of the corporation) by reason of the fact that he is or was a
director, officer, employee or agent of the corporation, or is or was serving at
the request of the corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
against expenses (including attorneys' fees), judgments, fines and amounts paid
in settlement actually and reasonably incurred by him in connection with such
action, suit or proceeding if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. Section 145 further
provides that a corporation similarly may indemnify any such person serving in
any such capacity who was or is a party or is threatened to be made a party to
any threatened, pending or completed action or suit by or in the right of the
corporation to procure a judgment in its favor, against expenses (including
attorneys' fees) actually and reasonably incurred in connection with the defense
or settlement of such action or suit if he acted in good faith and in a manner
he reasonably believed to be in or not opposed to the best interests of the
corporation and except that no indemnification shall be made in respect of any
claim, issue or matter as to which such person shall have been adjudged to be
liable to the corporation unless and only to the extent that the Delaware Court
of Chancery or such other court in which such action or suit was brought shall
determine upon application that, despite the adjudication of liability but in
view of all the circumstances of the case, such person is fairly and reasonably
entitled to indemnity for such expenses which the Court of Chancery or such
other court shall deem proper.
Section 102(b)(7) of the DGCL permits a corporation to include in its
certificate of incorporation a provision eliminating or limiting the personal
liability of a director to the corporation or its stockholders for monetary
damages for breach of fiduciary duty as a director, provided that such provision
shall not eliminate or limit the liability of a director (i) for any breach of
the director's duty of loyalty to the corporation or its stockholders, (ii) for
acts or omission not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) under Section 174 of the DGCL (relating to
unlawful payment of dividends and
II-1
<PAGE> 125
unlawful stock purchase and redemption) or (iv) for any transaction from which
the director derived an improper personal benefit.
The Company's Certificate of Incorporation provides that the Company's
Directors shall not be liable to the Company or its stockholders for monetary
damages for breach of fiduciary duty as a director provided, however, that such
exculpation from liabilities is not permitted with respect to liability arising
from items described in clauses (i) through (iv) in the preceding paragraph. The
Certificate of Incorporation and the Company's By-Laws further provide that the
Company shall indemnify its directors and officers to the fullest extent
permitted by the DGCL. If the DGCL is amended after the date of filing of the
Certificate of Incorporation to authorize corporate action further eliminating
or limiting the personal liability of directors, then the liability of a
director of the Corporation shall be eliminated or limited to the fullest extent
permitted by the DGCL, as so amended from time to time.
The directors and officers of the Company are covered under directors' and
officers' liability insurance policies maintained by the Company.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
Within the past three years the Company issued securities which were not
registered under the Securities Act of 1933, as amended (the "Securities Act")
as follows:
In connection with its recapitalization of August 1996, MS Acquisition
amended its certificate of incorporation to provide for the reclassification of
its capital stock into two new classes (voting and non-voting) of common stock
(together, "MS Common Stock") and a new class of preferred stock ("MS Preferred
Stock"). The former stockholders of MS Acquisition exchanged their MS
Acquisition stock, pro rata, for MS Common Stock and MS Preferred Stock and CVC
purchased shares of MS Preferred Stock and MS Common Stock from the former
stockholders for $10.0 million cash. Subsequently, MS Acquisition formed Aetna
Holdings, and contributed to Aetna Holdings all of the shares of its capital
stock. Aetna Holdings purchased from the former stockholders of MS Acquisition
approximately 61% of their MS Acquisition stock in exchange for: (i) $11.1
million in cash; (ii) $8.7 million in principal amount of 11.0% junior
subordinated debentures of Aetna Holdings due 2007; (iii) $0.5 million in
unfunded contractual obligations of Aetna Holdings to certain former MS
Acquisition option holders; and (iv) $11.1 million cash. In addition, MS
Acquisition paid approximately $650,000 in cash to terminate certain outstanding
employee options. The former stockholders of MS Acquisition retained: (i) $2.36
million in stated value of New Preferred Stock and (ii) shares of MS Common
Stock representing 20.6% of the total number of shares of MS Common Stock then
outstanding on a fully-diluted basis. Such transaction was exempt from
registration pursuant to Section 4(2) of the Securities Act of 1993 as amended.
On April 14, 1998, pursuant to the terms of the Stock Purchase Agreement,
MS Acquisition and Sofedit completed a transaction whereby Sofedit's former
stockholders transferred the outstanding capital stock of Sofedit to MS
Acquisition in exchange for: (i) promissory notes of MS Acquisition in the
principal amount of $40.9 million; (ii) dividends in an amount of approximately
$1.0 million; (iii) 270,000 shares of Series B Preferred Stock ($27.0 million
stated value) of MS Acquisition; (iv) shares of Common Stock of MS
Acquisition and (v) the assumption of approximately $12.0 million of debt of the
former Sofedit stockholders. Such transaction was exempt from registration
pursuant to Section 4(2) of the Securities Act of 1933, as amended.
ITEM 16. EXHIBITS
(A) EXHIBITS:
The following is a list of exhibits filed as a part of this registration
statement.
<TABLE>
<S> <C>
1.1* Form of Underwriting Agreement
2.1 Stock Purchase Agreement dated April 3, 1998 among the MS
Acquisition, Sofedit and the other parties set forth on the
signature pages thereto
3.1* Amended and Restated Certificate of Incorporation of
Registrant
</TABLE>
II-2
<PAGE> 126
<TABLE>
<S> <C>
3.2* Amended and Restated By-laws of Registrant
4.1* Specimen of Stock Certificate for the Common Stock of the Registrant
4.2 Stockholders Agreement, dated as of April 9, 1998, among MS Acquisition and its stockholders
4.3 Registration Rights Agreement relating to the Common Stock of MS Acquisition, dated as of April 9, 1998,
among and the other parties set forth on the signature pages thereto
5.1* Form of Opinion of Shearman & Sterling, as counsel for the Registrant
10.1 Indenture of the Senior Notes of Aetna, dated as of August 1, 1996 by and among MS Acquisition, Aetna,
Aetna Holdings, Aetna Export Sales Corp. and Norwest Bank Minnesota, National Association, as Trustee
10.2 Forms of Senior Notes Due 2006 of Aetna, dated as of August 8, 1996
10.3 Amended and Restated Credit Agreement, dated as of April 10, 1998, among Aetna, Aetna Export Sales Corp.,
MS Acquisition, Aetna Holdings, Aetna Manufacturing Canada, the Lenders Party thereto and NBD Bank, as
Agent, as amended, together with the Amendments of May 20, 1998 and August 6, 1998
10.4 Form of Amended and Restated Junior Subordinated Promissory Note Due 2007 of Aetna Holdings, dated August
13, 1996
10.5 Form of Unfunded Promises to Pay of Aetna Holdings, dated February 13, 1998
10.6 Amended and Restated Executive Stock Option Plan of MS Acquisition dated August 13, 1996 as amended,
together with the Amendment of April 7, 1998
10.7 Form of Stock Option Agreement, pursuant to the 1996 Amended and Restated Executive Stock Option Plan of
MS Acquisition
10.8* 1998 Equity Incentive Plan of the Registrant dated , 1998
10.9* Form of Stock Option Agreement, pursuant to the 1998 Equity Incentive Plan of the Registrant
10.10* Form of Employment Agreement between Francis Barge and the Registrant
10.11* Form of Employment Agreement between Felix Domenech and the Registrant
10.12* Form of Employment Agreement between Jean-Rene Hergoualc'h and the Registrant
10.13* Form of Employment Agreement between Ueli Spring and the Registrant
10.14* Form of Employment Agreement between Harold Brown and the Registrant
10.15* Form of Employment Agreement between Gary Easterly and the Registrant
10.16* Form of Purchase Order with Chrysler Corporation
10.17* Form of Purchase Order with General Motors
10.18* Form of Purchase Order with Peugeot
10.19* Form of Purchase Order with Renault
10.20 Promissory Notes of MS Acquisition, dated April 14, 1998
15.1 Letter from Barbier Frinault & Autres regarding Unaudited Interim Financial Information
21.1 List of Subsidiaries of the Registrant
23.1* Consent of Shearman & Sterling (included in Exhibit 5.1)
23.2 Consent of Barbier Frinault & Autres
23.3 Consent of PricewaterhouseCoopers LLP
23.4 Consent of Cabinet Constantin & Associes
23.5 Consent of Ueli Spring in connection with his nomination as a Director of the Company following the
Offering
24.1 Power of Attorney (included on signature page to this Registration Statement)
</TABLE>
- ---------------
* To be filed by amendment.
II-3
<PAGE> 127
(B) FINANCIAL STATEMENTS AND SCHEDULES:
(1) Financial Statements
The financial statements filed as part of this Registration Statement are
listed in the Index to Financial Statements on page F-1.
(2) Financial Statement Schedules
All required information is set forth in the financial statements included
in the Prospectus constituting part of this Registration Statement.
ITEM 17. UNDERTAKINGS
The Undersigned registrant hereby undertakes to provide to the Underwriters
at the closing specified in the Underwriting Agreement certificates in such
denominations and registered in such names as required by the Underwriters to
permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions or otherwise, the registrant has
been advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act of
1933 and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act of 1933 and will be governed by the final adjudication of such issue.
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in form of
prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act of 1933 shall be deemed to be part of this registration
statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities Act
of 1933, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
II-4
<PAGE> 128
SIGNATURES
Pursuant to the requirements of the Securities Act of 1993, as amended, the
registrant certifies that it has duly caused this Registration Statement to be
signed on its behalf by the undersigned, thereunto duly authorized, in the city
of St. Quentin en Yvelines, on this 11th day of August, 1998.
MS Acquisition Corp.
By: /s/ FRANCIS BARGE
------------------------------------
Name: Francis Barge
Title: President and Chief
Executive Officer
II-5
<PAGE> 129
POWER OF ATTORNEY
We, the undersigned officers and directors of MS Acquisition Corp., hereby
severally constitute and appoint Francis Barge our true and lawful attorney with
full power to him singly to sign for us and in our names in the capacities
indicated below the Registration Statement on Form S-1 filed herewith and any
and all pre-effective and post-effective amendments to said Registration
Statement, and, in connection with any registration of additional securities
pursuant to Rule 462(b) under the Securities Act of 1933, as amended, to sign
any abbreviated registration statement and any and all amendments thereto, and
to file the same, with all exhibits thereto and other documents in connection
therewith, in each case, with the Securities and Exchange Commission, and
generally to do all such things in our names and on our behalf in our capacities
as officers and directors to enable MS Acquisition Corp. to comply with the
provisions of the Securities Act of 1933, as amended, and all requirements of
the Securities and Exchange Commission, hereby ratifying and confirming our
signatures as they may be signed by our said attorney to said Registration
Statement and any and all amendments thereto.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the date indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ FRANCIS BARGE Director; Chairman, President and August 11, 1998
- --------------------------------------------- Chief Executive Officer
Francis Barge
/s/ FELIX DOMENECH Director; Group Executive Vice- August 11, 1998
- --------------------------------------------- President Finance
Felix Domenech
/s/ JEAN-RENE HERGOUALC'H Director; Group Executive Vice- August 11, 1998
- --------------------------------------------- President Product Development
Jean-Rene Hergoualc'h
Director
- ---------------------------------------------
David Howe
/s/ MICHAEL DELANEY Director August 11, 1998
- ---------------------------------------------
Michael Delaney
/s/ JEAN-PHILIPPE LARRAMENDY Director August 11, 1998
- ---------------------------------------------
Jean-Philippe Larramendy
/s/ GERY-EDOUARD LANTHIER Director August 11, 1998
- ---------------------------------------------
Gery-Edouard Lanthier
</TABLE>
<PAGE> 1
EXHIBIT 2.1
STOCK PURCHASE AGREEMENT
AMONG
SOFEDIT,
MS,
BDHI, CIBA,CEFI
THE BARGE FAMILY,
THE DOMENECH FAMILY,
YACESE,
JRMH,
H.H.A.WAY,
AND
SOFEDIT FINANCIAL SHAREHOLDERS
DATED AS OF APRIL 3, 1998
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
SECTION PAGE
<S> <C>
ARTICLE I
DEFINITIONS
1.01. Certain Defined Terms............................................................................2
ARTICLE II
PURCHASE AND SALE
2.01. Purchase and Sale of the Shares..................................................................9
2.02. Consideration....................................................................................9
2.03. Closing.........................................................................................10
2.04. Closing Deliveries by the Sellers...............................................................10
2.05. Closing Deliveries by MS........................................................................10
2.06. Sellers' Representative.........................................................................10
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF MS
3.01. Organization, Authority and Qualification of MS.................................................11
3.02. Capital Stock of MS; Ownership of the Shares....................................................11
3.03. Subsidiaries....................................................................................13
3.04. Corporate Books and Records.....................................................................14
3.05. No Conflict.....................................................................................14
3.06. Governmental Consents and Approvals.............................................................15
3.07. Financial Information, Books and Records, Securities Reports....................................15
3.08. No Undisclosed Liabilities......................................................................16
3.09. Conduct in the Ordinary Course; Absence of Certain Changes, Events and Conditions...............17
3.10. Litigation......................................................................................18
3.11. Certain Interests...............................................................................18
3.12. Compliance with Laws............................................................................19
3.13. Environmental and Other Permits and Licenses; Related Matters...................................19
3.14. Material Contracts..............................................................................20
3.15. Real Property...................................................................................22
3.16. Customers.......................................................................................23
3.17. Suppliers.......................................................................................23
3.18. Employee Benefit Matters........................................................................23
3.19. Labor Matters...................................................................................26
</TABLE>
<PAGE> 3
-ii-
<TABLE>
<CAPTION>
SECTION PAGE
<S> <C>
3.20. Key Employees...................................................................................27
3.21. Taxes...........................................................................................27
3.22. Insurance.......................................................................................28
3.23. Full Disclosure.................................................................................28
3.24. Brokers.........................................................................................28
3.25. Stockholder Approvals...........................................................................28
3.26. State Takeover Statute..........................................................................28
ARTICLE IV-A
REPRESENTATIONS AND WARRANTIES OF CIBA
4.A.01. Organization of CIBA..........................................................................29
4.A.02. No Conflict...................................................................................29
4.A.03. Governmental Consents and Approvals...........................................................29
4.A.04. Capital Stock of CIBA.........................................................................29
4.A.05. Ownership of the CIBA Shares..................................................................30
4.A.06. Financial Information, Books and Records......................................................30
4.A.07. No Undisclosed Liabilities....................................................................30
4.A.08. Conduct in the Ordinary Course; Absence of Certain Changes, Events and Conditions.............31
4.A.09. Litigation....................................................................................32
4.A.10. Compliance with Laws..........................................................................32
4.A.11. Absence of Activities.........................................................................32
4.A.12. Subsidiaries..................................................................................32
4.A.13. Corporate Books and Records...................................................................32
4.A.14. Brokers.......................................................................................32
4.A.15. Taxes.........................................................................................32
4.A.16. Full Disclosure...............................................................................33
4.A.17. Title to the Shares Owned by CIBA in BDHI.....................................................33
4.A.18. Stockholders Approval.........................................................................33
ARTICLE IV-B
REPRESENTATIONS AND WARRANTIES OF THE BARGE FAMILY AND CEFI
4.B.01. Authority and Qualification of the Barge Family and ..........................................33
4.B.02. No Conflict...................................................................................34
4.B.03. Governmental Consents and Approvals...........................................................34
4.B.04. Title to the Shares Owned by the Barge Family and CEFI in CIBA................................34
</TABLE>
<PAGE> 4
-iii-
<TABLE>
<CAPTION>
SECTION PAGE
<S> <C>
4.B.05. Full Disclosure...............................................................................34
4.B.06. Brokers.......................................................................................35
4.B.07. Stockholders Approval.........................................................................35
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF EACH OF THE MEMBERS
OF THE DOMENECH FAMILY AND YACESE
5.01. Organization of YACESE, Authority and Qualification of the Domenech
Family and YACESE..............................................................................35
5.02. No Conflict.....................................................................................36
5.03. Governmental Consents and Approvals.............................................................36
5.04. Title to the Shares Owned by the Domenech Family and YACESE in BDHI
..............................................................................................36
5.05. Full Disclosure.................................................................................36
5.06. Brokers.........................................................................................36
5.07. Stockholders Approval...........................................................................36
ARTICLE VI-A
REPRESENTATIONS AND WARRANTIES OF JRMH AND H.H.A.WAY
6.A.01. Organization, Authority and Qualification of JRMH and H.H.A.WAY...............................37
6.A.02. No Conflict...................................................................................37
6.A.03. Governmental Consents and Approvals...........................................................38
6.A.04. Title to the Shares Owned by JRMH and H.H.A.WAY in BDHI.......................................38
6.A.05. Full Disclosure...............................................................................38
6.A.06. Brokers.......................................................................................38
6.A07. Stockholders Approval.........................................................................38
ARTICLE VI-B
REPRESENTATIONS AND WARRANTIES OF BDHI
6.B.01. Organization, Authority and Qualification of BDHI.............................................38
6.B.02. Capital Stock of BDHI; Ownership of the BDHI Shares...........................................39
. No Conflict.........................................................................................39
</TABLE>
<PAGE> 5
-iv-
<TABLE>
<CAPTION>
SECTION PAGE
<S> <C>
6.B.04. Governmental Consents and Approvals...........................................................39
6.B.05. Subsidiaries..................................................................................40
6.B.06. Corporate Books and Records...................................................................40
6.B.07. Financial Information, Books and Records......................................................40
6.B.08. No Undisclosed Liabilities....................................................................40
6.B.09. Conduct in the Ordinary Course; Absence of Certain Changes, Events and
Conditions.....................................................................................40
6.B.10. Litigation....................................................................................42
6.B.11. Compliance with Laws..........................................................................42
6.B.12. Brokers.......................................................................................42
6.B.13. SOFEDIT Shares................................................................................42
6.B.14. Taxes.........................................................................................42
6.B.15. Full Disclosure...............................................................................43
6.B.16. Stockholders Approval.........................................................................43
ARTICLE VII
REPRESENTATIONS AND WARRANTIES OF
THE SOFEDIT FINANCIAL SHAREHOLDERS
7.01. Organization, Authority and Qualification of the SOFEDIT Financial
Shareholders...................................................................................43
7.02. No Conflict.....................................................................................43
7.03. Governmental Consents and Approvals.............................................................44
7.04. Brokers.........................................................................................44
7.05. SOFEDIT Shares..................................................................................44
7.06. Full Disclosure.................................................................................44
7.07. Stockholders Approval...........................................................................44
ARTICLE VIII
REPRESENTATIONS AND WARRANTIES OF SOFEDIT
8.01. Organization, Authority and Qualification of SOFEDIT............................................44
8.02. Capital Stock of SOFEDIT........................................................................45
8.03. Ownership of the shares of SOFEDIT..............................................................45
8.04. Subsidiaries....................................................................................46
8.05. Corporate Books and Records.....................................................................47
8.06. No Conflict.....................................................................................47
8.07. Governmental Consents and Approvals.............................................................47
8.08. Financial Information, Books and Records........................................................47
8.09. No Undisclosed Liabilities......................................................................48
</TABLE>
<PAGE> 6
-v-
<TABLE>
<CAPTION>
SECTION PAGE
<S> <C>
8.10. Conduct in the Ordinary Course; Absence of Certain Changes, Events and
Conditions......................................................................................48
8.11. Litigation......................................................................................50
8.12. Compliance with Laws............................................................................50
8.13. Environmental and Other Permits and Licenses; Related Matters...................................50
8.14. Material Contracts..............................................................................51
8.15. Brokers.........................................................................................53
8.16. Taxes...........................................................................................53
8.17. Customers.......................................................................................53
8.18. Suppliers.......................................................................................54
8.19. Employee Benefit Matters........................................................................54
8.20. Labor Matters...................................................................................55
8.21. Certain Interests...............................................................................56
8.22. Real Property...................................................................................56
8.23. Insurance.......................................................................................57
8.24. Full Disclosure.................................................................................57
8.25. Stockholders Approval...........................................................................57
ARTICLE IX
ADDITIONAL AGREEMENTS
9.01. Conduct of Business Prior to the Closing........................................................58
9.02. Access to Information...........................................................................58
9.03. Confidentiality.................................................................................59
9.04. Regulatory and Other Authorizations; Notices and Consents.......................................59
9.05. Notice of Developments..........................................................................60
9.06. Stockholder Approvals...........................................................................60
9.07. Contribution(s) of BDHI Shares to YACESE........................................................60
9.08. Contribution(s) of BDHI Shares to H.H.A.WAY.....................................................61
9.09. Purchases of BDHI Shares........................................................................61
9.10. Promise to Transfer the Preferred Shares........................................................61
9.11. Further Action..................................................................................61
9.12. Securities Act..................................................................................61
ARTICLE X
CONDITIONS TO CLOSING
10.01. Conditions to Obligations of MS................................................................62
</TABLE>
<PAGE> 7
-vi-
<TABLE>
<CAPTION>
SECTION PAGE
<S> <C>
Termination of the SOFEDIT Stockholders Agreement and of the BDHI
Stockholders Agreement.........................................................................63
10.02. Conditions to Obligations of SOFEDIT, BDHI, CIBA and the Sellers...............................63
ARTICLE XI
SURVIVAL OF REPRESENTATIONS AND WARRANTIES
11.01. Survival of Representations and Warranties.....................................................66
ARTICLE XII
TERMINATION AND WAIVER
12.01. Termination....................................................................................66
12.02. Effect of Termination..........................................................................67
12.03. Waiver.........................................................................................68
ARTICLE XIII
GENERAL PROVISIONS
13.01. Expenses.......................................................................................68
13.02. Notices........................................................................................68
13.03. Public Announcements...........................................................................69
13.04. Headings.......................................................................................69
13.05. Severability...................................................................................69
13.06. Entire Agreement...............................................................................69
13.07. Assignment.....................................................................................70
13.08. No Third Party Beneficiaries...................................................................70
13.09. Amendment......................................................................................70
13.10. Governing Law..................................................................................70
13.11. Dispute Resolution and Arbitration.............................................................70
13.12. Counterparts...................................................................................71
13.13. Specific Performance...........................................................................71
13.14. Limited Recourse...............................................................................71
</TABLE>
<PAGE> 8
STOCK PURCHASE AGREEMENT, dated as of April 3, 1998, between
MS Acquisition Corp., a Delaware corporation ("MS"), Societe Financiere de
Developpement Industriel et Technologique, a French societe anonyme ("SOFEDIT"),
BDHI, a French societe anonyme ("BDHI"), CIBA, a French societe anonyme
("CIBA"), CEFI, a Luxembourg societe de participations financieres ("CEFI"), the
individuals listed in Exhibit 1 hereto, duly represented by Mr. Francis Barge
(collectively, the "Barge Family"), YACESE S.A., a French societe anonyme
("YACESE"), the individuals listed in Exhibit 2 hereto, duly represented by Mr.
Felix Domenech (collectively, the "Domenech Family"), JRMH, a French societe
civile ("JRMH"), H.H.A.WAY S.A., a French societe anonyme ("H.H.A.WAY"), and the
entities listed in Exhibit 3 hereto (collectively, the "SOFEDIT Financial
Shareholders" and, together with CEFI, YACESE, JRMH, H.H.A.WAY, the Barge
Family, the Domenech Family, the "Sellers").
W I T N E S S E T H:
WHEREAS, MS and the Sellers have agreed on the principle of a
transaction whereby the Sellers would sell to MS the CIBA Shares (as defined
below), the BDHI Shares (as defined below) and the SOFEDIT Shares (as defined
below), in consideration of the issuance by MS of promissory notes issued by MS
and shares of Common Stock and Preferred Stock of MS.
WHEREAS, BDHI and the SOFEDIT Financial Shareholders own all
the issued and outstanding shares of common stock, FF 100 par value per share
(the "SOFEDIT Common Stock"), of SOFEDIT;
WHEREAS, as of the date hereof, CIBA, YACESE, JRMH and the
individuals listed in Exhibit 5 hereto own all the issued and outstanding shares
of common stock, FF 100 par value per share of BDHI (the "BDHI Common Stock");
WHEREAS, the members of the Barge Family and CEFI own all the
issued and outstanding shares of common stock, FF 100 par value per share (the
"CIBA Common Stock"), of CIBA;
WHEREAS, the SOFEDIT Financial Shareholders wish to sell to
MS, and MS wishes to purchase from the SOFEDIT Financial Shareholders, their
shares of SOFEDIT (the "SOFEDIT Shares") held at the Closing (as defined below),
upon the terms and subject to the conditions set forth herein;
WHEREAS, between the date hereof and the Closing Date (as
defined below), Mr. Felix Domenech will sell 578 shares of BDHI to COMPAGNIE DE
FINANCEMENT INDUSTRIEL S.A. and Mr. Jean-Rene Hergoualc'h will sell one share of
BDHI to H.H.A.WAY;
WHEREAS, on the Closing Date (as defined below), the
contribution of 3.051 shares of BDHI by JRMH to H.H.A.WAY will become effective;
<PAGE> 9
2
WHEREAS, YACESE, the members of the Domenech Family,
H.H.A.WAY, JRMH and COMPAGNIE DE FINANCEMENT INDUSTRIEL S.A wish to sell to MS,
and MS wishes to purchase from YACESE, the Domenech Family, H.H.A.WAY, JRMH and
COMPAGNIE DE FINANCEMENT INDUSTRIEL S.A., all their shares of BDHI (the "BDHI
Shares") owned at the Closing Date (as defined below), upon the terms and
subject to the conditions set forth herein; and
WHEREAS, the members of the Barge Family and CEFI wish to sell
to MS, and MS wishes to purchase from the members of the Barge Family and CEFI,
their shares of CIBA (the "CIBA Shares"), upon the terms and subject to the
conditions set forth herein;
NOW, THEREFORE, in consideration of the premises and the
mutual agreements and covenants hereinafter set forth, the parties hereto agree
as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01. Certain Defined Terms. As used in this
Agreement, the following terms shall have the following meanings:
"Action" means any claim, action, suit, arbitration, inquiry,
proceeding or investigation by or before any Governmental Authority.
"Aetna Holdings" means Aetna Holdings, Inc., a wholly owned
subsidiary of MS.
"Aetna Industries" means Aetna Industries, Inc., a wholly
owned subsidiary of Aetna Holdings.
"Affiliate" means, with respect to any specified Person, any
other Person that directly, or indirectly through one or more intermediaries,
controls, is controlled by, or is under common control with, such specified
Person.
"Agreement" or "this Agreement" means this Stock Purchase
Agreement, dated as of April 3, 1998, among the parties hereto (including the
Exhibits hereto and the Disclosure Schedules) and all amendments hereto made in
accordance with the provisions of Section 14.09.
"BDHI Reference Balance Sheet" means the audited balance sheet
of BDHI as of December 31, 1997, a copy of which is set forth in Section
6.B.07(a) of the Disclosure Schedules.
<PAGE> 10
3
"BDHI Stockholders Agreement" means the agreement dated March
1, 1995, relating to, among other things, the management of BDHI, among Messrs.
Francis Barge, Felix Domenech and Jean-Rene Hergoualc'h.
"Business" means, as applicable to MS or SOFEDIT or their
respective subsidiaries, the business of automobile equipment part supplier and
all other business which prior to the date hereof has been conducted by MS or
SOFEDIT or their respective subsidiaries, as applicable.
"Business Day" means any day that is not a Saturday, a Sunday
or other day on which banks are required or authorized by law to be closed in
the City of New York or Paris.
"CERCLA" means the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended through the date hereof.
"CERCLIS" means the Comprehensive Environmental Response,
Compensation and Liability Information System, as updated through the date
hereof.
"CIBA Reference Balance Sheet" means the audited balance sheet
of CIBA as of December 31, 1997, a copy of which is set forth in Section
4.A.06(a) of the Disclosure Schedules.
"Code" means the Internal Revenue Code of 1986, as amended.
"Control" (including the terms "control", "controlled by" and
"under common control with"), with respect to the relationship between or among
two or more Persons, means the possession, directly or indirectly or as trustee
or executor, of the power to direct or cause the direction of the affairs or
management of a Person, whether through the ownership of voting securities, as
trustee or executor, by contract or otherwise, including, without limitation,
the ownership, directly or indirectly, of securities having the power to elect a
majority of the board of directors or similar body governing the affairs of such
Person.
"Disclosure Schedules" means the Disclosure Schedules attached
hereto, dated as of the date hereof, and forming a part of this Agreement.
"Encumbrance" means any security interest, pledge, mortgage,
lien (including, without limitation, environmental and tax liens), charge,
encumbrance, adverse claim, preferential arrangement or restriction of any kind,
including, without limitation, any restriction on the use, voting, transfer,
receipt of income or other exercise of any attributes of ownership, in each case
other than pursuant to the Stockholders Agreement, the New Stockholders
Agreement, the Registration Rights Agreement, or the New Registration Rights
Agreement.
"Environment" means surface waters, ground waters, soil,
subsurface strata and ambient air.
<PAGE> 11
4
"Environmental Claims" means any and all administrative,
regulatory or judicial actions, suits, demands, demand letters, claims, liens,
notices of non-compliance or violation, investigations, proceedings, consent
orders or consent agreements relating in any way to any Environmental Law or any
Environmental Permit (hereafter "Claims"), including, without limitation, (a)
any and all Claims by Governmental Authorities for enforcement, cleanup,
removal, response, remedial or other actions or damages pursuant to any
applicable Environmental Law and (b) any and all Claims by any Person seeking
damages, contribution, indemnification, cost recovery, compensation or
injunctive relief resulting from Hazardous Materials or arising from alleged
injury or threat of injury to health, safety or the Environment.
"Environmental Condition" means a condition relating to or
arising or resulting from a failure to comply with any applicable Environmental
Law or Environmental Permit or a Release of Hazardous Materials into the
Environment that is required to be remediated under applicable Environmental
Laws.
"Environmental Laws" means any Law in effect on the Closing
Date and any binding judicial or administrative interpretation thereof,
including any binding judicial or administrative order, consent decree or
judgment, relating to pollution or protection of the environment, health, safety
or natural resources, including without limitation, those relating to the use,
handling, transportation, treatment, storage, disposal, release or discharge of
Hazardous Materials.
"Environmental Permits" means all permits, approvals,
identification numbers, licenses and other authorizations required under any
applicable Environmental Law.
"Governmental Authority" means any United States federal,
state or local or any foreign government or international organization,
governmental, regulatory or administrative authority, agency or commission or
any court, tribunal, or judicial or arbitral body.
"Governmental Order" means any order, writ, judgment,
injunction, decree, stipulation, determination or award entered by or with any
Governmental Authority.
"Hazardous Materials" means (a) petroleum and petroleum
products, by-products or breakdown products, radioactive materials, asbestos in
any form that is or could become friable, urea formaldehyde foam insulation,
polychlorinated biphenyls, and radon gas, (b) any other chemicals, materials or
substances defined as or included in the definition of "hazardous substances",
"hazardous wastes", "hazardous materials", "extremely hazardous wastes",
"restricted hazardous wastes", "toxic substances", "toxic pollutants",
"contaminants" or "pollutants", or words of similar import, under any applicable
Environmental Law, and (c) any other chemical, material or substance exposure to
which is regulated by any Governmental Authority under Environmental Laws.
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended, and the rules and regulations promulgated thereunder.
<PAGE> 12
5
"Indebtedness" means, with respect to any Person, (a) all
indebtedness of such Person, whether or not contingent, for borrowed money, (b)
all obligations of such Person for the deferred purchase price of property or
services, (c) all obligations of such Person to purchase, redeem, retire,
defease or otherwise acquire for value any capital stock of such Person or any
warrants, rights or options to acquire such capital stock, valued, in the case
of redeemable preferred stock, at the greater of its voluntary or involuntary
liquidation preference plus accrued and unpaid dividends, (d) all Indebtedness
of others referred to in clauses (a) through (c) above guaranteed in any manner
by such Person, or in effect guaranteed by such Person through an agreement to
assure a creditor against loss, and (e) all Indebtedness referred to in clauses
(a) through (c) above secured by (or for which the holder of such Indebtedness
has an existing right, contingent or otherwise, to be secured by) any
Encumbrance on property (including, without limitation, accounts and contract
rights) owned by such Person, even though such Person has not assumed or become
liable for the payment of such Indebtedness.
"Inventories" means all inventory, merchandise, finished
goods, and raw materials, packaging, supplies and other personal property
related to the Business maintained, held or stored by or for MS or any MS
Subsidiary on the Closing Date and any prepaid deposits for any of the same.
"IRS" means the Internal Revenue Service of the United States.
"Law" means any U.S., French or European, federal, state,
local or otherwise foreign statute, law, ordinance, regulation, rule, code,
order, other requirement or rule of law.
"Leased Real Property" means the real property leased by MS or
any MS Subsidiary, as tenant, together with, to the extent leased by MS or any
MS Subsidiary, all buildings and other structures, facilities or improvements
currently or hereafter located thereon, all fixtures, systems, equipment and
items of personal property of MS or any MS Subsidiary attached or appurtenant
thereto, and all easements, licenses, rights and appurtenances relating to the
foregoing.
"Liabilities" means any and all debts, liabilities and
obligations, whether accrued or fixed, absolute or contingent, matured or
unmatured or determined or determinable, including, without limitation, those
arising under any Law (including, without limitation, any Environmental Law),
Action or Governmental Order and those arising under any contract, agreement,
arrangement, commitment or undertaking.
"Material Adverse Effect" means any circumstance, change in,
or effect on the Business, MS or any MS Subsidiary, SOFEDIT or any SOFEDIT
Subsidiary, BDHI or CIBA, as applicable, that, individually or in the aggregate
with any other circumstances, changes in, or effects on, the Business, MS or any
MS Subsidiary, or SOFEDIT or any SOFEDIT Subsidiary, BDHI or CIBA, respectively:
(a) is materially adverse to the business, operations, assets or Liabilities,
employee relationships, customer or supplier relationships, prospects, results
of operations or the condition (financial or otherwise) of MS or any MS
Subsidiary, SOFEDIT or any SOFEDIT
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6
Subsidiary, BDHI or CIBA, as applicable, or (b) adversely affectsthe ability of
MS or any MS Subsidiary, SOFEDIT or any SOFEDIT Subsidiary, BDHI or CIBA, as
applicable, to operate or conduct the Business in the manner in which it is
currently operated or conducted by MS or any MS Subsidiary, SOFEDIT or any
SOFEDIT Subsidiary, BDHI or CIBA, as applicable.
"MS Class A Common Stock" means the Series A-1 Class A Common
Stock, $0.01 par value per share, of MS, the Series A-2 Class A Common Stock,
$0.01 par value per share, of MS, the Series A-3 Class A Common Stock, $0.01 par
value per share, of MS and the Series I Class A Common Stock, $0.01 par value
per share, of MS, as such series are defined in the attached form of Amended and
Restated Certificate of Incorporation of MS, taken together.
"MS Class B Common Stock" means the Series B-1 Class A Common
Stock, $0.01 par value per share, of MS, the the Series B-2 Class B Common
Stock, $0.01 par value per share, of MS and the Series II Class B Common Stock,
$.01 par value per share, of MS, as such series are defined in the attached form
of Amended and Restated Certificate of Incorporation of MS, taken together.
"MS Common Shares" has the meaning specified in Section 2.02.
"MS Common Stock" means the MS Class A Common Stock and the MS
Class B Common Stock.
"MS Preferred Shares" has the meaning specified in Section
2.02.
"MS Reference Balance Sheet" means the unaudited consolidated
balance sheet (including the related notes and schedules thereto) of MS, as of
June 30, 1997 (such date being the "MS Reference Balance Sheet Date"), a copy of
which is set forth in Section 3.07(a) of the Disclosure Schedules.
"MS Series A Preferred Stock" means the Series A Preferred
Stock, $0.01 par value, $100 stated value per share, of MS.
"MS Series B Preferred Stock" means the Series B Preferred
Stock, $0.01 par value, $100 stated value per share, of MS.
"MS Subsidiaries" means Aetna Holdings, Inc., Aetna
Industries, Inc., Aetna Export Sales Corp., Aetna Manufacturing Canada, Limited
and any and all other corporations, partnerships, joint ventures, associations
and other entities in which MS directly or indirectly owns an equity interest.
"New Registration Rights Agreement" has the meaning specified
in Section 10.01(h).
<PAGE> 14
7
"New Stockholders Agreement" has the meaning specified in
Section 10.01(h).
"Owned Real Property" means the real property owned by MS or
any MS Subsidiary or SOFEDIT or any SOFEDIT Subsidiary, as applicable, together
with all buildings and other structures, facilities or improvements currently or
hereafter located thereon, all fixtures, systems, equipment and items of
personal property of MS or any MS Subsidiary or SOFEDIT or any SOFEDIT
Subsidiary, as applicable, attached or appurtenant thereto and all easements,
licenses, rights and appurtenances relating to the foregoing.
"Permits" has the meaning specified in Section 3.13(a).
"Permitted Encumbrances" means such of the following as to
which no enforcement, collection, execution, levy or foreclosure proceeding
shall have been commenced: (a) liens for taxes, assessments and governmental
charges or levies not yet due and payable which are not in excess of $25,000 in
the aggregate; (b) Encumbrances imposed by law, such as materialmen's,
mechanics', carriers', workmen's and repairmen's liens and other similar liens
arising in the ordinary course of business securing obligations that (i) are not
overdue for a period of more than 30 days and (ii) are not in excess of $25,000
in the case of a single property or $50,000 in the aggregate at any time; (c)
pledges or deposits to secure obligations under workers' compensation laws or
similar legislation or to secure public or statutory obligations; and (d) minor
survey exceptions, reciprocal easement agreements and other customary
encumbrances on title to real property that (i) were not incurred in connection
with any Indebtedness, (ii) do not render title to the property encumbered
thereby unmarketable and (iii) do not, individually or in the aggregate,
materially adversely affect the value or use of such property for its current
and anticipated purposes.
"Person" means any individual, partnership, firm, corporation,
limited liability company, association, trust, unincorporated organization or
other entity, as well as any syndicate or group that would be deemed to be a
person under Section 13(d)(3) of the Securities Exchange Act of 1934, as
amended.
"Preferred Stock" means the MS Series A Preferred Stock and
the MS Series B Preferred Stock.
"Registration Rights Agreement" means the registration rights
agreement dated August 13, 1996, among MS and the stockholders of MS party
thereto.
"Real Property" applied to MS or SOFEDIT means the Leased Real
Property and the Owned Real Property, respectively, of MS or SOFEDIT and their
respective Subsidiaries.
"Regulations" means the Treasury Regulations (including
Temporary Regulations) promulgated by the United States Department of Treasury
with respect to the Code or other federal tax statutes.
<PAGE> 15
8
"Release" means disposing, discharging, injecting, spilling,
leaking, leaching, dumping, emitting, escaping, emptying or seeping into or upon
any land or water or air or otherwise entering into the Environment.
"Sellers' Shares" means the CIBA Shares, the BDHI Shares and
the SOFEDIT Shares, taken together.
"SOFEDIT Reference Balance Sheet" means the audited
consolidated balance sheet of SOFEDIT, as of June 30, 1997, a copy of which is
set forth in Section 8.08 of the Disclosure Schedules.
"SOFEDIT Stockholders Agreement" means the agreement dated
July 8, 1995, as amended, among the shareholders of SOFEDIT and Messrs. Francis
Barge, Felix Domenech and Jean-Rene Hergoualc'h.
"SOFEDIT Subsidiary" means any and all other corporations,
partnerships, joint ventures, associations and other entities in which SOFEDIT
directly or indirectly owns an equity interest.
"Stockholders Agreement" has the meaning specified in Section
3.02(a).
"Stock Option Plan" means the MS Acquisition Corp. Executive
Stock Option Plan.
"Subordinated Notes" means the 11% junior subordinated
promissory notes of Aetna Holdings due 2007.
"Subsidiaries" means any and all corporations, partnerships,
joint ventures, associations and other entities controlled by MS or SOFEDIT, as
applicable, directly or indirectly through one or more intermediaries.
"Tax" or "Taxes" means any and all federal, state, local or
foreign net or gross income, gross receipts, net proceeds, sales, use, ad
valorem, value-added, franchise, bank shares, withholding, payroll, employment,
excise, property, alternative or add-on minimum, environmental or other taxes,
fees, levies, duties, tariffs, imposts, and other charges of any kind (together
with any and all interest, penalties, additions to tax and additional amounts
imposed with respect thereto) imposed by any government or taxing authority,
whether disputed or not.
"U.S. GAAP" means United States generally accepted accounting
principles and practices as in effect from time to time and applied consistently
throughout the periods involved.
"USTs" means underground storage tanks, as such term is
defined in the Resource Conservation and Recovery Act, as amended, and the
regulations promulgated thereunder.
<PAGE> 16
9
ARTICLE II
PURCHASE AND SALE
SECTION 2.01. Purchase and Sale of the Shares. Upon the terms
and subject to the conditions of this Agreement, at the Closing (as defined
below), (i) the SOFEDIT Financial Shareholders shall sell to MS, and MS shall
purchase from the SOFEDIT Financial Shareholders, the SOFEDIT Shares, (ii) the
members of the Barge Family and CEFI shall sell to MS, and MS shall purchase
from the members of the Barge Family and CEFI, the CIBA Shares, and (iii)
YACESE, the members of the Domenech Family, H.H.A.WAY and JRMH shall sell to MS,
and MS shall purchase from YACESE, the members of the Domenech Family, H.H.A.WAY
and JRMH, the BDHI Shares.
SECTION 2.02. Consideration. As consideration for the sales
set forth in Section 2.01, MS shall:
(i) issue to the Sellers a total of three million (3,000,000)
shares of MS Series A-1 Common Stock (the "MS Common Shares"), so that
after completion of the Closing, if all the stock options that have
been issued under the Stock Option Plan in effect as of the date hereof
were exercised, the Sellers would own seventy-five percent (75%) of the
total number of issued and outstanding shares of MS Common Stock;
(ii) issue to the Sellers promissory notes dated as of the
Closing Date and substantially in the form attached hereto as Exhibit
2.02 (A) (the "Promissory Notes"), for an aggregate amount of forty
million nine hundred sixty eight thousand U.S. Dollars ($40,968,000)
(the "Debt Amount"); and
(iii) issue to the Sellers two hundred and seventy thousand
(270,000) shares of MS Series B Preferred Stock (the "MS Preferred
Shares").
The allocation of the MS Common Shares and the MS Preferred
Shares among the Sellers, and the amount in principal of the Promissory Notes
are indicated in Exhibit 2.02 (B) hereto.
The parties hereto acknowledge and agree that the shareholders
of SOFEDIT are entitled to an amount equal to the dividends corresponding to
SOFEDIT's profits for fiscal year 1997 that would be paid in 1998 if SOFEDIT's
past dividend policy remained unchanged from the past practices of SOFEDIT with
respect to the payment of dividends. Therefore, in addition to the consideration
described above and notwithstanding any transfer of title interest with respect
to their SOFEDIT Shares at the Closing, the SOFEDIT Financial Shareholders will
keep the jouissance (as such term is defined under French law) of their SOFEDIT
Shares until 12:00 p.m., the day following the date of the 1998 Annual General
Shareholders Meeting of SOFEDIT called to resolve the
<PAGE> 17
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distribution of dividends for fiscal year 1997 and, as a result, they will
receive the dividends voted on that meeting. With respect to the shareholders of
BDHI and CIBA, the Sellers acknowledge and agree among themselves that the
initial principal amounts of the PromissoryNotes to be issued to the Sellers as
set forth on the table attached as Exhibit 2.02 hereto reflect the amount of
BDHI's outstanding debt and the amount of dividends that would be paid by
SOFEDIT to BDHI out of SOFEDIT's profits for fiscal year 1997, based on
SOFEDIT's past dividend policy.
SECTION 2.03. Closing. Upon the terms and subject to the
conditions of this Agreement, the sales and purchases of Sellers' Shares
contemplated by this Agreement shall take place at a closing (the "Closing") to
be held at the offices of Natexis Finance S.A., in Paris, at 10:00 A.M. Paris
time on (i) April 9, 1998, or, if the closing conditions set forth in Article X
are not fulfilled on that date, (ii) at such other place or at such other time
or on such other date as the Sellers' Representative and MS may mutually agree
upon(the day on which the Closing actually takes place being the "Closing
Date").
SECTION 2.04. Closing Deliveries by the Sellers. At the
Closing, the Sellers shall deliver or cause to be delivered to MS:
(a) executed stock transfer forms ("ordres de mouvement") for
all their respective Sellers' Shares, completed pursuant to the terms
thereof, the stock ledger ("registre des mouvements de titres",
together with the "comptes d'actionnaires") of each of SOFEDIT, BDHI
and CIBA and any other documents necessary for the transfer of good and
marketable title to the Sellers' Shares;
(b) a receipt for the Promissory Notes, the MS Common Shares
and the MS Preferred Shares issued to them; and
(c) the certificates and other documents required to be
delivered pursuant to Section 10.01.
SECTION 2.05. Closing Deliveries by MS. At the Closing, MS
shall deliver to the Sellers:
(a) certificates for the MS Common Shares;
(b) certificates for the MS Preferred Shares;
(c) the Promissory Notes; and
(d) the certificates and other documents required to be
delivered pursuant to Section 10.02.
<PAGE> 18
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SECTION 2.06. Sellers' Representative. Each Seller hereby
appoints Mr. Francis Barge (such Person being the "Sellers' Representative"), as
each such Sellers' attorney-in-fact and representative, (i) to do any and all
things and to execute any and all documents or other papers, in each such
Seller's name, place and stead, in any way which each such Seller could do if
personally present, in connection with this Agreement, the New Stockholders
Agreement and the New Registration Rights Agreement and the transactions
contemplated hereby and thereby, (ii) to amend, cancel or extend, or waive the
terms of, this Agreement, the New Stockholders Agreement and the New
Registration Rights Agreement.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF MS
As an inducement to the Sellers to enter into this Agreement,
MS hereby represents and warrants to the Sellers as follows:
SECTION 3.01. Organization, Authority and Qualification of MS.
MS is a corporation duly organized, validly existing and in good standing under
the laws of the State of Delaware and has all necessary power and authority to
own, operate or lease the properties and assets now owned, operated or leased by
it and to carry on the Business as it is currently conducted. The execution and
delivery of this Agreement, the New Stockholders Agreement and the New
Registration Rights Agreement by MS, the performance by MS of its obligations
hereunder and thereunder and the consummation by MS of the transactions
contemplated hereby and thereby have been duly authorized by all requisite
action on the part of MS. This Agreement has been, and upon their execution the
New Stockholders Agreement and the New Registration Rights Agreement shall have
been, duly executed and delivered by MS, and (assuming due authorization,
execution and delivery by the other parties hereto and thereto) this Agreement
constitutes, and upon their execution the New Stockholders Agreement and the New
Registration Rights Agreement will constitute, a legal, valid and binding
obligation of MS enforceable against MS in accordance with its and their terms.
MS is duly licensed or qualified to do business and is in good standing in each
jurisdiction in which the properties owned or leased by it or the operation of
its business makes such licensing or qualification necessary or desirable. All
corporate actions taken by MS have been duly authorized, and MS has not taken
any action that in any material respect conflicts with, constitutes a default
under or results in a violation of any provision of its Certificate of
Incorporation or By-laws, each as amended to date. True and correct copies of
the Certificate of Incorporation and By-laws of MS, each as in effect on the
date hereof, have been delivered or made available by MS to the Sellers.
SECTION 3.02. Capital Stock of MS; Ownership of the Shares.
(a) As of the date hereof, the authorized capital stock of MS consists of:
(x) 2,293,123.32 shares of Preferred Stock, consisting
of:
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12
(i) 293,123.32 shares of Series A Preferred Stock;
and
(ii) 2,000,000 additional shares of authorized
preferred stock which may be issued in one or more series upon
such terms as may be set forth by the board of directors of
MS; and
(y) 10,000,000 shares of Common Stock, par value $.01 per
share, consisting of:
5,000,000 shares of MS Class A Common Stock; and
5,000,000 shares of MS Class B Common Stock.
As of the date of this Agreement,
(i) 383,409 shares of MS Class A Common Stock are
issued and outstanding, all of which are duly authorized,
validly issued, fully paid and non-assessable;
(ii) 516,590 shares of MS Class B Common Stock are
issued and outstanding, all of which are validly issued, fully
paid and non-assessable;
(iii) 114,967.38 shares of Series A Preferred Stock
are issued and outstanding, all of which are duly authorized,
validly issued, fully paid and non-assessable;
(iv) 100,000 shares of MS Class A Common Stock are
reserved for issuance pursuant to employee stock options
granted pursuant to the Stock Option Plan;
(v) 1,394,491 shares of MS Class B Common Stock are
issued and outstanding and held by Aetna Holdings, all of
which are validly issued, fully paid and non-assessable; and
(vi) 178,155.94 shares of Series A Preferred Sock are
issued and outstanding and held by Aetna Holdings, all of
which are validly issued, fully paid and non-assessable.
None of the issued and outstanding shares of MS Common Stock
or MS Preferred Stock was issued in violation of any preemptive rights. Except
for the stockholders agreement (the "Stockholders Agreement") dated August 13,
1996, among MS and the stockholders of MS party thereto (as of the date hereof),
the New Stockholders Agreement (as of the Closing Date), the Registration Rights
Agreement (as of the date hereof and as of the Closing Date), the New
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Registration Rights Agreement (as of the Closing Date), the Stock Option Plan
and the MS Series A Preferred Stock, there are no options, warrants, convertible
securities or other rights, agreements, arrangements or commitments of any
character relating to the capital stock of MS or obligating MS to issue or sell
any shares of capital stock of, or any other interest in, MS. There are no
outstanding contractual obligations of MS to repurchase, redeem or otherwise
acquire any shares of MS Common Stock or of MS Preferred Stock or to provide
funds to, or make any investment (in the form of a loan, capital contribution or
otherwise) in, any other Person. The outstanding shares of MS Common Stock and
MS Preferred Stock referred to in this section constitute all the issued and
outstanding capital stock of MS and are owned of record and beneficially solely
by the Persons set forth in Section 3.02(a) of the Disclosure Schedules free and
clear of all Encumbrances.
(b) Upon consummation of the transactions contemplated by this
Agreement and registration of the MS Common Shares in the name of the Sellers in
the stock records of MS, the Sellers, assuming they shall have received the MS
Common Shares, will own at least seventy-five percent (75%) of the total number
of issued and outstanding shares of MS Common Stock free and clear of any
Encumbrances. Upon consummation of the transactions contemplated by this
Agreement, the MS Common Shares and the MS Preferred Shares will be fully paid
and nonassessable. There are no voting trusts, stockholder agreements, proxies
or other agreements or understandings in effect with respect to the voting or
transfer of any of the MS Common Stock or of the Preferred Stock, except for the
Registration Rights Agreement and the Stockholders Agreement (as of the date of
this Agreement only) and the Registration Rights Agreement, the New Registration
Rights Agreement and the New Stockholders Agreement (upon consummation of the
transactions contemplated by this Agreement). The MS Common Shares and MS
Preferred Shares to be issued pursuant to this Agreement will be duly
authorized, validly issued and not subject to preemptive rights created by
statute, MS' Certificate of Incorporation or By-laws or any agreement to which
MS is a party or is bound.
(c) The stock register of MS accurately records: (i) the name
and address of each Person owning shares of capital stock of MS and (ii) the
certificate number of each certificate evidencing shares of capital stock issued
by MS, the number of shares evidenced by each such certificate, the date of
issuance thereof and, in the case of cancellation, the date of cancellation.
SECTION 3.03. Subsidiaries. (a) Section 3.03(a) of the
Disclosure Schedules sets forth a true and complete list of all MS Subsidiaries,
listing for each MS Subsidiary its name, type of entity, the jurisdiction and
date of its incorporation or organization, its authorized capital stock,
partnership capital or equivalent, the number and type of its issued and
outstanding shares of capital stock, partnership interests or similar ownership
interests and the current ownership of such shares, partnership interests or
similar ownership interests.
(b) Other than the MS Subsidiaries, there are no other
corporations, limited liability company, partnerships, associations or other
entities in which MS owns, of record or beneficially, any direct or indirect
equity or other similar interest or any right (contingent or
<PAGE> 21
14
otherwise) to acquire the same. MS is not a member of (nor is any part of the
Business conducted through) any partnership. Except as set forth in Section
3.03(b) of the Disclosure Schedules, MS is not a participant in any joint
venture or similar arrangement.
(c) Each MS Subsidiary: (i) that is a corporation is duly
organized and validly existing under the laws of its jurisdiction of
incorporation, (ii) that is not a corporation is duly organized and validly
existing under the laws of its jurisdiction of organization, (iii) has all
necessary power and authority to own, operate or lease the properties and assets
owned, operated or leased by such MS Subsidiary and to carry on its business as
it has been and is currently conducted by such MS Subsidiary, and (iv) is duly
licensed or qualified to do business and is in good standing in each
jurisdiction in which the properties owned or leased by it or the operation of
its business makes such licensing or qualification necessary.
(d) All the outstanding shares of capital stock of each MS
Subsidiary are validly issued, fully paid, nonassessable and free of preemptive
rights and are owned by MS, whether directly or indirectly, free and clear of
all Encumbrances.
(e) There are no options, warrants, convertible securities, or
other rights, agreements, arrangements or commitments of any character relating
to the capital stock of any MS Subsidiary or obligating MS or any MS Subsidiary
to issue or sell any shares of capital stock of, or any other interest in, MS or
any MS Subsidiary.
(f) All corporate actions taken by each MS Subsidiary have
been duly authorized and no MS Subsidiary has taken any action that in any
respect conflicts with, constitutes a default under or results in a violation of
any provision of its charter or by-laws (or similar organizational documents).
(g) No MS Subsidiary is a member of (nor is any part of its
business conducted through) any partnership nor is any MS Subsidiary a
participant in any joint venture or similar arrangement.
(h) Except for the Stockholders Agreement (on the date of this
Agreement), the New Stockholders Agreement and the New Registration Rights
Agreement ( after the Closing Date), there are no voting trusts, stockholder
agreements, proxies or other agreements or understandings in effect with respect
to the voting or transfer of any shares of capital stock of or any other
interests in any MS Subsidiary.
(i) The stock register of each MS Subsidiary accurately
records: (i) the name and address of each Person owning shares of capital stock
of such MS Subsidiary and (ii) the certificate number of each certificate
evidencing shares of capital stock issued by such MS Subsidiary, the number of
shares evidenced each such certificate, the date of issuance thereof and, in the
case of cancellation, the date of cancellation.
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SECTION 3.04. Corporate Books and Records. The minute books of
MS and the MS Subsidiaries contain accurate records of all meetings and
accurately reflect all other actions taken by the stockholders, Boards of
Directors and all committees of the Boards of Directors of MS and the MS
Subsidiaries. Complete and accurate copies of all such minute books and of the
stock register of MS and each MS Subsidiary have been provided or made available
for inspection by MS to the Sellers for the period from August 1, 1996 to the
date hereof.
SECTION 3.05. No Conflict. Assuming that all consents,
approvals, authorizations and other actions described in Section 3.06 have been
obtained and all filings and notifications listed in Section 3.05 and Section
3.06 of the Disclosure Schedules have been made, the execution, delivery and
performance of this Agreement, the Promissory Notes, the New Stockholders
Agreement and the New Registration Rights Agreement by MS do not (a) violate,
conflict with or result in the breach of any provision of the charter or by-laws
(or similar organizational documents) of MS or any MS Subsidiary, (b) conflict
with or violate (or cause an event which could have a Material Adverse Effect as
a result of) any Law or Governmental Order applicable to MS or any MS Subsidiary
or any of their respective assets, properties or businesses, including, without
limitation, the Business, or (c) conflict with, result in any breach of,
constitute a material default (or event which, with the giving of notice or
lapse of time, or both, would become a material default) under, require any
consent under or give to others any rights of termination, amendment,
acceleration, suspension, revocation or cancellation of, or result in the
creation of any Encumbrance on any of the shares or on any of the assets or
properties of MS or any MS Subsidiary pursuant to, any note, bond, mortgage or
indenture, contract, agreement, lease, sublease, license, permit, franchise or
other instrument or arrangement to which MS or any MS Subsidiary is a party or
by which any of the shares or any of such assets or properties is bound or
affected. MS specifically represents and warrants that, assuming that all
consents, approvals, authorizations and other actions described in Section 3.06
have been obtained and all filings and notifications listed in Section 3.05 and
Section 3.06 of the Disclosure Schedules have been made, the execution, delivery
and performance of this Agreement, the Promissory Notes, the New Stockholders
Agreement and the New Registration Rights Agreement by MS and the consummation
of the transactions contemplated hereby and thereby do not and will not (i)
result in either (w) the redemption of the outstanding shares of MS Series A
Preferred Stock, (x) the acceleration of the $35 million credit facility among
Aetna Industries, MS, Aetna Holdings, Aetna Export Sales Corp. and NBD Bank, (y)
the obligation for Aetna Industries to offer to purchase any of its 11 7/8%
Senior Notes due 2006 (the "Aetna Notes") or the qualification of a "Change of
Control" under the indenture of the Aetna Notes, or (z) the mandatory redemption
of the 11% junior subordinated notes due 2007 issued by Aetna Holdings nor (ii)
result in any increase of the interest rate of these financings.
SECTION 3.06. Governmental Consents and Approvals. The
execution, delivery and performance of this Agreement, the New Stockholders
Agreement and the New Registration Rights Agreement by MS do not and will not
require any consent, approval, authorization or other order of, action by,
filing with or notification to any Governmental Authority, except for a filing
with the French Treasury pursuant to regulations on foreign investment in
France.
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SECTION 3.07. Financial Information, Books and Records,
Securities Reports. (a) True and complete copies of the audited consolidated
balance sheet of MS and Aetna Industries for each of the three fiscal years
ended as of December 31, 1996, and December 31, 1997 and the related audited
consolidated statements of income, retained earnings, stockholders equity and
changes in financial position of MS and Aetna Industries, together with all
related notes and schedules thereto, accompanied by the reports thereon of MS
and Aetna Industries' accountants (collectively referred to herein as the
"Financial Statements") have been delivered by MS to the Sellers' Representative
and are attached hereto under Section 3.07(a) of the Disclosure Schedules. The
Financial Statements (i) were prepared in accordance with the books of account
and other financial records of MS and each of the MS Subsidiaries, (ii) present
fairly the consolidated financial condition and results of operations of MS and
each of the MS Subsidiaries as of the dates thereof or for the periods covered
thereby, (iii) have been prepared in accordance with U.S. GAAP applied on a
basis consistent with the past practices of MS and each of the MS Subsidiaries
(except as may be otherwise indicated in the notes thereto) and (iv) include all
adjustments that are necessary for a fair presentation of the consolidated
financial condition of MS and the MS Subsidiaries and the results of the
operations of MS and the MS Subsidiaries as of the dates thereof or for the
periods covered thereby. The Form 10-K405 of MS, Aetna Holdings and Aetna
Industries for the fiscal year ended December 28, 1997, does not contain any
information that reflects a breach of a covenant under the indenture of the
Aetna Notes or in the NBD Credit Agreement of Aetna Industries dated May 2,
1996, as amended.
(b) The books of account and other financial records of MS and
the MS Subsidiaries: (i) reflect all items of income and expense and all assets
and Liabilities required to be reflected therein in accordance with U.S. GAAP
applied on a basis consistent with the past practices of MS and the MS
Subsidiaries, respectively, (ii) are in all material respects complete and
correct, and do not contain or reflect any material inaccuracies or
discrepancies and (iii) have been maintained in accordance with good business
and accounting practices.
(c) Since August 1, 1996, Aetna Industries and MS have filed
(x) all forms, reports, statements and other documents required to be filed with
(A) the SEC including, without limitation, (i) all annual reports on Form 10-K,
(ii) all quarterly reports on Form 10-Q and (iii) all amendments and supplements
thereto, and (B) any other applicable state securities authorities, and (y) all
forms, reports, statements and other documents required to be filed with any
other applicable federal or state regulatory authorities (all such reports in
clauses (x) and (y) being the "Aetna Reports"). The Aetna Reports, including all
Aetna Reports filed after the date of this Agreement and prior to the Closing
Date, (x) were or will be prepared in all material respects in accordance with
the requirements of applicable Law and (y) did not at the time they were filed,
or will not at the time they are filed, contain any untrue statement of a
material fact required to be stated therein or necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading. Since June 30, 1997, there have been no events or
circumstances relating to MS, any MS Subsidiary or the Business that would
require the filing of any report on Form 8-K, other than any events after the
date hereof and prior to the Closing as to which MS and Aetna Industries shall
have filed with the SEC and delivered to the Sellers' Representative, a copy of
such report on Form 8-K.
<PAGE> 24
17
SECTION 3.08. No Undisclosed Liabilities. There are no
Liabilities of MS or any MS Subsidiary, other than Liabilities (i) reflected or
reserved against on the MS Reference Balance Sheet, or (ii) disclosed in Section
3.08 of the Disclosure Schedules or (iii) incurred since the date of the MS
Reference Balance Sheet in the ordinary course of the business, consistent with
the past practice, of MS and the MS Subsidiaries and which, taken together, do
not and would not
<PAGE> 25
18
reasonably be expected to have a Material Adverse Effect. Reserves are
reflected on the MS Reference Balance Sheet against all Liabilities of MS and
the MS Subsidiaries in amounts that have been established on a basis consistent
with the past practices of MS and the MS Subsidiaries and in accordance with
U.S. GAAP.
SECTION 3.09. Conduct in the Ordinary Course; Absence of
Certain Changes, Events and Conditions. Since the date of the MS Reference
Balance Sheet, except as disclosed in Section 3.09 of the Disclosure Schedules,
the business of MS and the MS Subsidiaries has been conducted in the ordinary
course and consistent with past practice. As amplification and not limitation of
the foregoing, except as disclosed in Section 3.09 of the Disclosure Schedules,
since the date of the MS Reference Balance Sheet, neither MS nor any MS
Subsidiary has:
(i) permitted or allowed any of the assets or properties
(whether tangible or intangible) of MS or any MS Subsidiary to be
subjected to any Encumbrance, other than Permitted Encumbrances and
Encumbrances that will be released at or prior to the Closing;
(ii) except in the ordinary course of business consistent with
past practice, discharged or otherwise obtained the release of any
Encumbrance or paid or otherwise discharged any Liability, other than
current liabilities reflected on the MS Reference Balance Sheet and
current liabilities incurred in the ordinary course of business
consistent with past practice since the date of the MS Reference
Balance Sheet;
(iii) made any loan to, guaranteed any Indebtedness of or
otherwise incurred any Indebtedness on behalf of any Person;
(iv) redeemed any of the capital stock or declared, made or
paid any dividends or distributions (whether in cash, securities or
other property) to the holders of capital stock of MS or any MS
Subsidiary or otherwise, other than dividends, distributions and
redemptions declared, made or paid by any MS Subsidiary solely to MS;
(v) sold, transferred, leased, subleased, licensed or
otherwise disposed of any properties or assets, real, personal or mixed
(including, without limitation, leasehold interests and intangible
assets), other than the sale of Inventories in the ordinary course of
business consistent with past practice;
(vi) issued or sold any capital stock, notes, bonds or other
securities, or any option, warrant or other right to acquire the same,
of, or any other interest in, MS or any MS Subsidiary;
<PAGE> 26
19
(vii) entered into any agreement, arrangement or transaction
with any of its directors, officers, employees or shareholders (or with
any relative, beneficiary, spouse or Affiliate of such Person);
(viii) made any change in any method of accounting or
accounting practice or policy used by MS or any MS Subsidiary, other
than such changes required by U.S. GAAP or disclosed in Section 3.09 of
the Disclosure Schedules;
(ix) allowed any Permit or Environmental Permit that was
issued or relates to MS or any MS Subsidiary or otherwise relates to
any Asset to lapse or terminate or failed to renew any such Permit or
Environmental Permit or any insurance policy that is scheduled to
terminate or expire within 45 calendar days of the Closing Date;
(x) incurred any Indebtedness, in excess of $50,000
individually or $250,000 in the aggregate;
(xi) amended or restated the Certificate of Incorporation or
the By-laws (or other organizational documents) of MS or any MS
Subsidiary, except as expressly provided for under this Agreement;
(xii) suffered any casualty loss or damage with respect to any
of their assets which in the aggregate have a replacement cost of more
than $50,000, whether or not such loss or damage shall have been
covered by insurance;
(xiii) suffered any Material Adverse Effect; or
(xiv) agreed, whether in writing or otherwise, to take any of
the actions specified in this Section 3.09 or granted any options to
purchase, rights of first refusal, rights of first offer or any other
similar rights or commitments with respect to any of the actions
specified in this Section 3.09, except as expressly contemplated by
this Agreement.
SECTION 3.10. Litigation. Except as set forth in Section 3.10
of the Disclosure Schedules (which, with respect to each Action disclosed
therein, sets forth: the parties, nature of the proceeding, date and method
commenced, amount of damages or other relief sought and, if applicable, paid or
granted), there are no Actions by or against MS or any MS Subsidiary, or
affecting any of their Assets, pending before any Governmental Authority (or, to
the best knowledge of MS after due inquiry, threatened to be brought by or
before any Governmental Authority). None of the matters disclosed in Section
3.10 of the Disclosure Schedules has or has had a Material Adverse Effect or
would reasonably be expected to affect the legality, validity or enforceability
of this Agreement or the New Stockholders Agreement or the New Registration
Rights Agreement or the consummation of the transactions contemplated hereby and
thereby. Except as set forth in Section 3.10 of the Disclosure Schedules,
neither MS nor the MS Subsidiaries is subject to any Governmental Order (nor, to
the best
<PAGE> 27
20
knowledge of MS after due inquiry, are there any such Governmental Orders
threatened to be imposed by any Governmental Authority) which has or has had a
Material Adverse Effect.
SECTION 3.11. Certain Interests. (a) Except as disclosed in
Section 3.11(a) of the Disclosure Schedules, no officer or director of MS or any
MS Subsidiary, and no relative or spouse (or relative of such spouse) who
resides with, or is a dependent of, any such officer or director:
(i) owns, directly or indirectly, in whole or in part, or has
any other interest in any tangible or intangible property which MS or
any MS Subsidiary uses in the conduct of the Business or otherwise; or
(ii) has outstanding any Indebtedness to MS or any MS
Subsidiary.
(b) Except as disclosed in Section 3.11(b) of the Disclosure
Schedules, neither MS nor any MS Subsidiary has any Liability or any other
obligation of any nature whatsoever to any officer or director of MS or any MS
Subsidiary or to any relative or spouse (or relative of such spouse) who resides
with, or is a dependent of, any such officer or director.
SECTION 3.12. Compliance with Laws. MS and the MS Subsidiaries
have each conducted the Business, in all material respects, in accordance with
all Laws and Governmental Orders applicable, to the knowledge of MS, to MS or
any MS Subsidiary or any of their respective assets or properties or the
Business, and neither MS nor any MS Subsidiary is in violation of any such Law
or Governmental Order, which would result in a Material Adverse Effect.
SECTION 3.13. Environmental and Other Permits and Licenses;
Related Matters. (a) Except as disclosed in Section 3.13(a)(i) of the Disclosure
Schedules, and except as would not reasonably be expected to result in a
Material Adverse Effect, MS and the MS Subsidiaries currently hold and are in
compliance with, all the health and safety and other permits, licenses,
authorizations, certificates, exemptions and approvals of Governmental
Authorities (collectively, "Permits"), including, without limitation,
Environmental Permits, necessary or proper for the current use, occupancy and
operation of each Asset of MS and the MS Subsidiaries and the conduct of the
Business, and all such Permits are in full force and effect. Except as disclosed
in Section 3.13(a)(ii) of the Disclosure Schedules, and except as would not
reasonably be expected to result in a Material Adverse Effect, there is no
existing practice, action or activity of MS or any MS Subsidiary and no existing
condition of the assets of MS or any MS Subsidiary or the Business which would
reasonably be expected to give rise to any civil or criminal Liability under, or
violate or prevent compliance with, any health or occupational safety or other
applicable Law. Except as disclosed in Section 3.13(a)(iii) of the Disclosure
Schedules, neither MS nor any MS Subsidiary has received any notice from any
Governmental Authority revoking, canceling, rescinding, materially modifying or
refusing to renew any Permit or providing written notice of violations under any
Law. To the knowledge of MS, Section 3.13(a)(iv) of the Disclosure Schedules
identifies all Permits that are nontransferable or which
<PAGE> 28
21
will require the consent of any Governmental Authority in the event of the
consummation of the transactions contemplated by this Agreement.
(b) Except as disclosed in Section 3.13(b) of the Disclosure
Schedules, and except as would not reasonably be expected to result in a
Material Adverse Effect, (i) Hazardous Materials have not been generated, used,
treated, handled or stored on, or transported to or from, or Released on any
Real Property or on any property formerly owned, leased or occupied by MS
or any MS Subsidiaries; (ii) MS and the MS Subsidiaries have disposed of all
Hazardous Materials, in compliance with all applicable Environmental Laws and
Environmental Permits; (iii) there are no pending or, to the knowledge of MS,
threatened Environmental Claims against MS, any MS Subsidiary, or any Real
Property; (iv) no Real Property is listed or proposed for listing on the
National Priorities List under CERCLA or on the CERCLIS or any analogous state
list of sites requiring investigation or cleanup; and (v) neither MS nor any MS
Subsidiary has received notice that it transported or arranged for the
transportation of any Hazardous Materials to any location that is listed or
proposed for listing on the National Priorities List under CERCLA or on the
CERCLIS or any analogous state list or which is the subject of any Environmental
Claim.
(c) Except as disclosed in Section 3.13(c) of the Disclosure
Schedules and except as would not reasonably be expected to result in a Material
Adverse Effect, there are no circumstances with respect to any Real Property or
other Asset or the operation of the Business which could reasonably be
anticipated (i) to form the basis of an Environmental Claim against MS, any MS
Subsidiary or any Real Property or Asset or (ii) to cause such Real Property or
Asset to be subject to any restrictions on ownership, occupancy, use or
transferability under any applicable Environmental Law.
(d) Except as disclosed in Section 3.13(d) of the Disclosure
Schedules, there are not now and never have been any USTs located on any Real
Property.
SECTION 3.14. Material Contracts. (a) Section 3.14(a) of the
Disclosure Schedules lists each of the following contracts and agreements
(including, without limitation, oral and informal arrangements) of MS and the MS
Subsidiaries (such contracts and agreements, together with all contracts,
agreements, leases and subleases concerning the management or operation of any
Real Property listed or otherwise disclosed in Section 3.15(a) or 3.15(b) of the
Disclosure Schedules to which MS or any MS Subsidiary is a party and all
agreements relating to Intellectual Property set forth in Section 3.14(a) of the
Disclosure Schedules, being "Material Contracts"):
(i) each contract and agreement for the purchase of Inventory,
spare parts, other materials or personal property with any supplier or
for the furnishing of services to MS, any MS Subsidiary or otherwise
related to the Business under the terms of which MS or any MS
Subsidiary: (A) is likely to pay or otherwise give consideration of
more than $50,000 in the aggregate during the calendar year to be ended
on December 31, 1998, (B) is likely to pay or otherwise give
consideration of more than $100,000 in the aggregate over the remaining
term
<PAGE> 29
22
of such contract or (C) cannot be cancelled by MS or such MS
Subsidiary without penalty or further payment and without more than 30
days' notice;
(ii) each contract and agreement for the sale of Inventory or
other personal property or for the furnishing of services by MS or any
MS Subsidiary which: (A) is likely to involve consideration of more
than $50,000 in the aggregate during the calendar year ended December
31, 1998, (B) is likely to involve consideration of more than $100,000
in the aggregate over the remaining term of the contract or (C) cannot
be cancelled by MS or such MS Subsidiary without penalty or further
payment and without more than 30 days' notice;
(iii) all broker, distributor, dealer, manufacturer's
representative, franchise, agency, sales promotion, market research,
marketing consulting and advertising contracts and agreements to which
MS or any MS Subsidiary is a party;
(iv) all management contracts and contracts with independent
contractors or consultants (or similar arrangements) to which MS or any
MS Subsidiary is a party and which are not cancellable without penalty
or further payment and without more than 30 days' notice;
(v) all contracts and agreements relating to Indebtedness of
MS or any MS Subsidiary;
(vi) all contracts and agreements with any Governmental
Authority to which MS or any MS Subsidiary is a party;
(vii) all contracts and agreements that limit or purport to
limit the ability of MS or any MS Subsidiary to compete in any line of
business or with any Person or in any geographic area or during any
period of time;
(viii) all contracts and agreements between or among MS, any
MS Subsidiary and any Affiliate of MS or any MS Subsidiary;
(ix) all contracts and agreements providing for benefits under
any Plan; and
(x) all other contracts and agreements whether or not made in
the ordinary course of business, which are material to MS, any MS
Subsidiary or the conduct of the Business or the absence of which would
have a Material Adverse Effect.
For purposes of this Section 3.14 and Section 3.15, the term
"lease" shall include any and all leases, subleases, sale/leaseback agreements
or similar arrangements.
(b) Except as disclosed in Section 3.14(b) of the Disclosure
Schedules, each Material Contract: (i) is valid and binding on the respective
parties thereto and is in full force and
<PAGE> 30
23
effect and (ii) upon consummation of the transactions contemplated by this
Agreement or the New Stockholders Agreement, shall continue in full force and
effect without penalty or other material adverse consequence resulting from the
transactions contemplated hereby and thereby. Neither MS nor any MS Subsidiary
is in material breach of, or material default under, any Material Contract.
(c) Except as disclosed in Section 3.14(c) of the Disclosure
Schedules, to the knowledge of MS, no other party to any Material Contract is in
material breach thereof or material default thereunder.
(d) Except as disclosed in Section 3.14(d) of the Disclosure
Schedules, there is no contract, agreement or other arrangement granting any
Person any preferential right to purchase, other than in the ordinary course of
business consistent with past practice, any of the properties or assets of MS or
any MS Subsidiary.
SECTION 3.15. Real Property. (a) Section 3.15(a) of the
Disclosure Schedules lists: (i) the street address of each parcel of Owned Real
Property, (ii) the date on which each parcel of Owned Real Property was
acquired, (iii) the current owner of each such parcel of Owned Real Property,
(iv) information relating to the recordation of the deed pursuant to which each
such parcel of Owned Real Property was acquired and (v) the current use of each
such parcel of Owned Real Property.
(b) Section 3.15(b) of the Disclosure Schedules lists: (i) the
street address of each parcel of Leased Real Property, (ii) the identity of the
lessor, lessee and current occupant (if different from lessee) of each such
parcel of Leased Real Property, (iii) the term (referencing applicable renewal
periods) and fixed or basic rental payment terms of the leases (and any
subleases) pertaining to each such parcel of Leased Real Property and (iv) the
current use of each such parcel of Leased Real Property.
(c) Except as described in Section 3.15(c) of the Disclosure
Schedules, there is no violation of any Law relating to any of the Owned Real
Property that would reasonably be expected to have a Material Adverse Effect. MS
has made available to the Sellers (to the extent such copies are in MS' physical
possession) true and complete copies of each deed for each parcel of Owned Real
Property and, to the extent available, for each parcel of Leased Real Property
and all the title insurance policies, title reports, surveys, certificates of
occupancy, environmental reports and audits, appraisals and Permits relating to
the Real Property, the operations of MS or any MS Subsidiary thereon or any
other uses thereof. Subject to all applicable leases, either MS or a MS
Subsidiary, as the case may be, is in peaceful and undisturbed possession of
each parcel of Real Property and neither MS nor any MS Subsidiary has executed
and delivered any contractual restrictions that preclude or materially restrict
the ability to use the premises for the purposes for which they are currently
being used. Except as set forth in Section 3.15(c) of the Disclosure Schedules,
neither MS nor any MS Subsidiary has leased or subleased any parcel or any
portion of any parcel of Real Property to any other Person, nor has MS
<PAGE> 31
24
or any MS Subsidiary assigned its interest under any lease or sublease listed in
Section 3.15(b) of the Disclosure Schedules to any third party.
(d) MS has, or has caused to be, delivered to the Sellers true
and complete copies of all leases and subleases listed in Section 3.15(b) of the
Disclosure Schedules. With respect to each of such leases and subleases:
(i) such lease or sublease represents the entire agreement
between the respective landlord and tenant with respect to such
property; and
(ii) except as otherwise disclosed in Section 3.15(b) of the
Disclosure Schedules, with respect to each such lease or sublease: (A)
neither MS nor any MS Subsidiary has received any notice of
cancellation or termination under such lease or sublease and (B)
neither MS nor any MS Subsidiary has received any notice of a breach or
default under such lease or sublease, which breach or default has not
been cured.
(e) There are no condemnation proceedings or eminent domain
proceedings of any kind pending or, to the actual knowledge of MS (without
investigation), threatened against the Owned Real Property.
(f) To the best knowledge of MS, all improvements on the Real
Property constructed by or on behalf of MS or any MS Subsidiary were constructed
in material compliance with all applicable Laws (including, but not limited to,
any building, planning or zoning Laws) affecting such Real Property.
SECTION 3.16. Customers. Listed in Section 3.16 of the
Disclosure Schedules are the names and addresses of the ten most significant
customers (by revenue) of MS and the MS Subsidiaries for the twelve-month period
ended December 31, 1997, and the amount for which each such customer was
invoiced during such period. Except as disclosed in Section 3.16 of the
Disclosure Schedules, neither MS nor any MS Subsidiary has received any notice
that any significant customer of MS has ceased, or will cease, to use the
products, equipment, goods or services of MS or any MS Subsidiary, or has
substantially reduced, or will substantially reduce, the use of such products,
equipment, goods or services at any time.
SECTION 3.17. Suppliers. Listed in Section 3.17 of the
Disclosure Schedules are the names and addresses of each of the ten most
significant suppliers of raw materials, supplies, merchandise and other goods
for MS and the MS Subsidiaries for the twelve-month period ended December 31,
1997, and the amount for which each such supplier invoiced MS and the MS
Subsidiaries during such period. Except as disclosed in Section 3.17 of the
Disclosure Schedules, neither MS nor any MS Subsidiary has received any notice
that any such supplier will not sell raw materials, supplies, merchandise and
other goods to MS or any MS Subsidiary at any time after the
<PAGE> 32
25
Closing Date on terms and conditions substantially similar to those used in its
current sales to MS and the MS Subsidiaries, subject only to general and
customary price increases.
SECTION 3.18. Employee Benefit Matters. (a) Plans and Material
Documents. Section 3.18(a) of the Disclosure Schedules lists (i) all employee
benefit plans (as defined in Section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA")) and all bonus, stock option, stock
purchase, restricted stock, incentive, deferred compensation, retiree medical or
life insurance, supplemental retirement, pension or severance plans and other
welfare and benefit plans, programs or arrangements, and all employment,
termination, severance or other contracts or agreements, whether legally
enforceable or not, to which MS or any MS Subsidiary is a party, with respect to
which MS or any MS Subsidiary has any obligation or which are maintained,
contributed to or sponsored by MS or any MS Subsidiary for the benefit of any
current or former employee, officer or director of MS or any MS Subsidiary, and
(ii) any contracts, arrangements or understandings between the Seller or any of
its Affiliates and any employee of MS or of any MS Subsidiary, including,
without limitation, any contracts, arrangements or understandings relating to a
sale or merger of MS (collectively, the "Plans"). Each Plan is in writing and MS
has furnished the Sellers with a complete and accurate copy of each Plan and a
complete and accurate copy of each material document prepared in connection with
each such Plan including, without limitation, (A) a copy of each trust or other
funding arrangement, (B) each summary plan description and summary of material
modifications, (C) the most recently filed Internal Revenue Service ("IRS") Form
5500, (D) the most recently received IRS determination letter for each such
Plan, and (E) the most recently prepared actuarial report and financial
statement in connection with each such Plan. Except as may be required pursuant
to any collective bargaining agreement, neither MS nor any MS Subsidiary has any
express or implied commitment, whether legally enforceable or not, (i) to create
any other employee benefit plan, program or arrangement, (ii) to enter into any
contract or agreement to provide compensation or benefits to any individual or
(iii) to modify, change or terminate any Plan, other than with respect to a
modification, change or termination required by Law. Each of the following
representations regarding the Plans is true, other than as disclosed in Section
3.18 of the Disclosures Schedules attached hereto.
(b) Absence of Certain Types of Plans. None of the Plans is a
multiemployer plan (within the meaning of Section 3(37) or 4001(a)(3) of ERISA)
(a "Multiemployer Plan") or a single employer pension plan (within the meaning
of Section 4001(a)(15) of ERISA) for which MS or any MS Subsidiary could incur
liability under Section 4063 or 4064 of ERISA (a "Multiple Employer Plan"). None
of the Plans obligates MS or any MS Subsidiary to pay separation, severance,
termination or similar-type benefits solely as a result of any transaction
contemplated by this Agreement or as a result of a "change in control", within
the meaning of such term under Section 280G of the Code, other than with respect
to the vesting of stock options which will vest as a result of the transactions
contemplated herein. None of the Plans provides for or promises retiree medical,
disability or life insurance benefits to any current or former employee, officer
or director of MS or any MS Subsidiary.
<PAGE> 33
26
(c) Compliance with Applicable Law. Each Plan has been
operated in all material respects in accordance with the requirements of all
applicable Law, including, without limitation, ERISA and the Code, and all
persons who participate in the operation of such Plans and, to the best
knowledge of MS, all Plan "fiduciaries" (within the meaning of Section 3(21) of
ERISA) have always acted in all material respects in accordance with the
provisions of all applicable Law, including, without limitation, ERISA and the
Code. MS and each MS Subsidiary has performed all material obligations required
to be performed by it under, is not in any respect in default under or in
violation of, and has no knowledge of any material default or violation by any
party to, any Plan. No legal action, suit or claim is pending or threatened with
respect to any Plan (other than claims for benefits in the ordinary course), no
audit or investigation of any Plan is underway by the IRS, the Department of
Labor or the Pension Benefit Guaranty Corporation and, to the best knowledge of
MS, no fact or event exists that could give rise to any such action, suit,
audit, investigation or claim.
(d) Qualification of Certain Plans. Each Plan which is
intended to be qualified under Section 401(a) of the Code or Section 401(k) of
the Code has received a favorable determination letter from the IRS that it is
so qualified and each trust established in connection with any Plan which is
intended to be exempt from federal income taxation under Section 501(a)
of the Code has received a determination letter from the IRS that it is so
exempt, and no fact or event has occurred to the best knowledge of MS since the
date of such determination letter from the IRS to adversely affect the qualified
status of any such Plan or the exempt status of any such trust. Each trust
maintained or contributed to by MS or any MS Subsidiary which is intended to be
qualified as a voluntary employees' beneficiary association and which is
intended to be exempt from federal income taxation under Section 501(c)(9) of
the Code has received a favorable determination letter from the IRS that it is
so qualified and so exempt, and no fact or event has occurred to the best
knowledge of MS since the date of such determination by the IRS to adversely
affect such qualified or exempt status.
(e) Absence of Certain Liabilities and Events. There has been,
to the best knowledge of MS, no prohibited transaction (within the meaning of
Section 406 of ERISA or Section 4975 of the Code) with respect to any Plan.
Neither MS nor any MS Subsidiary has incurred any material liability for any
penalty or tax arising under Section 4971, 4972, 4980, 4980B or 6652 of the Code
or any material liability under Section 502 of ERISA, and no fact or event
exists which could give rise to any such liability. Neither MS nor any MS
Subsidiary has incurred any material liability under, arising out of or by
operation of Title IV of ERISA (other than liability for premiums to the Pension
Benefit Guaranty Corporation arising in the ordinary course), including, without
limitation, any such liability in connection with (i) the termination or
reorganization of any employee benefit plan subject to Title IV of ERISA or (ii)
the withdrawal from any Multiemployer Plan or Multiple Employer Plan, and no
fact or event exists which could give rise to any such liability. No Plan had an
accumulated funding deficiency (within the meaning of Section 302 of ERISA or
Section 412 of the Code), whether or not waived, as of the most recently ended
plan year of such Plan. None of the assets of MS or any MS Subsidiary is the
subject of any lien arising under Section 302(f) of ERISA or Section 412(n) of
the Code; neither MS nor any MS Subsidiary has been required to post any
security under Section 307 of ERISA or Section 401(a)(29) of the Code; and no
fact or event
<PAGE> 34
27
exists which could give rise to any such lien or requirement to post any such
security. Except as set forth in Section 3.18(e) of the Disclosure Schedules,
the consummation of the transactions contemplated by the Agreement will not
(either alone or upon the occurrence of any additional or subsequent events)
constitute an event under any Plan, trust, or loan that will or may result in
any payment (whether of severance pay or otherwise), acceleration, forgiveness
of indebtedness, vesting, distribution, increase in benefits or obligation to
fund benefits with respect to any employee of MS or any MS Subsidiary.
(f) Plan Contributions and Funding. To the best knowledge of
MS, all contributions, premiums or payments required to be made with respect to
any Plan have been made on or before their due dates. All such contributions
have been fully deducted for income tax purposes and no such deduction has been
challenged or disallowed by any government entity and, to the best knowledge of
MS, no fact or event exists which could give rise to any such challenge or
disallowance. With respect to each Plan which is an "employee welfare benefit
plan" within the meaning of Section 3(1) of ERISA, all material claims incurred
(including claims incurred but not reported) by employees thereunder for which
MS or any MS Subsidiary is, or will become, liable are (i) insured pursuant to a
contract of insurance whereby the insurance company bears any risk of loss with
respect to such claim, (ii) covered under a contract with a health maintenance
organization (an "HMO") pursuant to which the HMO bears the liability for such
claims; or (iii) reflected as a liability or accrued for in Section 3.18(f) of
the Disclosure Schedules.
(g) WARN Act. To the extent presently applicable, MS and the
MS Subsidiaries are in material compliance with the requirements of the Workers
Adjustment and Retraining Notification Act ("WARN").
SECTION 3.19. Labor Matters. Except as set forth in Section
3.19 of the Disclosure Schedules,
(a) neither MS nor any MS Subsidiary is a party to any
collective bargaining agreement or other labor union contract
applicable to persons employed by MS or any MS Subsidiary and, to the
best knowledge of MS, currently there are no organizational campaigns,
petitions or other unionization activities seeking recognition of a
collective bargaining unit which could affect MS or any MS Subsidiary;
(b) there are no controversies, strikes, slowdowns or work
stoppages pending or, to the knowledge of MS, threatened between MS or
any MS Subsidiary and any of their respective employees, and neither MS
nor any MS Subsidiary has experienced any such controversy, strike,
slowdown or work stoppage within the past three years;
(c) neither MS nor any MS Subsidiary has breached or otherwise
failed to comply with the provisions of any collective bargaining or
union contract and there are no grievances
<PAGE> 35
28
outstanding against MS or any MS Subsidiary under any such agreement or
contract which could have a Material Adverse Effect;
(d) there are no unfair labor practice complaints pending or,
to the knowledge of MS, threatened, against MS or any MS Subsidiary
before the National Labor Relations Board or any other Governmental
Authority or any current union representation questions involving
employees of MS or any MS Subsidiary which could have a Material
Adverse Effect;
(e) MS and each MS Subsidiary is currently in compliance with
all applicable Laws relating to the employment of labor, including
those related to wages, hours, collective bargaining and the payment
and withholding of taxes and other sums as required by the appropriate
Governmental Authority and has withheld and paid to the appropriate
Governmental Authority or is holding for payment not yet due to such
Governmental Authority all amounts required to be withheld from
employees of MS or any MS Subsidiary and is not liable for any arrears
of wages, taxes, penalties or other sums for failure to comply with any
of the foregoing;
(f) MS and each MS Subsidiary has paid in full to all their
respective employees or adequately accrued for in accordance with U.S.
GAAP all wages, salaries, commissions, bonuses, benefits and other
compensation due to or on behalf of such employees;
(g) to the knowledge of MS, there is no claim with respect to
payment of wages, salary or overtime pay that has been asserted or is
now pending or, to the best knowledge of MS, threatened before any
Governmental Authority with respect to any Persons currently or
formerly employed by MS or any MS Subsidiary;
(h) neither MS nor any MS Subsidiary is a party to, or
otherwise bound by, any consent decree with any Governmental Authority
relating to employees or employment practices;
(i) there is no charge or proceeding with respect to a
violation of any occupational safety or health standards that has been
asserted or is now pending or, to the best knowledge of MS, threatened
with respect to MS or any MS Subsidiary; and
(j) to the knowledge of MS, there is no charge of
discrimination in employment or employment practices, for any reason,
including, without limitation, age, gender, race, religion or other
legally protected category, which has been asserted or is now pending
or, to the best knowledge of MS, threatened before the United States
Equal Employment Opportunity Commission, or any other Governmental
Authority in any jurisdiction in which MS or any MS Subsidiary has
employed or currently employs any Person which would reasonably be
expected to have a Material Adverse Effect.
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29
SECTION 3.20. Key Employees. Section 3.20 of the Disclosure
Schedules lists the name, place of employment, the current annual salary rates,
bonuses, deferred or contingent compensation, pension, accrued vacation, "golden
parachute" and other like benefits paid or payable (in cash or otherwise) in
1997, the date of employment and a description of position and job function of
each current salaried employee, officer, director, consultant or agent of MS or
any MS Subsidiary whose annual compensation exceeded $100,000.
SECTION 3.21. Taxes. (a) (i) All returns and reports in
respect of Taxes required to be filed with respect to MS and each of its
Subsidiaries have been timely filed; (ii) all Taxes owed by MS or any of its
Subsidiaries, whether or not shown on such returns and reports due have been
timely paid; (iii) all such returns and reports are true, correct and complete
in all material respects; (iv) no adjustment relating to such returns and
reports has been proposed formally or informally by any Tax authority; (v) there
are no pending actions or proceedings for the assessment or collection of Taxes
against MS or any MS Subsidiary; (vi) there are no Tax liens on any assets of MS
or any MS Subsidiary; (vii) neither MS nor any of its Subsidiaries is a party to
any agreements or arrangements that would result, separately or in the aggregate
in the payment of any "excess parachute payments" within the meaning of Section
280G of the Code; (viii) no acceleration of the vesting schedule for any
property that is substantially unvested within the meaning of the regulations
under Section 83 of the Code will occur in connection with the transactions
contemplated by this Agreement; (ix) neither MS nor any MS Subsidiary has been a
United States real property holding corporation within the meaning of Section
897(c)(2) of the Code; and (x) neither MS nor any MS Subsidiary is subject to
any accumulated earnings tax penalty or personal holding company tax.
(b) Except as disclosed in reasonable specificity in Section
3.21(b) of the Disclosure Schedules: (i) there are no outstanding waivers or
agreements extending the statute of limitations for any period with respect to
any Tax to which MS or any of its Subsidiaries may be subject; (ii) neither MS
nor any MS Subsidiary presently has any income occurring in, or a change in
accounting method made for, a period ending on or prior to the Closing Date
which resulted from a deferred reporting of income from such transaction, or
from such change in accounting method; (iii) there are no proposed reassessments
of any property owned by MS or any MS Subsidiary or other proposals that could
increase the amount of any Tax to which MS or any MS Subsidiary would be
subject; and (iv) neither MS nor any MS Subsidiary is a party to any tax
sharing, indemnification or allocation agreement.
(c) The balance sheet of MS provides for reserves and
allowances adequate in amount to satisfy all Liabilities for Taxes relating to
MS and the MS Subsidiaries for prior Tax periods (including partial Tax periods
through the date hereof).
SECTION 3.22. Insurance. MS and the MS Subsidiaries have
obtained and maintained in full force and effect insurance with responsible and
reputable insurance companies or associations in such amounts, on such terms and
covering such risks, including fire and other risks insured against by extended
coverage, as is reasonably prudent, and each has maintained in full force and
effect public liability insurance, insurance against claims for personal injury
or death or property damage occurring
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30
in connection with the activities of MS or the MS Subsidiaries or any properties
owned, occupied or controlled by MS or the MS Subsidiaries, in such amount as
reasonably deemed necessary by MS.
SECTION 3.23. Full Disclosure. MS is not aware of any facts
pertaining to MS, any MS Subsidiary or the Business that would render any of the
representations and warranties of MS contained in this Article III inaccurate in
any material respect.
SECTION 3.24. Brokers. No broker, finder or investment banker
is entitled to any brokerage, finder's or other fee or commission in connection
with the transactions contemplated by this Agreement based upon arrangements
made by or on behalf of MS.
SECTION 3.25. Stockholder Approvals. No other approval of the
stockholders of MS is required for the completion of the transactions
contemplated herein, in the New Stockholders Agreement and in the New
Registration Rights Agreement than the approval of: (i) this Agreement; (ii) the
New Stockholders Agreement; (iii) the Amended and Restated Certificate of
Incorporation of MS, substantially in the form attached hereto (together, the
"MS Stockholder Approvals").
SECTION 3.26. State Takeover Statute. The Board of Directors
of MS has taken all actions necessary under the Delaware General Corporation Law
(the "DGCL"), including approving the issuance of new shares of MS and the other
transactions contemplated in this Agreement to ensure that the restrictions on
business combinations set forth in Section 203 of the DGCL do not or will not
apply to the issuance of new shares of MS or any of the transactions
contemplated by this Agreement.
ARTICLE IV-A
REPRESENTATIONS AND WARRANTIES OF CIBA
As an inducement to MS to enter into this Agreement, CIBA
hereby represents and warrants to MS as follows:
SECTION 4.A.01. Organization of CIBA. CIBA is a French societe
anonyme duly organized, validly existing and in good standing under the laws of
France and has all necessary power and authority to enter into this Agreement to
carry out its obligations hereunder and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement by CIBA, the
performance by CIBA of its obligations hereunder and the consummation by CIBA of
the transactions contemplated hereby have been duly authorized by all requisite
action on the part of CIBA. This Agreement has been duly executed and delivered
by CIBA and (assuming due authorization, execution and delivery by all other
parties hereto) this Agreement constitutes a legal, valid and binding obligation
of CIBA enforceable against CIBA in accordance with its terms. All corporate
actions taken by CIBA
<PAGE> 38
31
have been duly authorized, and CIBA has not taken any action that in any
material respect conflicts with, constitutes a default under, or results in a
violation of any provision of its statuts.
SECTION 4.A.02. No Conflict. Assuming that all consents,
approvals, authorizations and other actions described in Section 4.A.03 have
been obtained and all filings and notifications listed in Section 4.A.03 have
been made, the execution, delivery and performance of this Agreement by CIBA do
not and will not (a) violate, conflict with or result in the breach of any
provision of the charter or by-laws (or similar organizational documents) of
CIBA, (b) conflict with or violate any Law or Governmental Order applicable to
CIBA, or (c) conflict with, result in any breach of, constitute a default (or
event which with the giving of notice or lapse of time, or both, would become a
default) under any contract to which CIBA is a party which would have a Material
Adverse Effect on the ability of CIBA to consummate the transactions
contemplated by this Agreement or the New Stockholders Agreement or the New
Registration Rights Agreement.
SECTION 4.A.03. Governmental Consents and Approvals. The
execution, delivery and performance of this Agreement by CIBA do not and will
not require any consent, approval, authorization or other order of, action by,
filing with or notification to any Governmental Authority.
SECTION 4.A.04. Capital Stock of CIBA. (a) The share capital
of CIBA consists of one class of 19,100 shares, each share having a par value of
FF 100. The CIBA Shares constitute 100% of the issued and outstanding capital
stock of CIBA. The CIBA Shares have been duly authorized and validly issued and
are fully paid and non-assessable. CIBA has no other shares or securities of any
kind outstanding. None of the issued and outstanding shares of CIBA was issued
in violation of any preemptive rights. There are no options, warrants,
convertible securities or other rights, agreements, arrangements or commitments
of any character relating to the capital stock of CIBA or obligating CIBA to
issue or sell any shares of capital stock of, or any other interest in, CIBA.
There are no outstanding contractual obligations of CIBA to repurchase, redeem
or otherwise acquire any shares of CIBA or to provide funds to, or make any
investment (in the form of a loan, capital contribution or otherwise) in, any
other Person. The outstanding shares of CIBA referred to in this section are
free and clear of all Encumbrances.
(b) The stock register of CIBA accurately records: (i) the
name and address of each Person owning shares of capital stock of CIBA and (ii)
the certificate number of each certificate evidencing shares of capital stock
issued by CIBA, the number of shares evidenced by each such certificate, the
date of issuance thereof and, in the case of cancellation, the date of
cancellation.
SECTION 4.A.05. Ownership of the CIBA Shares. (a) Section
4.A.05(a) of the Disclosure Schedules sets out the capital ownership of CIBA.
(b) Upon consummation of the transactions contemplated by this
Agreement, MS will own all the issued and outstanding capital stock of CIBA.
There are no voting trusts, stockholders
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32
agreements, proxies or other agreements or undertakings in effect with respect
to the voting or transfer of the CIBA Shares.
SECTION 4.A.06. Financial Information, Books and Records. (a)
True and complete copies of the CIBA Reference Balance Sheet have been delivered
to MS by CIBA and are attached hereto under Section 4.A.06 of the Disclosure
Schedules. The CIBA Reference Balance Sheet (i) was prepared in accordance with
the books of account and other financial records of CIBA, (ii) present fairly
the financial condition and results of operations of CIBA as of the date thereof
or for the period covered thereby, (iii) has been prepared in accordance with
French GAAP applied on a basis consistent with the past practices of CIBA and
(iv) include all adjustments (consisting only of normal recurring accruals) that
are necessary for a fair presentation of the financial condition of CIBA and the
results of the operations of CIBA as of the dates thereof or for the periods
covered thereby.
(b) The books of account and other financial records of CIBA:
(i) reflect all items of income and expense and all assets and Liabilities
required to be reflected therein in accordance with French GAAP applied on a
basis consistent with the past practices of CIBA, (ii) are in all material
respects complete and correct, and do not contain or reflect any material
inaccuracies or discrepancies and (iii) have been maintained in accordance with
good business and accounting practices.
SECTION 4.A.07. No Undisclosed Liabilities. There are no
Liabilities of CIBA, other than Liabilities (i) reflected or reserved against on
the CIBA Reference Balance Sheet, or (ii) incurred since the date of the CIBA
Reference Balance Sheet in the ordinary course of the business, consistent with
the past practice, of CIBA, and which do not and could not have a Material
Adverse Effect. Reserves are reflected on the CIBA Reference Balance Sheet
against all Liabilities of CIBA in amounts that have been established on a basis
consistent with the past practices of CIBA and in accordance with French GAAP.
SECTION 4.A.08. Conduct in the Ordinary Course; Absence of
Certain Changes, Events and Conditions. Since the date of the CIBA Reference
Balance Sheet, except as disclosed in Section 4.A.08 of the Disclosure
Schedules, the business of CIBA has been conducted in the ordinary course and
consistent with past practice. As amplification and not limitation of the
foregoing, except as disclosed in Section 4.A.08 of the Disclosure Schedules,
since the date of the CIBA Reference Balance Sheet, CIBA has not:
(i) permitted or allowed any of the assets or properties
(whether tangible or intangible) of CIBA to be subjected to any
Encumbrance, other than Permitted Encumbrances and Encumbrances that
will be released at or prior to the Closing;
(ii) except in the ordinary course of business consistent with
past practice, discharged or otherwise obtained the release of any
Encumbrance or paid or otherwise discharged any Liability, other than
current liabilities reflected on the CIBA Reference Balance
<PAGE> 40
33
Sheet and current liabilities incurred in the ordinary course of
business consistent with past practice since the date of the CIBA
Reference Balance Sheet;
(iii) made any loan to, guaranteed any Indebtedness of or
otherwise incurred any Indebtedness on behalf of any Person;
(iv) redeemed any of the capital stock or declared, made or
paid any dividends or distributions (whether in cash, securities or
other property) to the holders of capital stock of CIBA or otherwise,
other than dividends, distributions and redemptions declared, made or
paid by CIBA.
(v) disposed of any properties or assets;
(vi) issued or sold any capital stock, notes, bonds or other
securities, or any option, warrant or other right to acquire the same,
of, or any other interest in, CIBA;
(vii) entered into any agreement, arrangement or transaction
with any of its directors, officers, employees or shareholders (or with
any relative, beneficiary, spouse or Affiliate of such Person);
(viii) made any change in any method of accounting or
accounting practice or policy used by CIBA, other than such changes
required by French GAAP or disclosed in Section 4.A.08 of the
Disclosure Schedules;
(ix) incurred any Indebtedness, in excess of $50,000
individually or $250,000 in the aggregate;
(x) amended or restated the Certificate of Incorporation or
the By-laws (or other organizational documents) of CIBA;
(xi) suffered any casualty loss or damage with respect to any
of their assets which in the aggregate have a replacement cost of more
than $50,000, whether or not such loss or damage shall have been
covered by insurance;
(xii) suffered any Material Adverse Effect; or
(xiii) agreed, whether in writing or otherwise, to take any of
the actions specified in this Section 4.A.08 or granted any options to
purchase, rights of first refusal, rights of first offer or any other
similar rights or commitments with respect to any of the actions
specified in this Section 4.A.08, except as expressly contemplated by
this Agreement.
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33
SECTION 4.A.09. Litigation. There are no Actions by or against
CIBA or any of its assets or properties, pending before any Governmental
Authority (or, to the best knowledge of CIBA after due inquiry, threatened to be
brought by or before any Governmental Authority).
SECTION 4.A.10. Compliance with Laws. CIBA has conducted its
business in accordance with all Laws and Governmental Orders applicable to it or
any of its assets or properties, and to the best of its knowledge CIBA is not in
violation of any such Law or Governmental Order.
SECTION 4.A.11. Absence of Activities. CIBA has no activities
except for holding shares in BDHI.
SECTION 4.A.12. Subsidiaries. CIBA has no other subsidiary
than BDHI.
SECTION 4.A.13. Corporate Books and Records. The minute books
of CIBA contain accurate records of all meetings and accurately reflect all
other actions taken by the stockholders, Boards of Directors and all committees
of the Boards of Directors of CIBA.
SECTION 4.A.14. Brokers. No broker, finder or investment
banker is entitled to any brokerage, finder's or other fee or commission from
CIBA in connection with this Agreement and the transactions contemplated
therein.
SECTION 4.A.15. Taxes. (a) (i) All returns and reports in
respect of Taxes required to be filed with respect to CIBA have been timely
filed; (ii) all Taxes owed by CIBA whether or not shown on such returns and
reports or otherwise due have been timely paid; (iii) all such returns and
reports are true, correct and complete in all material respects; (iv) no
adjustment relating to such returns and reports has been proposed formally or
informally by any Tax authority; (v) there are no pending actions or proceedings
for the assessment or collection of Taxes against CIBA; (vi) there are no Tax
liens on any assets of CIBA; and (vii) CIBA is not subject to any accumulated
earnings tax penalty or personal holding company tax.
(b) Except as disclosed in reasonable specificity in Section
4.A.15(b) of the Disclosure Schedules: (i) there are no outstanding waivers or
agreements extending the statute of limitations for any period with respect to
any Tax to which CIBA may be subject; (ii) CIBA presently does not have any
income occurring in, or a change in accounting method made for, a period ending
on or prior to the Closing Date which resulted from a deferred reporting of
income from such transaction, or from such change in accounting method; (iii)
there are no proposed reassessments of any property owned by CIBA or other
proposals that could increase the amount of any Tax to which CIBA would be
subject; and (iv) CIBA is not a party to any tax sharing, indemnification or
allocation agreement.
<PAGE> 42
35
(c) The CIBA Reference Balance Sheet provides for reserves and
allowances adequate in amount to satisfy all Liabilities for Taxes relating to
CIBA for prior tax periods (including partial tax periods through the date
hereof).
(d) CIBA is not, and at no time has been, engaged in the
conduct of a trade or business within the United States within the meaning of
Section 864(b) and Section 882(a) of the Code, or treated as or considered to be
so engaged under Section 882(d) or Section 897 of the Code or otherwise.
SECTION 4.A.16. Full Disclosure. CIBA is not aware of any
facts pertaining to CIBA that would render any of the representations and
warranties of MS contained in this Article IV-A inaccurate in any material
respect.
SECTION 4.A.17. Title to the Shares Owned by CIBA in BDHI.
CIBA owns its shares of BDHI free and clear of any and all Encumbrances.
SECTION 4.A.18. Stockholders Approval. No approval of the
Board of Directors or the stockholders of CIBA is required for the completion of
the transactions contemplated herein, in the New Stockholders Agreement or in
the New Registration Rights Agreement, except for the approval of MS as new
shareholder of CIBA by the Board of Directors of CIBA.
ARTICLE IV-B
REPRESENTATIONS AND WARRANTIES OF THE BARGE FAMILY AND CEFI
As an inducement to MS to enter into this Agreement, each of
the members of the Barge Family and CEFI hereby represents and warrants for
itself only, but not for the others, to MS as follows:
SECTION 4.B.01. Authority and Qualification of the Barge
Family and CEFI. CEFI is a Luxembourg societe de participations financiere, duly
organised and validly existing under the laws of Luxembourg, and it, along with
each of the members of the Barge Family, has all necessary power and authority
to enter into this Agreement, and CEFI has all necessary power and authority to
enter into the New Stockholders Agreement and the New Registration Rights
Agreement, to carry out their respective obligations hereunder and thereunder
and to consummate the transactions contemplated hereby and thereby. The
execution and delivery of this Agreement, the New Stockholders Agreement and the
New Registration Rights Agreement by CEFI and, with respect to this Agreement
only, the Barge Family, the performance by the Barge Family and CEFI of their
obligations hereunder and thereunder and the consummation by the Barge Family
and CEFI of the transactions contemplated hereby and thereby have been duly
authorized by all requisite action on the part of the Barge Family and CEFI.
This Agreement has been, and upon their execution the New
<PAGE> 43
36
Stockholders Agreement and the New Registration Rights Agreement shall have
been, duly executed and delivered by each of the members of the Barge Family and
CEFI, as applicable, and (assuming due authorization, execution and delivery by
all other parties hereto) this Agreement constitutes, and upon their execution
the New Stockholders Agreement and the New Registration Rights Agreement shall
constitute, legal, valid and binding obligations of each of the members of the
Barge Family and CEFI, as applicable, enforceable against each of the members of
the Barge Family and CEFI, as applicable, in accordance with their terms. All
corporate actions taken by the Barge Family and CEFI have been duly authorized,
and CEFI has not taken any action that in any material respect conflicts with,
constitutes a default under or results in a violation of any provision of its
statuts.
SECTION 4.B.02. No Conflict. The execution, delivery and
performance of this Agreement by the Barge Family and CEFI and of the New
Stockholders Agreement and the New Registration Rights Agreement by CEFI do not
and will not (a) violate, conflict with or result in the breach of any provision
of the charter or by-laws (or similar organizational documents) of CEFI, (b)
conflict with or violate any Law or Governmental Order applicable to CEFI or any
member of the Barge Family, or (c) conflict with, result in any breach of,
constitute a default (or event which with the giving of notice or lapse of time,
or both, would become a default) under any contract to which any member of the
Barge Family or CEFI is a party which would have a Material Adverse Effect on
the ability of any member of the Barge Family or CEFI to consummate the
transactions contemplated by this Agreement or the New Stockholders Agreement or
the New Registration Rights Agreement, as applicable.
SECTION 4.B.03. Governmental Consents and Approvals. The
execution, delivery and performance of this Agreement by the Barge Family and
CEFI and of the New Stockholders Agreement and the New Registration Rights
Agreement by CEFI by the members of the Barge Family or CEFI do not and will not
require any consent, approval, authorization or other order of, action by,
filing with or notification to any Governmental Authority.
SECTION 4.B.04. Title to the Shares Owned by the Barge Family
and CEFI in CIBA. Upon performance of this Agreement, the Barge Family and CEFI
will have transferred to MS good title to the shares of CIBA owned by the Barge
Family and CEFI, free and clear of any and all Encumbrances.
SECTION 4.B.05. Full Disclosure. Neither CEFI nor any member
of the Barge Family is aware of any facts pertaining to themselves that would
render any of their respective representations and warranties contained in this
Article IV-B inaccurate in any respect.
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37
SECTION 4.B.06. Brokers. No broker, finder or investment
banker is entitled to any brokerage, finder's or other fee or commission in
connection with the transactions contemplated by this Agreement based upon
arrangements made by or on behalf of any member of the Barge Family or CEFI.
SECTION 4.B.07. Stockholders Approval. No approval of the
Board of Directors or the stockholders of CEFI is required for the completion of
the transactions contemplated herein, in the New Stockholders Agreement or in
the New Registration Rights Agreement.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF EACH OF THE MEMBERS
OF THE DOMENECH FAMILY AND YACESE
As an inducement to MS to enter into this Agreement, each of
the members of the Domenech Family and YACESE hereby represents and warrants for
itself only, but not for the others, to MS as follows:
SECTION 5.01. Organization of YACESE, Authority and
Qualification of the Domenech Family and YACESE. YACESE is a French societe
anonyme duly organized, validly existing and in good standing under the laws of
France and, along with each of the members of the Domenech Family, has all
necessary power and authority to enter into this Agreement, has all necessary
power and authority to enter into the New Stockholders Agreement and the New
Registration Rights Agreement, to carry out their respective obligations
hereunder and thereunder and to consummate the transactions contemplated hereby
and thereby. The execution and delivery of this Agreement by the Domenech Family
and YACESE and of the New Stockholders Agreement and the New Registration Rights
Agreement by YACESE, the performance by the Domenech Family and YACESE of their
obligations hereunder and thereunder and the consummation by the Domenech Family
and YACESE of the transactions contemplated hereby and thereby have been duly
authorized by all requisite action on the part of the Domenech Family and
YACESE. This Agreement has been, and upon their execution the New Stockholders
Agreement and the New Registration Rights Agreement shall have been, duly
executed and delivered by each of the members of the Domenech Family and YACESE,
as applicable, and (assuming due authorization, execution and delivery by all
other parties hereto) this Agreement constitutes, and upon their execution the
New Stockholders Agreement and the New Registration Rights Agreement shall
constitute, legal, valid and binding obligations of each of the members of the
Domenech Family and YACESE, as applicable, enforceable against each of the
members of the Domenech Family and YACESE, as applicable, in accordance with
their terms. All corporate actions taken by the Domenech Family and YACESE have
been duly
<PAGE> 45
38
authorized, and YACESE has not taken any action that in any material respect
conflicts with, constitutes a default under or results in a violation of any
provision of its statuts.
SECTION 5.02. No Conflict. The execution, delivery and
performance of this Agreement by each member of the Domenech Family and YACESE
and of the New Stockholders Agreement and the New Registration Rights Agreement
by YACESE do not and will not (a) violate, conflict with or result in the breach
of any provision of the charter or by-laws (or similar organizational documents)
of YACESE, (b) conflict with or violate any Law or Governmental Order applicable
to any member of the Domenech Family or YACESE, or (c) conflict with, result in
any breach of, constitute a default (or event which, with the giving of notice
or lapse of time, or both, would become a default) under any contract which any
member of the Domenech Family or YACESE is a party which would have a Material
Adverse Effect on the ability of any member of the Domenech Family or YACESE to
consummate the transactions contemplated by this Agreement, the New Stockholders
Agreement or the New , as applicable.
SECTION 5.03. Governmental Consents and Approvals. The
execution, delivery and performance of this Agreement by the Domenech Family and
YACESE and of the New Stockholders Agreement and the New by YACESE do not and
will not require any consent, approval, authorization or other order of, action
by, filing with or notification to any Governmental Authority.
SECTION 5.04. Title to the Shares Owned by the Domenech Family
and YACESE in BDHI. Upon performance of this Agreement, the Domenech Family and
YACESE will have transferred to MS good and valid title to their shares of BDHI
Common Stock, free and clear of any and all Encumbrances.
SECTION 5.05. Full Disclosure. Neither YACESE nor any member
of the Domenech Family and YACESE is aware of any facts pertaining to themselves
that would render any of their respective representations and warranties
contained in this Article V inaccurate in any material respect.
SECTION 5.06. Brokers. No broker, finder or investment banker
is entitled to any brokerage, finder's or other fee or commission in connection
with the transactions contemplated by this Agreement based upon arrangements
made by or on behalf of any member of the Domenech Family or YACESE.
SECTION 5.07. Stockholders Approval. No approval of the Board
of Directors or stockholders of YACESE is required for the completion of the
transactions contemplated herein, in the New Stockholders Agreement or in the
New Registration Rights Agreement.
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39
ARTICLE VI-A
REPRESENTATIONS AND WARRANTIES OF JRMH AND H.H.A.WAY
As an inducement to MS to enter into this Agreement, each of
JRMH and H.H.A.WAY hereby represents and warrants, for itself, but not for the
other, to MS as follows:
SECTION 6.A.01. Organization, Authority and Qualification of
JRMH and H.H.A.WAY. JRMH and H.H.A.WAY are, respectively, a French societe
civile and a French societe anonyme, and are duly organized, validly existing
and in good standing under the laws of France and have all necessary power and
authority to enter into this Agreement, and H.H.A. WAY has all necessary power
and authority to enter into the New Stockholders Agreement and the New
Registration Rights Agreement, to carry out their respective obligations
hereunder and thereunder and to consummate the transactions contemplated hereby
and thereby. The execution and delivery of this Agreement by JRMH and H.H.A.WAY
and of the New Stockholders Agreement and the New Registration Rights Agreement
by H.H.A.WAY, the performance by JRMH and H.H.A.WAY of their obligations
hereunder and thereunder and the consummation by JRMH and H.H.A.WAY of the
transactions contemplated hereby and thereby have been duly authorized by all
requisite action on the part of JRMH and H.H.A.WAY. This Agreement has been, and
upon their execution the New Stockholders Agreement and the New Registration
Rights Agreement shall have been, duly executed and delivered by JRMH and
H.H.A.WAY and (assuming due authorization, execution and delivery by all other
parties hereto and thereto) this Agreement constitutes, and upon their execution
the New Stockholders Agreement and the New Registration Rights Agreement shall
constitute, legal, valid and binding obligations of JRMH and H.H.A.WAY
enforceable against JRMH and H.H.A.WAY in accordance with their terms All
corporate actions taken by JRMH and H.H.A.WAY have been duly authorized, and
JRMH and H.H.A.WAY have not taken any action that in any material respect
conflicts with, constitutes a default under or results in a violation of any
provision of their statuts.
SECTION 6.A.02. No Conflict. The execution, delivery and
performance of this Agreement by JRMH and H.H.A.WAY and of the New Stockholders
Agreement and the New Registration Rights Agreement by H.H.A.WAY do not and will
not (a) violate, conflict with or result in the breach of any provision of the
charter or by-laws (or similar organizational documents) of JRMH or H.H.A.WAY,
(b) conflict with or violate any Law or Governmental Order applicable to JRMH or
H.H.A.WAY, or (c) conflict with, result in any breach of, constitute a default
(or event which with the giving of notice or lapse of time, or both, would
become a default) under any contract to which JRMH or H.H.A.WAY is a party which
would have a Material Adverse Effect on the ability of JRMH or H.H.A.WAY to
consummate the transactions contemplated by this Agreement, the New Stockholders
Agreement or the New .
<PAGE> 47
40
SECTION 6.A.03. Governmental Consents and Approvals. The
execution, delivery and performance of this Agreement by JRMH and H.H.A.WAY and
of the New Stockholders Agreement and the New by H.H.A.WAY do not and will not
require any consent, approval, authorization or other order of, action by,
filing with or notification to any Governmental Authority.
SECTION 6.A.04. Title to the Shares Owned by JRMH and
H.H.A.WAY in BDHI. Upon performance of this Agreement, JRMH and H.H.A.WAY will
have transferred to MS good and valid title to their shares of BDHI Common
Stock, as indicated in Exhibit 4, free and clear of any and all Encumbrances.
SECTION 6.A.05. Full Disclosure. Neither JRMH nor H.H.A.WAY is
aware of any facts pertaining to themselves that would render any of their
respective representations and warranties contained in this Article VI-A
inaccurate in any material respect.
SECTION 6.A.06. Brokers. No broker, finder or investment
banker is entitled to any brokerage, finder's or other fee or commission in
connection with this Agreement or the transactions contemplated herein from
either JRMH or H.H.A. WAY.
SECTION 6.A07. Stockholders Approval. No approval of the
members of JRMH or the Board of Directors or stockholders of H.H.A.WAY is
required for the completion of the transactions contemplated herein, in the New
Stockholders Agreement or in the New Registration Rights Agreement.
ARTICLE VI-B
REPRESENTATIONS AND WARRANTIES OF BDHI
As an inducement to MS to enter into this Agreement, BDHI
hereby represents and warrants to MS as follows:
SECTION 6.B.01. Organization, Authority and Qualification of
BDHI. BDHI is a French societe anonyme duly organized, validly existing and in
good standing under the laws of France and has all necessary power and authority
to enter into this Agreement, to carry out its obligations hereunder and to
consummate the transactions contemplated hereby. The execution and delivery of
this Agreement by BDHI, the performance by BDHI of its obligations hereunder and
the consummation by BDHI of the transactions contemplated hereby have been duly
authorized by all requisite action on the part of BDHI. This Agreement has been
duly executed and delivered by BDHI and (assuming due authorization, execution
and delivery by all other parties hereto) this Agreement constitutes a legal,
valid and binding obligation of BDHI enforceable against BDHI in accordance with
its terms. All corporate actions taken by BDHI have been duly authorized, and
BDHI has not taken
<PAGE> 48
41
any action that in any material respect conflicts with, constitutes a default
under or results in a violation of any provision of its statuts.
SECTION 6.B.02. Capital Stock of BDHI; Ownership of the BDHI
Shares. (a) The authorized capital stock of BDHI consists of 35,000 shares of
Common Stock, par value FF 100 per share. The BDHI Shares, together with the
shares of BDHI held by CIBA, constitute 100% of the issued and outstanding
shares of BDHI. The BDHI Shares have been duly authorized and validly issued and
are fully paid and non-assessable. BDHI has no other shares or securities of any
kind outstanding.
None of the issued and outstanding shares of BDHI was issued
in violation of any preemptive rights. Except for the stockholders agreement
dated March 1, 1995, among BDHI and its current stockholders (the "BDHI
Stockholders Agreement"), there are no options, warrants, convertible securities
or other rights, agreements, arrangements or commitments of any character
relating to the capital stock of BDHI or obligating BDHI to issue or sell any
shares of capital stock of, or any other interest in, BDHI. There are no
outstanding contractual obligations of BDHI to repurchase, redeem or otherwise
acquire any shares of BDHI or to provide funds to, or make any investment (in
the form of a loan, capital contribution or otherwise) in, any other Person. The
outstanding shares of BDHI referred to in this section constitute all the issued
and outstanding capital stock of BDHI and are owned of record and beneficially
solely by the Persons set forth in Section 6.B.02(a) of the Disclosure Schedules
free and clear of all Encumbrances.
(b) The stock register of BDHI accurately records: (i) the
name and address of each Person owning shares of capital stock of BDHI and (ii)
the certificate number of each certificate evidencing shares of capital stock
issued by BDHI, the number of shares evidenced by each such certificate, the
date of issuance thereof and, in the case of cancellation, the date of
cancellation.
SECTION 6.B.03. No Conflict. Assuming that all consents,
approvals, authorizations and other actions described in Section 6.B.03 of the
Disclosure Schedules, have been obtained and all filings and notifications
listed in Section 6.B.03 of the Disclosure Schedules, have been made, the
execution, delivery and performance of this Agreement by BDHI do not and will
not (a) violate, conflict with or result in the breach of any provision of the
charter or by-laws (or similar organizational documents) of BDHI, (b) conflict
with or violate any Law or Governmental Order applicable to BDHI, or (c)
conflict with, result in any breach of, constitute a default (or event which,
with the giving of notice or lapse of time, or both, would become a default)
under, require any consent under or give to others any rights of termination,
amendment, acceleration, suspension, revocation or cancellation of, or result in
the creation of any Encumbrance on any of the shares or on any of the assets or
properties of BDHI pursuant to, any note, bond, mortgage or indenture, contract,
agreement, lease, sublease, license, permit, franchise or other .instrument or
arrangement to which BDHI is a party or by which any of the shares or any of
such assets or properties is bound or affected.
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42
SECTION 6.B.04. Governmental Consents and Approvals. The
execution, delivery and performance of this Agreement and the New Stockholders
Agreement by BDHI do not and will not require any consent, approval,
authorization or other order of, action by, filing with or notification to any
Governmental Authority.
SECTION 6.B.05. Subsidiaries. BDHI has no other subsidiary
than SOFEDIT.
SECTION 6.B.06. Corporate Books and Records. The minute books
of BDHI contain accurate records of all meetings and accurately reflect all
other actions taken by the stockholders, Board of Directors and all committees
of the Board of Directors of BDHI. Complete and accurate copies of all such
minute books and of the stock register of BDHI have been provided by BDHI to MS.
SECTION 6.B.07. Financial Information, Books and Records. (a)
True and complete copies of BDHI Reference Balance Sheet have been delivered to
MS by BDHI or its financial advisor and are attached hereto under Section 6.B.07
of the Disclosure Schedules. The BDHI Reference Sheet (i) was prepared in
accordance with the books of account and other financial records of BDHI, (ii)
present fairly the financial condition and results of operations of BDHI as of
the date thereof or for the period covered thereby, (iii) has been prepared in
accordance with French GAAP applied on a basis consistent with the past
practices of BDHI and (iv) include all adjustments (consisting only of normal
recurring accruals) that are necessary for a fair presentation of the financial
condition of BDHI and the results of the operations of BDHI as of the date
thereof or for the period covered thereby.
(b) The books of account and other financial records of BDHI:
(i) reflect all items of income and expense and all assets and Liabilities
required to be reflected therein in accordance with French GAAP applied on a
basis consistent with the past practices of BDHI, (ii) are in all material
respects complete and correct, and do not contain or reflect any material
inaccuracies or discrepancies and (iii) have been maintained in accordance with
good business and accounting practices.
SECTION 6.B.08. No Undisclosed Liabilities. There are no
Liabilities of BDHI, other than Liabilities (i) reflected or reserved against on
the BDHI Reference Balance Sheet, or (ii) incurred since the date of the BDHI
Reference Balance Sheet in the ordinary course of the business, consistent with
the past practice, of BDHI, as applicable, and which do not and could not have a
Material Adverse Effect. Reserves are reflected on the BDHI Reference Balance
Sheet against all Liabilities of BDHI in amounts that have been established on a
basis consistent with the past practices of BDHI and in accordance with French
GAAP.
SECTION 6.B.09. Conduct in the Ordinary Course; Absence of
Certain Changes, Events and Conditions. Since the date of the BDHI Reference
Balance Sheet, the business of BDHI has been conducted in the ordinary course
and consistent with past practice. As amplification and not limitation of the
foregoing, except as disclosed in Section 6.B.09 of the Disclosure Schedules,
since the date of the BDHI Reference Balance Sheet, BDHI has not:
<PAGE> 50
43
(i) permitted or allowed any of the assets or properties
(whether tangible or intangible) of BDHI to be subjected to any
Encumbrance, other than Permitted Encumbrances and Encumbrances that
will be released at or prior to the Closing;
(ii) except in the ordinary course of business consistent
with past practice, discharged or otherwise obtained the release of
any Encumbrance or paid or otherwise discharged any Liability, other
than current liabilities reflected on the BDHI Reference Balance
Sheet and current liabilities incurred in the ordinary course of
business consistent with past practice since the date of the BDHI
Reference Balance Sheet;
(iii) made any loan to, guaranteed any Indebtedness of or
otherwise incurred any Indebtedness on behalf of any Person;
(iv) redeemed any of the capital stock or declared, made or
paid any dividends or distributions (whether in cash, securities or
other property) to the holders of capital stock of BDHI or otherwise,
other than dividends, distributions and redemptions declared, made or
paid by any of BDHI;
(v) disposed of any properties or assets;
(vi) issued or sold any capital stock, notes, bonds or other
securities, or any option, warrant or other right to acquire the same,
of, or any other interest in, BDHI;
(vii) entered into any agreement, arrangement or transaction
with any of its directors, officers, employees or shareholders (or with
any relative, beneficiary, spouse or Affiliate of such Person);
(viii) made any change in any method of accounting or
accounting practice or policy used by BDHI, other than such changes
required by French GAAP or disclosed in Section 6.B.09 of the
Disclosure Schedules;
(ix) incurred any Indebtedness, in excess of $50,000
individually or $250,000 in the aggregate;
(x) amended or restated the Certificate of Incorporation or
the By-laws (or other organizational documents) of BDHI;
(xi) suffered any casualty loss or damage with respect to
any of their assets which in the aggregate have a replacement cost of
more than $50,000, whether or not such loss or damage shall have
been covered by insurance;
(xii) suffered any Material Adverse Effect; or
<PAGE> 51
44
(xiii) agreed, whether in writing or otherwise, to take any of
the actions specified in this Section 6.B.09 or granted any options to
purchase, rights of first refusal, rights of first offer or any other
similar rights or commitments with respect to any of the actions
specified in this Section 6.B.09, except as expressly contemplated by
this Agreement.
SECTION 6.B.10. Litigation. There are no Actions by or against
BDHI, or affecting any of their assets, pending before any Governmental
Authority (or, to the best knowledge of BDHI after due inquiry, threatened to be
brought by or before any Governmental Authority).
SECTION 6.B.11. Compliance with Laws. BDHI has conducted its
Business in accordance with all Laws and Governmental Orders applicable to it or
any of their respective assets or properties, and BDHI is not in violation of
any such Law or Governmental Order.
SECTION 6.B.12. Brokers. No broker, finder or investment
banker is entitled to any brokerage, finder's or other fee or commission from
BDHI in connection with this Agreement and the transactions contemplated
therein.
SECTION 6.B.13. SOFEDIT Shares. BDHI owns the SOFEDIT Shares
subject to the pledges disclosed in Section 6.B.13 of the Disclosure Schedules.
SECTION 6.B.14. Taxes. (a) (i) All returns and reports in
respect of Taxes required to be filed with respect to BDHI have been timely
filed; (ii) all Taxes owed by BDHI whether or not shown on such returns and
reports have been timely paid; (iii) all such returns and reports are true,
correct and complete in all material respects; (iv) no adjustment relating to
such returns and reports has been proposed formally or informally by any Tax
authority; (v) there are no pending actions or proceedings for the assessment or
collection of Taxes against BDHI; (vi) there are no Tax liens on any assets of
BDHI; and (vii) BDHI is not subject to any accumulated earnings tax penalty or
personal holding company tax.
(b) Except as disclosed in reasonable specificity in Section
6.B.14(b) of the Disclosure Schedules: (i) there are no outstanding waivers or
agreements extending the statute of limitations for any period with respect to
any Tax to which BDHI may be subject; (ii) BDHI presently does not have any
income occurring in, or a change in accounting method made for, a period ending
on or prior to the Closing Date which resulted from a deferred reporting of
income from such transaction, or from such change in accounting method; (iii)
there are no proposed reassessments of any property owned by BDHI or other
proposals that could increase the amount of any Tax to which BDHI would be
subject; and (iv) BDHI is not a party to any tax sharing, indemnification or
allocation agreement.
(c) The BDHI Reference Balance Sheet provides for reserves and
allowances adequate in amount to satisfy all Liabilities for Taxes relating to
BDHI for prior Tax periods (including partial Tax periods through the date
hereof).
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45
(d) BDHI is not, and at no time has been, engaged in the
conduct of a trade or business within the United States within the meaning of
Section 864(b) and Section 882(a) of the Code, or treated as or considered to be
so engaged under Section 882(d) or Section 897 of the Code or otherwise.
SECTION 6.B.15. Full Disclosure. BDHI is not aware of any
facts pertaining to BDHI that would render any of the representations and
warranties of BDHI contained in this Article VI-B inaccurate in any material
respect.
SECTION 6.B.16. Stockholders Approval. No approval of the
Board of Directors or stockholders of BDHI is required for the completion of the
transactions contemplated herein, in the New Stockholders Agreement or in the
New , except for the approval of MS as new shareholder of BDHI by the Board of
Directors of BDHI
ARTICLE VII
REPRESENTATIONS AND WARRANTIES OF
THE SOFEDIT FINANCIAL SHAREHOLDERS
As an inducement to MS to enter into this Agreement, each of
the SOFEDIT Financial Shareholders hereby represents and warrants to MS as
follows, provided that, none of the representations or warranties under this
article VII shall be construed as a representation or a warranty on either
SOFEDIT, any SOFEDIT Subsidiary, or on any party hereto other than itself:
SECTION 7.01. Organization, Authority and Qualification of the
SOFEDIT Financial Shareholders. Each of the SOFEDIT Financial Shareholders has
all necessary power and authority to enter into this Agreement, the New
Stockholders Agreement and the New Registration Rights Agreement, to carry out
its obligations hereunder and thereunder and to consummate the transactions
contemplated hereby and thereby. The execution and delivery of this Agreement,
the New Stockholders Agreement and the New Registration Rights Agreement by each
SOFEDIT Financial Shareholder, the performance of its obligations hereunder and
thereunder and the consummation of the transactions contemplated hereby and
thereby have been duly authorized by all requisite action on its part. This
Agreement has been, and upon their execution the New Stockholders Agreement and
the New Registration Rights Agreement shall have been, duly executed and
delivered by it and (assuming due authorization, execution and delivery by all
other parties hereto) this Agreement constitutes, and upon their execution the
New Stockholders Agreement and the New Registration Rights Agreement shall
constitute, legal, valid and binding obligations of such SOFEDIT Financial
Shareholder, enforceable against it in accordance with their terms.
<PAGE> 53
46
SECTION 7.02. No Conflict. The execution, delivery and
performance of this Agreement, the New Stockholders Agreement and the New by
each SOFEDIT Financial Shareholder do not and will not (a) violate, conflict
with or result in the breach of any provision of the charter or by-laws (or
similar organizational documents) of such SOFEDIT Financial Shareholder, (b)
conflict with or violate any Law or Governmental Order applicable to such
SOFEDIT Financial Shareholder, or (c) conflict with, result in any breach of,
constitute a default (or event which with the giving of notice or lapse of time,
or both, would become a default) under any contract to which such SOFEDIT
Financial Shareholder is a party which would have a Material Adverse Effect on
the ability of such SOFEDIT Financial Shareholder to consummate the transactions
contemplated by this Agreement, the New Stockholders Agreement and the New
Registration Rights Agreement.
SECTION 7.03. Governmental Consents and Approvals. The
execution, delivery and performance of this Agreement and the New Stockholders
Agreement by each SOFEDIT Financial Shareholder do not and will not require any
consent, approval, authorization or other order of, action by, filing with or
notification to any Governmental Authority.
SECTION 7.04. Brokers. No broker, finder or investment banker
other than Natexis Finance S.A. is entitled to any brokerage, finder's or other
fee or commission in connection with this Agreement and the transactions
contemplated therein, from any of the SOFEDIT Financial Shareholders.
SECTION 7.05. SOFEDIT Shares. Each of the SOFEDIT Financial
Shareholders owns its SOFEDIT Shares unrestricted, beneficially and of record,
free and clear of all Encumbrances and, at the Closing Date, it will transfer
good and valid title to its SOFEDIT Shares to MS pursuant to the terms of this
Agreement, free and clear of all Encumbrances.
SECTION 7.06. Full Disclosure. No SOFEDIT Financial
Shareholders is aware of any facts pertaining to itself that would render any of
the representations and warranties contained in this Article VII inaccurate in
any material respect.
(b) No representation or warranty of each of the SOFEDIT
Financial Shareholders in this Agreement, nor any statement or certificate
furnished or to be furnished to MS pursuant to this Agreement, or in connection
with the transactions contemplated by this Agreement, contains or will contain
on the Closing Date any untrue statement of a material fact, or omits or will,
on the Closing Date, omit to state a material fact necessary to make the
statements contained herein or therein not misleading.
SECTION 7.07. Stockholders Approval. No approval of the
stockholders of any SOFEDIT Financial Shareholders is required for the
completion of the transactions contemplated herein, in the New Stockholders
Agreement or in the New .
<PAGE> 54
47
ARTICLE VIII
REPRESENTATIONS AND WARRANTIES OF SOFEDIT
As an inducement to MS to enter into this Agreement, SOFEDIT
hereby represents and warrants to MS as follows:
SECTION 8.01. Organization, Authority and Qualification of
SOFEDIT. SOFEDIT is a French societe anonyme duly organized, validly existing
and in good standing under the laws of France and has all necessary power and
authority to own, operate or lease the properties and assets now owned, operated
or leased by it and to carry on the Business as it has been and is currently
conducted. The execution and delivery of this Agreement by SOFEDIT, the
performance by SOFEDIT of its obligations hereunder and the consummation by
SOFEDIT of the transactions contemplated hereby have been duly authorized by all
requisite action on the part of SOFEDIT. This Agreement has been duly executed
and delivered by SOFEDIT, and (assuming due authorization, execution and
delivery by the other parties hereto) this Agreement constitutes a legal, valid
and binding obligation of SOFEDIT enforceable against SOFEDIT in accordance with
its terms. SOFEDIT is duly licensed or qualified to do business and is in good
standing in each jurisdiction in which the properties owned or leased by it or
the operation of its business makes such licensing or qualification necessary or
desirable. All corporate actions taken by SOFEDIT have been duly authorized, and
SOFEDIT has not taken any action that in any respect conflicts with, constitutes
a default under or results in a violation of any provision of its "statuts".
True and correct copies of the "statuts" of SOFEDIT, as in effect on the date
hereof have been delivered by SOFEDIT to MS.
SECTION 8.02. Capital Stock of SOFEDIT. The share capital of
SOFEDIT consists of one class of authorized shares, each share having a par
value of FF 100. As of the date hereof, there are 102,812 issued and outstanding
shares of SOFEDIT Common Stock, which constitute 100% of the issued and
outstanding capital stock of SOFEDIT. The outstanding shares of SOFEDIT have
been duly authorized and validly issued and are fully paid and non-assessable.
SOFEDIT has no other shares or securities of any kind outstanding.
SECTION 8.03. Ownership of the shares of SOFEDIT. (a) Section
8.03(a) of the Disclosure Schedules sets out the capital ownership of SOFEDIT.
(b) Upon consummation of the transactions contemplated by this
Agreement, MS will own, directly or indirectly, all the issued and outstanding
capital stock of SOFEDIT. There are no voting trusts, stockholder agreement,
proxies or other agreements or understandings in effect with respect to the
voting or transfer of the shares of SOFEDIT free and clear of any and all
Encumbrances, except for the pledges described under Section 6.B.13 of the
Disclosure Schedules.
None of the issued and outstanding shares of SOFEDIT was
issued in violation of any preemptive rights. Except for the stockholders
agreement dated July 8, 1995, among SOFEDIT
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48
stockholders (the "SOFEDIT Stockholders Agreement"), there are no options,
warrants, convertible securities or other rights, agreements, arrangements or
commitments of any character relating to the capital stock of SOFEDIT or
obligating SOFEDIT to issue or sell any shares of capital stock of, or any other
interest in, SOFEDIT. There are no outstanding contractual obligations of
SOFEDIT to repurchase, redeem or otherwise acquire any shares of SOFEDIT or to
provide funds to, or make any investment (in the form of a loan, capital
contribution or otherwise) in, any other Person. The outstanding shares of
SOFEDIT referred to in this section constitute all the issued and outstanding
capital stock of SOFEDIT and are owned of record and beneficially solely by the
Persons set forth in Section 8.03(a) of the Disclosure Schedules free and clear
of any Encumbrances, except for the pledges disclosed under Section 6.B.13 of
the Disclosure Schedules.
(c) The stock register of SOFEDIT accurately records: (i) the
name and address of each Person owning shares of capital stock of SOFEDIT and
(ii) the certificate number of each certificate evidencing shares of capital
stock issued by SOFEDIT, the number of shares evidenced by each such
certificate, the date of issuance thereof and, in the case of cancellation, the
date of cancellation.
SECTION 8.04. Subsidiaries. (a) Section 8.04(a) of the
Disclosure Schedules sets forth a true and complete list of all SOFEDIT
Subsidiaries, listing for each SOFEDIT Subsidiary its name, type of entity, the
jurisdiction, and its authorized capital stock.
(b) Other than the SOFEDIT Subsidiaries, there are no other
corporations, limited liability companies, partnerships, associations or other
entities in which SOFEDIT owns, of record or beneficially, any direct or
indirect equity or other similar interest or any right (contingent or otherwise)
to acquire the same. SOFEDIT is not a member of (nor is any part of the Business
conducted through) any partnership. Except as set forth in Section 8.04(b) of
the Disclosure Schedules, neither SOFEDIT nor any SOFEDIT Subsidiary is a
participant in any joint venture or similar arrangement.
(c) Each SOFEDIT Subsidiary: (i) that is a corporation is duly
organized and validly existing under the laws of its jurisdiction of
incorporation, (ii) that is not a corporation is duly organized and validly
existing under the laws of its jurisdiction of organization, (iii) has all
necessary power and authority to own, operate or lease the properties and assets
owned, operated or leased by such SOFEDIT Subsidiary and to carry on its
business as it has been and is currently conducted by such SOFEDIT Subsidiary
and (iv) is duly licensed or qualified to do business and is in good standing in
each jurisdiction in which the properties owned or leased by it or the operation
of its business makes such licensing or qualification necessary or desirable.
(d) All the outstanding shares of capital stock of each
SOFEDIT Subsidiary are duly authorized, validly issued, fully paid,
nonassessable and free of preemptive rights and are owned by SOFEDIT, whether
directly or indirectly, free and clear of all Encumbrances.
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49
(e) There are no options, warrants, convertible securities, or
other rights, agreements, arrangements or commitments of any character relating
to the capital stock of any SOFEDIT Subsidiary or obligating any SOFEDIT
Subsidiary to issue or sell any shares of capital stock of, or any other
interest in, such SOFEDIT Subsidiary.
(f) All corporate actions taken by each SOFEDIT Subsidiary
have been duly authorized and no SOFEDIT Subsidiary has taken any action that in
any respect conflicts with, constitutes a default under or results in a
violation of any provision of its charter or by-laws (or similar organizational
documents).
(g) There are no voting trusts, stockholder agreements,
proxies or other agreements or understandings in effect with respect to the
voting or transfer of any shares of capital stock of or any other interests in
any SOFEDIT Subsidiary.
(h) The stock register of each SOFEDIT Subsidiary accurately
records: (i) the name and address of each Person owning shares of capital stock
of such SOFEDIT Subsidiary and (ii) the certificate number of each certificate
evidencing shares of capital stock issued by such SOFEDIT Subsidiary, the number
of shares evidenced each such certificate, the date of issuance thereof and, in
the case of cancellation, the date of cancellation.
(i) Except as disclosed in Section 8.04 (b) of the Disclosure
Schedules, no SOFEDIT Subsidiary is a member of (nor is any part of the Business
conducted through) any partnership, nor is any SOFEDIT Subsidiary a participant
in any joint-venture or similar arrangement.
SECTION 8.05. Corporate Books and Records. The minute books of
SOFEDIT and the SOFEDIT Subsidiaries contain accurate records of all meetings
and accurately reflect all other actions taken by the stockholders, Boards of
Directors and all committees of the Boards of Directors of SOFEDIT and the
SOFEDIT Subsidiaries. Complete and accurate copies of all such minute books and
of the stock register of SOFEDIT and each SOFEDIT Subsidiary have been provided
by SOFEDIT to MS for the period from January 1, 1996, to the date hereof.
SECTION 8.06. No Conflict. Except as disclosed under Section
6.B.03 of the Disclosure Schedules, the execution, delivery and performance of
this Agreement by SOFEDIT and the Sellers do not and will not (a) violate,
conflict with or result in the breach of any provision of the charter or by-laws
(or similar organizational documents) of SOFEDIT or any SOFEDIT Subsidiary, (b)
conflict with or violate (or cause an event which could have a Material Adverse
Effect as a result of) any Law or Governmental Order applicable to SOFEDIT or
any SOFEDIT Subsidiary or any of their respective assets, properties or
businesses, including, without limitation, their Business, or (c) conflict with,
result in any breach of, constitute a default (or event which with the giving of
notice or lapse of time, or both, would become a default) under, require any
consent under, or give to others any rights of termination, amendment,
acceleration, suspension, revocation or cancellation of, or result in the
creation of any Encumbrance on any of the shares or on any of the assets or
properties of SOFEDIT
<PAGE> 57
50
or any SOFEDIT Subsidiary pursuant to, any note, bond, mortgage or indenture,
contract, agreement, lease, sublease, license, permit, franchise or other
instrument or arrangement to which SOFEDIT or any SOFEDIT Subsidiary is a party
or by which any of the shares or any of such assets or properties is bound or
affected.
SECTION 8.07. Governmental Consents and Approvals. The
execution, delivery and performance of this Agreement by SOFEDIT do not and will
not require any consent, approval, authorization or other order of, action by,
filing with or notification to any Governmental Authority.
SECTION 8.08. Financial Information, Books and Records. (a)
True and complete copies of the SOFEDIT Reference Balance Sheet have been
delivered to MS by SOFEDIT and are attached hereto as Section 8.08 of the
Disclosure Schedules. The SOFEDIT Reference Balance Sheet (i) was prepared in
accordance with the books of account and other financial records of SOFEDIT,
(ii) presents fairly the consolidated financial condition and results
of operations of SOFEDIT described therein as of the dates thereof for the
period covered thereby, (iii) has been prepared in accordance with French GAAP
applied on a basis consistent with the past practices of SOFEDIT and (iv)
includes all adjustments (consisting only of normal recurring accruals) that are
necessary for a fair presentation of the consolidated financial condition of
SOFEDIT and the results of the operations of SOFEDIT as of the date thereof or
for the period covered thereby.
(b) The books of account and other financial records of
SOFEDIT: (i) reflect all items of income and expense and all assets and
Liabilities required to be reflected therein in accordance with French GAAP
applied on a basis consistent with the past practices of SOFEDIT, (ii) are in
all material respects complete and correct, and do not contain or reflect any
material inaccuracies or discrepancies and (iii) have been maintained in
accordance with good business and accounting practices.
SECTION 8.09. No Undisclosed Liabilities. There are no
Liabilities of SOFEDIT or any SOFEDIT Subsidiary, other than Liabilities (i)
reflected or reserved against on the SOFEDIT Reference Balance Sheet, or (ii)
disclosed in Section 8.09 of the Disclosure Schedules, or (iii) incurred since
the date of the SOFEDIT Reference Balance Sheet in the ordinary course of the
business, consistent with the past practice, of SOFEDIT or the SOFEDIT
Subsidiaries, as applicable, and which do not and could not have a Material
Adverse Effect. Reserves are reflected on the SOFEDIT Reference Balance Sheet
against all Liabilities of SOFEDIT and the SOFEDIT Subsidiaries in amounts that
have been established on a basis consistent with the past practices of SOFEDIT
and the SOFEDIT Subsidiaries and in accordance with French GAAP.
SECTION 8.10. Conduct in the Ordinary Course; Absence of
Certain Changes, Events and Conditions. Since the date of the SOFEDIT Reference
Balance Sheet, except as disclosed in Section 8.10 of the Disclosure Schedules,
the business of SOFEDIT has been conducted in the ordinary course and consistent
with past practice. As amplification and not limitation of the foregoing,
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51
except as disclosed in Section 8.10 of the Disclosure Schedules, since the date
of the SOFEDIT Reference Balance Sheet, SOFEDIT has not:
(i) permitted or allowed any of the assets or properties
(whether tangible or intangible) of SOFEDIT or of any SOFEDIT
Subsidiary to be subjected to any Encumbrance, other than Permitted
Encumbrances and Encumbrances that will be released at or prior to the
Closing;
(ii) except in the ordinary course of business consistent
with past practice, discharged or otherwise obtained the release of
any Encumbrance or paid or otherwise discharged any Liability,
other than current liabilities reflected on the SOFEDIT Reference
Balance Sheet and current liabilities incurred in the ordinary course
of business consistent with past practice since the date of the
SOFEDIT Reference Balance Sheet;
(iii) made any loan to, guaranteed any Indebtedness of or
otherwise incurred any Indebtedness on behalf of any Person;
(iv) redeemed any of the capital stock or declared, made or
paid any dividends or distributions (whether in cash, securities or
other property) to the holders of capital stock of SOFEDIT or any
SOFEDIT Subsidiary or otherwise, other than dividends, distributions
and redemptions declared, made or paid by any of SOFEDIT or any SOFEDIT
Subsidiary;
(v) sold, transferred, leased, subleased, licensed or
otherwise disposed of any properties or assets, real, personal or mixed
(including, without limitation, leasehold interests and intangible
assets), other than the sale of Inventories in the ordinary course of
business consistent with past practice;
(vi) issued or sold any capital stock, notes, bonds or other
securities, or any option, warrant or other right to acquire the same,
of, or any other interest in, SOFEDIT or any SOFEDIT Subsidiary;
(vii) entered into any agreement, arrangement or transaction
with any of its directors, officers, employees or shareholders (or with
any relative, beneficiary, spouse or Affiliate of such Person);
(viii) made any change in any method of accounting or
accounting practice or policy used by SOFEDIT or any SOFEDIT
Subsidiary, other than such changes required by French GAAP or
disclosed in Section 8.10 of the Disclosure Schedules;
(ix) allowed any Permit or Environmental Permit that was
issued or relates to SOFEDIT or any SOFEDIT Subsidiary or otherwise
relates to any Asset to lapse or terminate
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or failed to renew any such Permit or Environmental Permit or any
insurance policy that is scheduled to terminate or expire within 45
calendar days of the Closing Date;
(x) incurred any Indebtedness, in excess of $50,000
individually or $250,000 in the aggregate;
(xi) amended or restated the Certificate of Incorporation or
the By-laws (or other organizational documents) of SOFEDIT or any
SOFEDIT Subsidiary;
(xii) suffered any casualty loss or damage with respect to any
of their assets which in the aggregate have a replacement cost of more
than $50,000, whether or not such loss or damage shall have been
covered by insurance;
(xiii) suffered any Material Adverse Effect; or
(xiv) agreed, whether in writing or otherwise, to take any of
the actions specified in this Section 8.10 or granted any options to
purchase, rights of first refusal, rights of first offer or any other
similar rights or commitments with respect to any of the actions
specified in this Section 8.10, except as expressly contemplated by
this Agreement.
SECTION 8.11. Litigation. There are no Actions by or against
SOFEDIT or any SOFEDIT Subsidiary, or affecting any of their assets, pending
before any Governmental Authority (or, to the best knowledge of SOFEDIT after
due inquiry, threatened to be brought by or before any Governmental Authority).
None of the matters disclosed in Section 8.11 of the Disclosure Schedules has or
has had a Material Adverse Effect or could affect the legality, validity or
enforceability of this Agreement, the New Stockholders Agreement or the New
Registration Rights Agreement or the consummation of the transactions
contemplated hereby and thereby. Except as set forth in Section 8.11 of the
Disclosure Schedules, neither SOFEDIT nor any SOFEDIT Subsidiary is subject to
any Governmental Order (nor, to the best knowledge of SOFEDIT after due inquiry,
are there any such Governmental Orders threatened to be imposed by any
Governmental Authority) which has or has had a Material Adverse Effect.
SECTION 8.12. Compliance with Laws. SOFEDIT and any SOFEDIT
Subsidiary have each conducted the Business in accordance with all Laws and
Governmental Orders applicable to them or any of their respective assets or
properties or the Business, and neither SOFEDIT nor any SOFEDIT Subsidiary is in
violation of any such Law or Governmental Order.
SECTION 8.13. Environmental and Other Permits and Licenses;
Related Matters. (a) Except as disclosed in Section 8.13(a)(i) of the Disclosure
Schedules, and except as would not reasonably be expected to result in a
Material Adverse Effect, SOFEDIT and the SOFEDIT Subsidiaries currently hold and
are in compliance with, all Permits, including, without limitation,
Environmental Permits, necessary or proper for the current use, occupancy and
operation of each Asset
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of SOFEDIT and the SOFEDIT Subsidiaries and the conduct of the Business, and all
such Permits are in full force and effect. Except as disclosed in Section
8.13(a)(ii) of the Disclosure Schedules and except as would not reasonably be
expected to result in a Material Adverse Effect, there is no existing practice,
action or activity of SOFEDIT or any SOFEDIT Subsidiary and no existing
condition of the assets of SOFEDIT or any SOFEDIT Subsidiary or the Business
which would reasonably be expected to give rise to any civil or criminal
Liability under, or violate or prevent compliance with, any health or
occupational safety or other applicable Law. Except as disclosed in Section
8.13(a)(iii) of the Disclosure Schedules, neither SOFEDIT nor any SOFEDIT
Subsidiary has received any notice from any Governmental Authority revoking,
canceling, rescinding, materially modifying or refusing to renew any Permit or
providing written notice of violations under any Law. To the knowledge of
SOFEDIT, Section 8.13(a)(iv) of the Disclosure Schedules identifies all Permits
that are nontransferable or which will require the consent of any Governmental
Authority in the event of the consummation of the transactions contemplated by
this Agreement.
(b) Except as disclosed in Section 8.13(b) of the Disclosure
Schedules and except as would not reasonably be expected to result in a Material
Adverse Effect, (i) Hazardous Materials have not been generated, used, treated,
handled or stored on, or transported to or from, or Released on any Real
Property or on any property formerly owned, leased or occupied by SOFEDIT or any
SOFEDIT Subsidiaries; (ii) SOFEDIT and the SOFEDIT Subsidiaries have disposed of
all Hazardous Materials, in compliance with all applicable Environmental Laws
and Environmental Permits; (iii) there are no pending or, to the knowledge of
SOFEDIT, threatened Environmental Claims against SOFEDIT, any SOFEDIT
Subsidiary, or any Real Property; (iv) no Real Property is listed or proposed
for listing on any list of sites of any Governmental Authority requiring
investigation or cleanup; and (v) neither SOFEDIT nor any SOFEDIT Subsidiary has
received notice that it has transported or arranged for the transportation of
any Hazardous Materials to any location that is listed or proposed for listing
on any list of any Governmental Authority or which is the subject of any
Governmental Claim.
(c) Except as disclosed in Section 8.13(c) of the Disclosure
Schedules, and except as would not reasonably be expected to result in a
Material Adverse Effect, there are no circumstances with respect to any Real
Property or other Asset or the operation of the Business which could reasonably
be anticipated (i) to form the basis of an Environmental Claim against SOFEDIT,
any SOFEDIT Subsidiary or any Real Property or Asset or (ii) to cause such Real
Property or Asset to be subject to any restrictions on ownership, occupancy, use
or transferability under any applicable Environmental Law.
(d) Except as disclosed in Section 8.13(d) of the Disclosure
Schedules, there are not now and never have been any USTs located on any Real
Property.
SECTION 8.14. Material Contracts. (a) Section 8.14(a) of the
Disclosure Schedules lists each of the following contracts and agreements
(including, without limitation, oral and informal
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54
arrangements) of SOFEDIT and of the SOFEDIT Subsidiaries (such contracts and
agreements to which SOFEDIT or any SOFEDIT Subsidiary is a party being "SOFEDIT
Material Contracts"):
(i) each contract and agreement for the purchase of inventory,
spare parts, other materials or personal property with any supplier or
for the furnishing of services to SOFEDIT or any SOFEDIT Subsidiary, or
otherwise related to the Business under the terms of which SOFEDIT or
any SOFEDIT Subsidiary, as applicable: (A) is likely to pay or
otherwise give consideration of more than $50,000 in the aggregate
during the calendar year ended December 31, 1998, (B) is likely to pay
or otherwise give consideration of more than $100,000 in the aggregate
over the remaining term of such contract or (C) cannot be cancelled by
SOFEDIT or the SOFEDIT Subsidiary that is a party thereto, as
applicable, without penalty or further payment and without more than 30
days' notice;
(ii) each contract and agreement for the sale of the inventory
of SOFEDIT or the SOFEDIT Subsidiaries or other personal property or
for the furnishing of services by SOFEDIT or any SOFEDIT Subsidiary,
which: (A) is likely to involve consideration of more than $50,000 in
the aggregate during the calendar year ended December 31, 1998, (B) is
likely to involve consideration of more than $100,000 in the aggregate
over the remaining term of the contract or (C) cannot be canceled by
SOFEDIT or the SOFEDIT Subsidiary that is a party thereto, as
applicable, without penalty or further payment and without more than 30
days' notice;
(iii) all broker, distributor, dealer, manufacturer's
representative, franchise, agency, sales promotion, market research,
marketing consulting and advertising contracts and agreements to which
SOFEDIT or any SOFEDIT Subsidiary is a party;
(iv) all management contracts and contracts with independent
contractors or consultants (or similar arrangements) to which SOFEDIT
or any SOFEDIT Subsidiary is a party and which are not cancellable
without penalty or further payment and without more than 30 days'
notice;
(v) all contracts and agreements relating to Indebtedness of
SOFEDIT or any SOFEDIT Subsidiary;
(vi) all contracts and agreements with any Governmental
Authority to which SOFEDIT or any SOFEDIT Subsidiary is a party;
(vii) all contracts and agreements that limit or purport to
limit the ability of SOFEDIT or any SOFEDIT Subsidiary to compete in
any line of business or with any Person or in any geographic area or
during any period of time;
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(viii) all contracts and agreements between or among SOFEDIT
or any SOFEDIT Subsidiary and any of the Sellers;
(ix) all contracts and agreements providing for benefits
under any Plan; and
(x) all other contracts and agreements whether or not made
in the ordinary course of business, which are material to SOFEDIT or
any SOFEDIT Subsidiary, or the conduct of the Business or the
absence of which would have a Material Adverse Effect.
(b) Each Material Contract: (i) is valid and binding on the
respective parties thereto and is in full force and effect and (ii) upon
consummation of the transactions contemplated by this Agreement or the New
Stockholders Agreement, shall continue in full force and effect without penalty
or other adverse consequence resulting from the transactions contemplated hereby
and thereby. Neither SOFEDIT nor any SOFEDIT Subsidiary is in breach of, or
default under, any Material Contract.
(c) No party to any Material Contract is in breach thereof or
default thereunder.
(d) Except as disclosed in Section 8.14(d) of the Disclosure
Schedules, there is no contract, agreement or other arrangement granting any
Person any preferential right to purchase, other than in the ordinary course of
business consistent with past practice, any of the properties or assets of
SOFEDIT or any SOFEDIT Subsidiary.
SECTION 8.15. Brokers. Except for Natexis Finance S.A., no
broker, finder or investment banker is entitled to any brokerage, finder's or
other fee or commission in connection with the transactions contemplated by this
Agreement based upon arrangements made by or on behalf of SOFEDIT.
SECTION 8.16. Taxes. (a) (i) All returns and reports in
respect of Taxes required to be filed with respect to SOFEDIT and each of its
Subsidiaries have been timely filed; (ii) all Taxes owed by SOFEDIT or any of
its Subsidiaries whether or not shown on such returns and reports have been
timely paid; (iii) all such returns and reports are true, correct and complete
in all material respects; (iv) no adjustment relating to such returns and
reports has been proposed formally or informally by any Tax authority; (v) there
are no pending actions or proceedings for the assessment or collection of Taxes
against SOFEDIT or any of its Subsidiaries; (vi) there are no Tax liens on any
assets of SOFEDIT or any of its Subsidiaries; and (vii) neither SOFEDIT nor any
of its Subsidiaries is subject to any accumulated earnings tax penalty or
personal holding company tax.
(b) Except as disclosed in reasonable specificity in Section
8.16(b) of the Disclosure Schedules: (i) there are no outstanding waivers or
agreements extending the statute of limitations for any period with respect to
any Tax to which SOFEDIT or any of its Subsidiaries may be subject; (ii) neither
SOFEDIT nor any of its Subsidiaries presently has any income occurring in, or a
change in
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56
accounting method made for, a period ending on or prior to the Closing Date
which resulted from a deferred reporting of income from such transaction, or
from such change in accounting method; (iii) there are no proposed reassessments
of any property owned by SOFEDIT or any of its Subsidiaries or other proposals
that could increase the amount of any Tax to which SOFEDIT or any of its
Subsidiaries would be subject; and (iv) neither SOFEDIT nor any of its
Subsidiaries is a party to any tax sharing, indemnification or allocation
agreement.
(c) The SOFEDIT Reference Balance Sheet provides for reserves
and allowances adequate in amount to satisfy all Liabilities for Taxes relating
to SOFEDIT and its Subsidiaries for prior Tax periods (including partial Tax
periods through the date hereof).
(d) SOFEDIT and its Subsidiaries are not, and at no time have
been, engaged in the conduct of a trade or business within the United States
within the meaning of Section 864(b) and Section 882(a) of the Code, or treated
as or considered to be so engaged under Section 882(d) or Section 897 of the
Code or otherwise.
SECTION 8.17. Customers. Listed in Section 8.17 of the
Disclosure Schedules are the names and addresses of the ten most significant
customers (by revenue) of SOFEDIT and the SOFEDIT Subsidiaries for the
twelve-month period to be ended December 31, 1996, and the amount for which each
such customer was invoiced during such period. Except as disclosed in Section
8.17 of the Disclosure Schedules, neither SOFEDIT nor any SOFEDIT Subsidiary has
received any notice or has any reason to believe that any significant customer
of SOFEDIT has ceased, or will cease, to use the products, equipment, goods or
services of SOFEDIT or any SOFEDIT Subsidiary, or has substantially reduced, or
will substantially reduce, the use of such products, equipment, goods or
services at any time.
SECTION 8.18. Suppliers. Listed in Section 8.18 of the
Disclosure Schedules are the names and addresses of each of the ten most
significant suppliers of raw materials, supplies, merchandise and other goods
for SOFEDIT and the SOFEDIT Subsidiaries for the twelve-month period to be ended
December 31, 1996, and the amount for which each such supplier invoiced SOFEDIT
and the SOFEDIT Subsidiaries during such period. Except as disclosed in Section
8.18 of the Disclosure Schedules, neither SOFEDIT nor any SOFEDIT Subsidiary has
received any notice or has any reason to believe that any such supplier will not
sell raw materials, supplies, merchandise and other goods to SOFEDIT or any
SOFEDIT Subsidiary at any time after the Closing Date on terms and conditions
substantially similar to those used in its current sales to SOFEDIT and the
SOFEDIT Subsidiaries, subject only to general and customary price increases.
SECTION 8.19. Employee Benefit Matters. (a) Section 8.19 of
the Disclosure Schedules lists (i) all employee benefit plans and all bonus,
stock option, stock purchase, restricted stock, incentive, deferred
compensation, retiree medical or life insurance, supplemental retirement,
pension or severance plans to which SOFEDIT is a party, with respect to which
SOFEDIT has any obligation or which are maintained, contributed to or sponsored
by SOFEDIT for the benefit of any
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57
current or former employee, officer or director, (ii) any contracts,
arrangements or understandings between SOFEDIT and any employee of SOFEDIT,
including, without limitation, any contracts, arrangements or understandings
relating to a sale or merger of SOFEDIT (collectively, the "SOFEDIT Plans")
except for the plans which are compulsory pursuant to French laws (including
compulsory collective bargaining agreements). Each SOFEDIT Plan is in writing
and SOFEDIT has furnished the Sellers with a complete and accurate copy of each
SOFEDIT Plan and a complete and accurate copy of each material document prepared
in connection with each such Plan including, without limitation (i) a copy of
each funding arrangement, (ii) each summary plan description and summary of
material modifications, (iii) the most recently prepared actuarial report and
financial statement in connection with each such Plan. Except as disclosed in
Section 8.19 of the Disclosure Schedules, SOFEDIT does not have any express or
implied commitment, whether legally enforceable or not (i) to create, incur
liability with respect to or cause to exist any other employee benefit plan,
program or arrangement, (ii) to enter into any contract or agreement to provide
compensation or benefits of any individual or (iii) to modify, change or
terminate any SOFEDIT Plan; each such Plan has been operated in material
compliance with all applicable Law. All contributions, premiums or payments to
be made with respect to each such Plan have been made on or before their due
dates, and the assets of each such Plan are sufficient to procure or provide for
the benefits provided under each such Plan to all current or former Plan
participants.
(b) (i) All returns and reports in respect of Social Security
Contributions required to be filed with respect to SOFEDIT have been timely
filed, (ii) all Social Security Contributions required to be shown on such
returns and reports or otherwise due have been timely paid, (iii) all such
returns and reports are true, correct and complete in all material respects,
(iv) there is no pending or, to the actual knowledge of SOFEDIT, threatened
action or proceeding for the assessment or collection of Social Security
Contributions against SOFEDIT, (v) there are no Social Security liens on any
asset of SOFEDIT, (vi) the SOFEDIT Reference Balance Sheet provides for reserve
or allowance adequate in amount to satisfy all liabilities for Social Security
Contributions through the date hereof. For purposes hereof, "Social Security
Contributions" means any and all compulsory contributions and other charges of
any kind with respect to social security, family contributions (allocations
familiales), retirements and pensions.
SECTION 8.20. Labor Matters. (a) Except as set forth in
Section 8.20 of the Disclosure Schedules, SOFEDIT is not a party to any
employment agreement which contains any provision which is substantially more
favorable than those which are provided for in applicable labor legislation,
including the applicable compulsory collective bargaining agreement.
(b) There are no controversies, strikes, slowdowns or work
stoppages outstanding or, to the knowledge of SOFEDIT, pending between SOFEDIT
and any of its employees.
(c) To the knowledge of SOFEDIT, SOFEDIT has not breached or
otherwise failed to comply with the provisions of any applicable collective
bargaining agreement, and there are no
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grievances outstanding against SOFEDIT under any such agreement which could
reasonably have a Material Adverse Effect.
(d) To the knowledge of SOFEDIT, SOFEDIT is currently in
compliance with all applicable laws relating to the employment of labor,
including those related to wages, hours, collective bargaining and the payment
and withholding of taxes and social security contributions and other sums as
required by the appropriate Governmental Authority except as would not be
expected to result in a Material Adverse Event and has withheld and paid to the
appropriate Governmental Authority or is holding for payment not yet due to such
Governmental Authority all amounts required to be withheld from employees of
SOFEDIT and is not liable for any arrears of wages, taxes, penalties or other
sums for failure to comply with any of the foregoing that would reasonably
result in a Material Adverse Effect.
(e) To SOFEDIT's actual knowledge, SOFEDIT has paid in full to
all of its employees or adequately accrued for in accordance with French GAAP
all wages, salaries, commissions, bonuses, benefits and other compensation due
to or on behalf of such employees.
(f) SOFEDIT has not received notice that any claim with
respect to payment of wages, salary or overtime pay has been asserted or is now
pending or threatened before any Governmental Authority with respect to any
Persons currently or formerly employed by SOFEDIT.
(g) SOFEDIT has not received notice that any charge or
proceeding with respect to a material violation of any occupational safety or
health standards has been asserted or is now pending or, to the best knowledge
of SOFEDIT, threatened with respect to SOFEDIT.
SECTION 8.21. Certain Interests. (a) Except as disclosed in
Section 8.21(a) of the Disclosure Schedules, no officer or director of SOFEDIT
or any SOFEDIT Subsidiary and no relative or spouse (or relative of such spouse)
who resides with, or is a dependent of, any such officer or director:
(i) owns, directly or indirectly, in whole or in part, or has
any other interest in any tangible or intangible property which SOFEDIT
or any SOFEDIT Subsidiary uses in the conduct of the Business or
otherwise; or
(ii) has outstanding indebtedness to SOFEDIT or any SOFEDIT
Subsidiary.
(b) Except as disclosed in Section 8.21(b) of the Disclosure
Schedules, neither SOFEDIT nor any SOFEDIT Subsidiary has any Liability or any
other obligation of any nature whatsoever to any officer or director of SOFEDIT
or any SOFEDIT Subsidiary or to any relative or spouse (or relative of such
spouse) who resides with, or is a dependent of, any such officer or director.
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SECTION 8.22. Real Property. (a) Section 8.22(a) of the
Disclosure Schedules lists: (i) the street address of each parcel of Owned Real
Property, (ii) the date on which each parcel of Owned Real Property was
acquired, (iii) the current owner of each such parcel of Owned Real Property,
(iv) information relating to the recordation of the deed pursuant to which each
such parcel of Owned Real Property was acquired and (v) the current use of each
such parcel of Owned Real Property.
(b) Section 8.22(b) of the Disclosure Schedules lists: (i) the
street address of each parcel of Leased Real Property, (ii) the identity of the
lessor, lessee and current occupant (if different from lessee) of each such
parcel of Leased Real Property, (iii) the term (referencing applicable renewal
periods) and fixed or basic rental payment terms of the leases (and any
subleases) pertaining to each such parcel of Leased Real Property and (iv) the
current use of each such parcel of Leased Real Property.
(c) Except as described in Section 8.22(c) of the Disclosure
Schedules, there is no violation of any Law relating to any of the Owned Real
Property that would reasonably be expected to have a Material Adverse Effect.
SOFEDIT has made available to the Sellers (to the extent in SOFEDIT's physical
possession) true and complete copies of each deed for each parcel of Owned Real
Property and, to the extent available, for each parcel of Leased Real Property
and all the title insurance policies, title reports, surveys, certificates of
occupancy, environmental reports and audits, appraisals and Permits relating to
the Real Property, the operations of SOFEDIT or any SOFEDIT Subsidiary thereon
or any other uses thereof. Subject to all applicable leases, either SOFEDIT or a
SOFEDIT Subsidiary, as the case may be, is in peaceful and undisturbed
possession of each parcel of Real Property and neither SOFEDIT nor any SOFEDIT
Subsidiary has executed and delivered any contractual restrictions that preclude
or materially restrict the ability to use the premises for the purposes for
which they are currently being used. Except as set forth in Section 8.22(c) of
the Disclosure Schedules, neither SOFEDIT nor any SOFEDIT Subsidiary has leased
or subleased any parcel or any portion of any parcel of Real Property to any
other Person, nor has SOFEDIT or any SOFEDIT Subsidiary assigned its interest
under any lease or sublease listed in Section 8.22(b) of the Disclosure
Schedules to any third party.
(d) SOFEDIT has, or has caused to be, delivered to the Sellers
(to the extent in SOFEDIT's physical possession) true and complete copies of all
leases and subleases listed in Section 8.22(b) of the Disclosure Schedules. With
respect to each of such leases and subleases:
(i) such lease or sublease represents the entire agreement
between the respective landlord and tenant with respect to such
property;
(ii) except as otherwise disclosed in Section 8.22(b) of the
Disclosure Schedules, with respect to each such lease or sublease: (A)
neither SOFEDIT nor any SOFEDIT Subsidiary has received any notice of
cancellation or termination under such lease or sublease,
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and (B) neither SOFEDIT nor any SOFEDIT Subsidiary has received any
notice of a breach or default under such lease or sublease, which
breach or default has not been cured.
(e) There are no condemnation proceedings or eminent domain
proceedings of any kind pending or, to the actual knowledge of SOFEDIT (without
investigation), threatened against the Owned Real Property.
(f) All improvements on the Real Property constructed by or on
behalf of SOFEDIT or any SOFEDIT Subsidiary were constructed in material
compliance with all applicable Laws (including, but not limited to, any
building, planning or zoning Laws) affecting such Real Property.
SECTION 8.23. Insurance. SOFEDIT and the SOFEDIT Subsidiaries
have obtained and maintained in full force and effect insurance with responsible
and reputable insurance companies or associations in such amounts, on such terms
and covering such risks, including fire and other risks insured against by
extended coverage, as is reasonably prudent, and each has maintained in full
force and effect public liability insurance, insurance against claims for
personal injury or death or property damage occurring in connection with the
activities of MS or the MS Subsidiaries or any properties owned, occupied or
controlled by SOFEDIT or the SOFEDIT Subsidiaries, in such amount as reasonably
deemed necessary by SOFEDIT.
SECTION 8.24. Full Disclosure. Except as disclosed in Section
8.24 of the Disclosure Schedules, SOFEDIT is not aware of any facts pertaining
to SOFEDIT, any SOFEDIT Subsidiary or the Business, that would render any
representations and warranties made by SOFEDIT in this Article VIII inaccurate
in any material respect.
SECTION 8.25. Stockholders Approval. No approval of the Board
of Directors or stockholders of SOFEDIT is required for the completion of the
transactions contemplated herein, in the New Stockholders Agreement or in the
New Registration Rights Agreement, except for the approval of MS as new
shareholder of SOFEDIT by the Board of Directors of SOFEDIT.
ARTICLE IX
ADDITIONAL AGREEMENTS
SECTION 9.01. Conduct of Business Prior to the Closing. (a) MS
covenants and agrees that, except as described in Section 9.01(a) of the
Disclosure Schedules, between the date hereof and the time of the Closing,
neither MS nor any MS Subsidiary shall conduct its Business other than in the
ordinary course and consistent with MS' and such MS Subsidiary's prior practice.
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(b) Except as described in Section 9.01(b) of the Disclosure
Schedules, MS covenants and agrees that, prior to the Closing, without the prior
written consent of the Sellers' Representative, neither MS nor any MS Subsidiary
will do or cause to be done any of the things enumerated in the second sentence
of Section 3.09 (including, without limitation, clauses (i) through (xiv)
thereof).
(c) SOFEDIT, BDHI and CIBA covenant and agree each for itself
and not for the others that, between the date hereof and the time of the
Closing, (i) neither SOFEDIT (or its subsidiaries) nor CIBA or BDHI shall
conduct its Business other than in the ordinary course and consistent with prior
practice; (ii) BDHI and CIBA shall continue to have no activities except for
holding shares in BDHI or SOFEDIT, respectively, and (iii) BDHI and CIBA shall
incur no liabilities.
(d) SOFEDIT, BDHI and CIBA covenant and agree each for itself
and not for the others that, prior to the Closing, without the prior written
consent of MS, neither SOFEDIT (or its subsidiaries) nor BDHI, nor CIBA will do
or cause to be done any of the things enumerated in the second sentence of
Section 8.10 (including, without limitation, clauses (i) through (xiv) thereof).
SECTION 9.02. Access to Information. (a) From the date hereof
until the Closing, upon reasonable notice, MS shall, and shall cause each of the
MS Subsidiaries and each of their officers, directors, accountants and counsel
to: (i) afford the officers, directors, accountants, counsel, and
representatives of SOFEDIT and the Sellers reasonable access, during normal
business hours, to the offices, properties, plants, other facilities, books and
records of MS and each MS Subsidiary and to those officers, directors,
accountants and counsel of MS and of each MS Subsidiary who have any knowledge
relating to MS, any MS Subsidiary or the Business and (ii) furnish to the
officers, directors, accountants, counsel, and representatives of SOFEDIT and
the Sellers such additional financial and operating data and other information
regarding the assets, properties and goodwill of MS, the MS Subsidiaries and the
Business (or legible copies thereof) as SOFEDIT or the Sellers may from time to
time reasonably request.
(b) From the date hereof until the Closing, upon reasonable
notice, SOFEDIT, CIBA and BDHI shall, and shall cause each of the SOFEDIT
Subsidiaries and each of their officers, directors, accountants and counsel to:
(i) afford the officers, directors, accountants, counsel, and representatives of
MS reasonable access, during normal business hours, to the offices, properties,
plants, other facilities, books and records of SOFEDIT, CIBA and BDHI and each
SOFEDIT Subsidiary and to those officers, directors, accountants and counsel of
SOFEDIT, CIBA and BDHI and of each SOFEDIT Subsidiary who have any knowledge
relating to SOFEDIT, CIBA and BDHI, any SOFEDIT Subsidiary or the Business and
(ii) furnish to the officers, directors, accountants, counsel, and
representatives of MS such additional financial and operating data and other
information regarding the assets, properties and goodwill of SOFEDIT, CIBA and
BDHI, the SOFEDIT Subsidiaries and the Business (or legible copies thereof) as
MS may from time to time reasonably request.
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SECTION 9.03. Confidentiality. The parties to this Agreement
agree to, and shall cause their respective agents, representatives, Affiliates,
employees, officers and directors to: (i) treat and hold as confidential (and
not disclose or provide access to any Person to) any information relating to
this Agreement, the New Stockholders Agreement, the New Registration Rights
Agreement and the transactions contemplated herein and therein, as well as to
all information relating to trade secrets, processes, patent and trademark
applications, product development, price, customer and supplier lists, pricing
and marketing plans, policies and strategies, details of client and consultant
contracts, operations methods, product development techniques, business
acquisition plans, new personnel acquisition plans and all other confidential
information with respect to the Business, SOFEDIT or any party hereto, (ii) in
the event that any party hereto, or any such agent, representative, Affiliate,
employee, officer or director becomes legally compelled to disclose any such
information, provide the other parties hereto with prompt written notice of such
requirements so that any parties hereto may seek or cause to seek a protective
order or other remedy or waive compliance with this Section 9.03, (iii) in the
event that such protective order or other remedy is not obtained, or the other
parties hereto waive compliance with this Section 9.03, furnish only that
portion of such confidential information which is legally required to be
provided and exercise its best efforts to obtain assurances that confidential
treatment will be accorded such information, provided, however, that this
sentence shall not apply to any information that, at the time of disclosure, is
available publicly and was not disclosed in breach of this Agreement by any of
the parties hereto or any of their agents, representatives, Affiliates,
employees, officers or directors; provided further that, with respect to
intellectual property, specific information shall not be deemed to be within the
foregoing exception merely because it is embraced in general disclosures in the
public domain. In addition, with respect to intellectual property, any
combination of features shall not be deemed to be within the foregoing exception
merely because the individual features are in the public domain unless the
combination itself and its principle of operation are in the public domain. The
parties hereto agree and acknowledge that remedies at law for any breach of its
obligations under this Section 9.03 are inadequate and that in addition thereto
the parties hereto shall be entitled to seek equitable relief, including
injunction and specific performance, in the event of any such breach.
SECTION 9.04. Regulatory and Other Authorizations; Notices and
Consents. (a) CVC, MS and the Sellers shall use their best efforts to obtain (or
in the case of the Sellers to cause CIBA, BDHI, SOFEDIT and the SOFEDIT
Subsidiaries to obtain) all authorizations, consents, orders and approvals of
all Governmental Authorities and officials that may be or become necessary for
its execution and delivery of, and the performance of its obligations pursuant
to, this Agreement, the New Stockholders Agreement and the New Registration
Rights Agreement and will cooperate fully together and with any other parties in
promptly seeking to obtain all such authorizations, consents, orders and
approvals. Each party hereto agrees to make an appropriate filing, if necessary,
pursuant to the HSR Act with respect to the transactions contemplated by this
Agreement within five Business Days of the date hereof and to supply as promptly
as practicable to the appropriate Governmental Authorities any additional
information and documentary material that may be requested pursuant to the HSR
Act.
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(b) MS shall, and shall cause the MS Subsidiaries to, give
promptly such notices to third parties and use its or their best efforts to
obtain such third party consents as the Sellers may reasonably deem necessary or
desirable in connection with the transactions contemplated by this Agreement.
(c) SOFEDIT, CIBA and BDHI shall, and shall cause the SOFEDIT
Subsidiaries to, give promptly such notices to third parties and use its or
their best efforts to obtain such third party consents as MS may reasonably deem
necessary or desirable in connection with the transactions contemplated by this
Agreement.
(d) The Sellers shall cooperate and use reasonable best
efforts to assist MS, BDHI and CIBA in giving such notices and obtaining such
consents; provided, however, that the Sellers shall have no obligation to give
any guarantee or other consideration of any nature in connection with any such
notice or consent to any change in the terms of any agreement or arrangement
which the Sellers in their sole and absolute discretion may deem adverse to the
interests of the Sellers, BDHI, CIBA, SOFEDIT, any SOFEDIT Subsidiary or the
Business.
SECTION 9.05. Notice of Developments. Prior to the Closing,
each party hereto shall promptly notify the other parties hereto in writing of
all events, circumstances, facts and occurrences arising subsequent to the date
of this Agreement of which such party becomes aware and which could result in
any breach of a representation or warranty or covenant of such party or which
could have the effect of making any representation or warranty of such party to
this Agreement untrue or incorrect in any material respect. Prior to the
Closing, each of MS, BDHI, CIBA and SOFEDIT shall notify the other parties
hereto in writing of all other material developments affecting the assets,
Liabilities, business, financial condition, operations, results of operations,
customer or supplier relations, employee relations, projections or prospects of
it, any of its Subsidiaries or the Business.
SECTION 9.06. Stockholder Approvals. MS shall take all
necessary actions to cause the Stockholder Approvals to be obtained prior to the
Closing and SOFEDIT, BDHI and CIBA shall take all necessary actions to cause all
approvals required from their respective Boards of Directors to be obtained
prior to the Closing..
SECTION 9.07. Contribution(s) of BDHI Shares to YACESE. Prior
or concurrent to the Closing, Mr. Domenech shall contribute 578 shares of BDHI
to YACESE.
SECTION 9.08. Contribution(s) of BDHI Shares to H.H.A.WAY.
Prior or concurrent to the Closing, JRMH shall contribute 3.051 shares of BDHI
to H.H.A.WAY.
SECTION 9.09. Purchases of BDHI Shares. Prior or concurrent to
the Closing, CIBA shall purchase one share of BDHI from Mr. Jerome Barge and
JRMH shall purchase one share of BDHI from Mr. Jean-Rene Hergoualc'h.
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SECTION 9.10. Promise to Transfer the Preferred Shares. In
consideration for the loss of their control of SOFEDIT by the shareholders of
BDHI as a result of the transactions contemplated hereby, the SOFEDIT Financial
Shareholders irrevocably promise to transfer without additional consideration to
CEFI, YACESE and H.H.A.WAY, or their successors in interest, all of the
Preferred Shares received as part of the consideration for their SOFEDIT Shares,
if a Sale of the Company (as such term is defined in the form of Amended and
Restated Certificate of Incorporation of MS attached hereto) or an Initial
Public Offering of MS (as such term is defined in the form of Registration
Rights Agreement attached hereto) is completed within eighteen (18) months
following the Closing Date on the basis of an aggregate consolidated value of MS
before the Initial Public Offering or, as the case may be, at the time of the
Sale of the Company, equal or higher to two hundred and fifty million dollars
(USD250,000,000). This transfer shall take place promptly after the Closing of
the Initial Public Offering or the Sale of Company, as applicable, and the
SOFEDIT Financial Shareholders shall use their best efforts to ensure that, for
purposes of such transfer, their Preferred Shares be allocated to CEFI, YACESE
and H.H.A.WAY pro rata based upon the number of MS Common Shares received by
CEFI, YACESE and H.H.A.WAY hereunder. The SOFEDIT Financial Shareholders hereby
acknowledge the sufficiency of the consideration received for the undertakings
contained in this paragraph and irrevocably waive any claims based on the lack
or inadequacy of consideration for such undertakings. The SOFEDIT Financial
Shareholders further acknowledge that their undertakings in this paragraph are
not subject to any conditions other than those expressly stated in this
paragraph.
SECTION 9.11. Further Action. Each of the parties hereto shall
use all reasonable efforts to take, or cause to be taken, all appropriate
action, do or cause to be done all things necessary, proper or advisable under
applicable Law, and execute and deliver such documents and other papers, as may
be required to carry out the provisions of this Agreement and consummate and
make effective the transactions contemplated by this Agreement.
SECTION 9.12. Securities Act. Each of the Sellers represents
and warrants, on behalf of itself only, that the Class A Common Stock, the
Series B Preferred Stock and the Promissory Notes (together, the "Restricted
Securities") to be issued to such Seller hereunder will be acquired by such
Seller for its own account for the purpose of investment and not with a view to
the resale or distribution of all or any part hereof in violation of the
Securities Act. Each of the Sofedit Financial Shareholders, CEFI, YACESE, JRMH
and H.H.A. Way represents and warrants, on behalf of itself only, that it is an
"accredited investor" as such term is defined in Rule 501 of Regulation D of the
Securities Act. Each member of the Barge Family and each member of the Domenech
Family represents and warrants, on behalf of itself only, that (i) such Seller's
financial situation is such that such Seller can afford to bear the economic
risk of holding the restricted Securities for an indefinite period of time and
(ii) the Seller's knowledge and experience in financial and business matters are
such that such Seller is capable of evaluating the merits and risks of such
Seller's ownership of such Restricted Securities, or such Seller has been
advised by a representative possessing such knowledge and experience. Each
Seller understands that the Restricted Securities have not been registered under
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the Securities Act in reliance on an exemption thereform under Section 4(2) of
the Securities Act and that such Restricted Securities shall bear an appropriate
legend.
ARTICLE X
CONDITIONS TO CLOSING
SECTION 10.01. Conditions to Obligations of MS. The
obligations of MS to consummate the transactions contemplated by this Agreement
shall be subject to the fulfillment, at or prior to the Closing, of each of the
following conditions:
(a) Representations, Warranties and Covenants. The
representations and warranties of the relevant Sellers contained in
this Agreement shall have been true and correct when made and each
representation and warranty (i) that is qualified as to materiality
shall be true and correct and (ii) that is not so qualified shall be
true and correct in all material respects in each case as of the
Closing, with the same force and effect as if made as of the Closing
Date, other than such representations and warranties as are made as of
another date, which shall be true and correct as of such date, the
covenants and agreements contained in this Agreement to be complied
with by the relevant Sellers on or before the Closing shall have been
complied with in all material respects;
(b) No Proceeding or Litigation. No Action shall have been
commenced by or before any Governmental Authority against MS, SOFEDIT,
BDHI, CIBA or any of the Sellers, seeking to restrain or materially and
adversely alter the transactions contemplated by this Agreement which,
in the reasonable, good faith determination of MS, is likely to render
it impossible or unlawful to consummate such transactions or which
could reasonably be expected to have a Material Adverse Effect or
otherwise render inadvisable, in the reasonable good faith
determination of MS, the consummation of the transactions contemplated
by this Agreement; provided, however, that the provisions of this
Section 10.01(b) shall not apply if MS or any MS Subsidiary has
directly or indirectly solicited or encouraged any such Action;
(c) Resolutions. MS shall have received a true and complete
copy, certified by the Secretary or an Assistant Secretary of each
Seller that is not a natural person, of the resolutions duly and
validly adopted by the Board of Directors or similar governing body of
such Seller evidencing its authorization of the execution and delivery
of this Agreement, the New Stockholders Agreement and the New
Registration Rights Agreement and the consummation of the transactions
contemplated hereby and thereby;
(d) Organizational Documents. MS shall have received a copy of
the statuts, as amended, of CIBA, BDHI, SOFEDIT and of each SOFEDIT
Subsidiary, certified as of a date not earlier than fifteen (15)
Business Days prior to the Closing Date;
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(e) Minute Books. MS shall have received a copy of the minute
books and stock register of CIBA, BDHI, SOFEDIT;
(f) Consents and Approvals. MS shall have received, each in
form and substance satisfactory to MS in its sole and absolute
discretion, all authorizations, consents, orders and approvals of all
Governmental Authorities and officials and all material third party
consents relating to any of CIBA, BDHI, SOFEDIT or any SOFEDIT
Subsidiary which MS reasonably deems necessary or desirable for the
consummation of the transactions contemplated by this Agreement;
(g) No Material Adverse Effect. No event or events shall have
occurred, or be reasonably likely to occur, which, individually or in
the aggregate, have, or could reasonably be expected to have, a
Material Adverse Effect on any of CIBA, BDHI or SOFEDIT;
(h) New Stockholders Agreement; New Registration Rights
Agreement. A stockholders agreement (the "New Stockholders Agreement")
and a registration rights agreement (the "New Registration Rights
Agreement"), in the forms attached hereto as Exhibits 10.01(h).A and
10.01(h).B, respectively, shall have been executed by the parties
thereto;
(i) Termination of the SOFEDIT Stockholders Agreement and of
the BDHI Stockholders Agreement. The SOFEDIT Stockholders Agreement and
the BDHI Stockholders Agreement shall have been terminated and shall be
of no further force or effect;
(j) Exchange of the Subordinated Notes. The holders of the
Subordinated Notes shall have exchanged their Subordinated Notes for
notes with the same principal amounts substantially in the form
attached hereto as Exhibit 10.01(j) hereto.
(k) Approvals by the Boards of Directors of SOFEDIT, BDHI and
CIBA. The Boards of Directors of SOFEDIT, BDHI and CIBA shall given all
approved MS as a new shareholder.
SECTION 10.02. Conditions to Obligations of SOFEDIT, BDHI,
CIBA and the Sellers. The obligations of SOFEDIT, BDHI, CIBA and the Sellers to
consummate the transactions contemplated by this Agreement shall be subject to
the fulfillment, at or prior to the Closing, of each of the following
conditions:
(a) Representations, Warranties and Covenants. The
representations and warranties of MS contained in this Agreement shall
have been true and correct when
made and each representation and warranty (i) that is qualified as to
materiality shall be true and correct and (ii) that is not so qualified
shall be true and correct in all material respects in each case as of
the Closing with the same force and effect as if made as of the
Closing, other than
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such representations and warranties as are made as of another date
which shall be true and correct as of such date, the covenants and
agreements contained in this Agreement to be complied with by MS on or
before the Closing shall have been complied with in all material
respects, and the Sellers shall have received a certificate of MS to
such effect signed by a duly authorized officer thereof;
(b) No Proceeding or Litigation. No Action shall have been
commenced or threatened by or before any Governmental Authority against
either MS, SOFEDIT, BDHI, CIBA or any of the Sellers, seeking to
restrain or materially and adversely alter the transactions
contemplated hereby which, in the reasonable, good faith determination
of the Sellers' Representative is likely to render it impossible or
unlawful to consummate the transactions contemplated by this Agreement,
or which could reasonably be expected to have a Material Adverse Effect
or otherwise render inadvisable, in the reasonable, good faith
determination of the Sellers' Representative, the consummation of the
transactions contemplated by this Agreement; provided, however, that
the provisions of this Section 10.02(b) shall not apply if SOFEDIT,
BDHI, CIBA, or the relevant Seller or Sellers has or have solicited or
encouraged any such Action;
(c) Resolutions. The Sellers shall have received a true and
complete copy, certified by the Secretary or an Assistant Secretary of
MS, of the resolutions duly and validly adopted by the Board of
Directors of MS evidencing its authorization of the execution and
delivery of this Agreement, the New Stockholders Agreement and the New
Registration Rights Agreement and the consummation of the transactions
contemplated hereby and thereby;
(d) Resignations of MS' Directors. MS shall have received
letters of resignation, effective as of the Closing, from Harold A.
Brown, Ueli Spring and Richard Puricelli.
(e) Employment Contracts. MS shall have received a copy of an
amendment to the employment contract of Mr. Ueli Spring substantially
in the form attached hereto as Exhibit 10.02(e);
(f) Organizational Documents. The Sellers shall have received
a copy of (i) the Amended and Restated Certificate of Incorporation of
MS (substantially in the form attached as Exhibit 10.02(f) hereto) and
the Certificate of Incorporation (or other organizational document) of
each MS Subsidiary, certified by the secretary of state of the
jurisdiction in which each such entity is incorporated or organized, as
of a date not earlier than five Business Days prior to the Closing Date
and accompanied by a certificate of the Secretary or Assistant
Secretary of each such entity, dated as of the Closing Date, stating
that no amendments have been made to such Certificate of Incorporation
(or similar organizational
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documents) since such date, except as provided herein, and (ii) the
By-laws (or similar organizational documents) of MS and of each MS
Subsidiary, certified by the Secretary or Assistant Secretary of each
such entity;
(g) Minute Books. The Sellers shall have received a copy of
the minute books and stock register of MS and each MS Subsidiary,
certified by their respective Secretaries or Assistant Secretaries as
of the Closing Date;
(h) Good Standing; Qualification to Do Business. The Sellers
shall have received good standing certificates for MS and for each MS
Subsidiary from the secretary of state of the jurisdiction in which
each such entity is incorporated or organized and from the secretary of
state in each other jurisdiction in which the properties owned or
leased by any of MS or any MS Subsidiary, or the operation of its
business in such jurisdiction, requires MS or any MS Subsidiary to
qualify to do business as a foreign corporation, in each case dated as
of a date not earlier than five Business Days prior to the Closing Date
and accompanied by bring-down telegrams dated the Closing Date;
(i) Stockholder Approvals. The MS Stockholder Approvals shall
have been obtained;
(j) Consents and Approvals. The Sellers shall have received,
in form and substance satisfactory to the Sellers in their sole and
absolute discretion, copies of all authorizations, consents, orders and
approvals of all Governmental Authorities and officials and all third
party consents and estoppel certificates relating to MS or any MS
Subsidiary which the Sellers reasonably deem necessary or desirable for
the consummation of the transactions contemplated by this Agreement;
and
(k) No Material Adverse Effect. No event or events shall have
occurred, or be reasonably likely to occur, which, individually or in
the aggregate, have, or could reasonably be expected to have, a
Material Adverse Effect on MS; and
(l) New Stockholders Agreement; New Registration Rights
Agreement. The New Stockholders Agreement and the New Registration
Rights Agreement shall have been executed by the parties thereto; and
waivers of all their rights under the Registration Rights Agreement
shall have been signed by the stockholders of MS that are party
thereto.
(m) Exchange of the Subordinated Notes. The holders of the
Subordinated Notes shall have exchanged their Subordinated Notes for
notes with the same principal amounts substantially in the form
attached hereto as Exhibit 10.01(j) hereto.
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ARTICLE XI
SURVIVAL OF REPRESENTATIONS AND WARRANTIES
SECTION 11.01. Survival of Representations and Warranties. The
representations and warranties contained in this Agreement, and all statements
contained in this Agreement, the Exhibits to this Agreement, the Disclosure
Schedules and any certificate delivered pursuant to this Agreement or in
connection with the transactions contemplated by this Agreement (collectively,
the "Acquisition Documents"), shall survive the Closing until the third (3rd)
anniversary of the Closing Date; provided, however, that the representations and
warranties dealing with Tax matters shall survive until 60 days after the
expiration of the applicable statute of limitations for any tax. Neither the
period of survival nor the liability of the relevant parties with respect to
their representations and warranties shall be reduced by any investigation made
at any time by or on behalf of the other parties. If written notice of a claim
has been given prior to the expiration of the applicable representations and
warranties by a party to the other parties, then the relevant representations
and warranties shall survive as to such claim, until such claim has been finally
resolved.
ARTICLE XII
TERMINATION AND WAIVER
SECTION 12.01. Termination. This Agreement may be terminated
at any time prior to the Closing:
(a) by the Sellers' Representative if: (i) an event or
condition occurs that has resulted in or that may be expected to result
in a Material Adverse Effect on MS or any MS Subsidiary, (ii) any
representation or warranty of MS contained in this Agreement shall not
have been true and correct when made or shall have become untrue, in
any such case such that Section 10.02(a) will not be satisfied and such
breach (if curable) has not been cured within 10 days following receipt
by MS, as applicable, of written notice of such breach, (iii) MS shall
not have materially complied with any covenant or agreement to be
complied with by it and contained in this Agreement, or (iv) MS or any
MS Subsidiary makes a general assignment for the benefit of creditors,
or any proceeding shall be instituted by or against MS or any MS
Subsidiary seeking to adjudicate any of them a bankrupt or insolvent,
or seeking liquidation, winding up or reorganization, arrangement,
adjustment, protection, relief or composition of its debts under any
Law relating to bankruptcy, insolvency or reorganization; or
(b) by MS if: (i) an event or condition occurs that has
resulted in or that may be expected to result in a Material Adverse
Effect on SOFEDIT, BDHI or CIBA, (ii) any representation or warranty of
SOFEDIT, BDHI, CIBA or any Seller contained in this
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Agreement shall not have been true and correct when made or shall have
become untrue, in any such case such that Section 10.01(a) will not be
satisfied and such breach (if curable) has not been cured within 10
days following receipt by SOFEDIT, BDHI, CIBA or such Seller, as
applicable, of written notice of such breach, (iii) SOFEDIT, BDHI, CIBA
or any Seller shall not have materially complied with any covenant or
agreement to be complied with by it and contained in this Agreement, or
(iv) any of SOFEDIT, any SOFEDIT Subsidiaries, BDHI or CIBA makes a
general assignment for the benefit of creditors, or any proceeding
shall be instituted by or against any of them seeking to adjudicate any
of them a bankrupt or insolvent, or seeking liquidation, winding up or
reorganization, arrangement, adjustment, protection, relief or
composition of its debts under any Law relating to bankruptcy,
insolvency or reorganization; or
(c) by either MS or the Sellers' Representative if the Closing
shall not have occurred by April 17, 1998; provided, however, that the
right to terminate this Agreement under this Section 12.01(c) shall not
be available to any party whose failure to fulfill any obligation under
this Agreement shall have been the cause of, or shall have resulted in,
the failure of the Closing to occur on or prior to such date; or
(d) by either MS or the Sellers' Representative in the event
that any Governmental Authority shall have issued an order, decree or
ruling or taken any other action restraining, enjoining or otherwise
prohibiting the transactions contemplated by this Agreement and such
order, decree, ruling or other action shall have become final and
nonappealable; or
(e) by the mutual consent of all the parties hereto.
SECTION 12.02. Effect of Termination. (a) In the event of
termination of this Agreement as provided in Section 12.01, this Agreement shall
forthwith become void and there shall be no liability on the part of any party
hereto except (i) for the breach of the obligations set forth in Sections 9.03,
12.02(b) and 12.02(c)(ii) that nothing herein shall relieve any party from
liability for any breach of any provision of the Agreement.
(b) Notwithstanding the foregoing, if the Closing does not
occur because of the failure to satisfy the conditions to the Sellers'
obligation to effect the Closing contained in Section 10.02 (a), then MS shall
reimburse SOFEDIT, BDHI, CIBA and the Sellers for their out-of-pocket costs and
expenses, including, without limitation, reasonable fees and disbursements of
counsel, financial advisors, financing sources and accountants, reasonably
incurred by SOFEDIT, BDHI, CIBA and the Sellers in connection with the
preparation, negotiation and performance of this Agreement and the transactions
contemplated hereby.
(c) Notwithstanding the foregoing, if the Closing does not
occur because of the failure to satisfy the conditions to MS' obligation to
effect the Closing contained in Section 10.01(a), then SOFEDIT, BDHI, CIBA and
the Sellers shall reimburse MS for its out-of-pocket costs and
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expenses, including, without limitation, reasonable fees and disbursements of
counsel, financial advisors, financing sources and accountants, reasonably
incurred by MS in connection with the preparation, negotiation and performance
of this Agreement and the transactions contemplated hereby.
SECTION 12.03. Waiver. Either the Sellers' Representative, on
behalf of the Sellers, SOFEDIT, BDHI, CIBA or MS may (a) extend the time for the
performance of any of the obligations or other acts of any other party, (b)
waive any inaccuracies in the representations and warranties of any other party
contained herein or in any document delivered by any other party pursuant hereto
or (c) waive compliance with any of the agreements or conditions of any other
party contained herein. Any such extension or waiver shall be valid only if set
forth in an instrument in writing signed by the party to be bound thereby. Any
waiver of any term or condition shall not be construed as a waiver of any
subsequent breach or a subsequent waiver of the same term or condition, or a
waiver of any other term or condition, of this Agreement. The failure of any
party to assert any of its rights hereunder shall not constitute a waiver of any
of such rights.
ARTICLE XIII
GENERAL PROVISIONS
SECTION 13.01. Expenses. Except as otherwise specified in this
Agreement, all costs and expenses, including, without limitation, fees and
disbursements of counsel, financial advisors and accountants, incurred in
connection with this Agreement and the transactions contemplated hereby shall be
paid by the party incurring such costs and expenses, whether or not the Closing
shall have occurred.
SECTION 13.02. Notices. All notices, requests, claims, demands
and other communications hereunder shall be in writing and shall be given or
made (and shall be deemed to have been duly given or made upon receipt) by
delivery in person, by courier service, by cable, by telecopy, by telegram, by
telex or by registered or certified mail (postage prepaid, return receipt
requested) to the respective parties at the following addresses (or at such
other address for a party as shall be specified in a notice given in accordance
with this Section 13.02):
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(a) if to MS:
(i) before the Closing Date:
MS Acquisition Corp.
24331 Sherwood Avenue
Centerline, Michigan
48015-0061 U.S.A.
Telephone: (810) 759-2200
Telecopy: (810) 759-2209
Attention: Mr. Ueli Spring
(ii) after the Closing Date:
MS Acquisition Corp.
24331 Sherwood Avenue
Centerline, Michigan
48015-0061 U.S.A.
Telephone: (810) 759-2200
Telecopy: (810) 759-2209
Attention: Mr. Francis Barge
(b) if to any of the Sellers:
SOFEDIT S.A.
Quartier des Chenes
1, avenue du 8 Mai 1945
78289 Guyancourt Cedex
France
Telephone: (33 1) 39 41 20 00
Telecopy: (33 1) 30 48 53 91
Attention: Mr. Francis Barge
SECTION 13.03. Public Announcements. Unless otherwise required
by applicable Law, no party to this Agreement shall make, or cause to be made,
any press release or public announcement in respect of this Agreement or the
transactions contemplated hereby or otherwise communicate with any news media
without the prior written consent of MS and the Sellers' Representative and MS
and the Sellers' Representative shall cooperate as to the timing and contents of
any such press release or public announcement.
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SECTION 13.04. Headings. The descriptive headings contained in
this Agreement are for convenience of reference only and shall not affect in any
way the meaning or interpretation of this Agreement.
SECTION 13.05. Severability. If any term or other provision of
this Agreement is invalid, illegal or incapable of being enforced by any Law or
public policy, all other terms and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
materially adverse to any party. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties hereto
shall negotiate in good faith to modify this Agreement so as to effect the
original intent of the parties as closely as possible in an acceptable manner in
order that the transactions contemplated hereby are consummated as originally
contemplated to the greatest extent possible.
SECTION 13.06. Entire Agreement. This Agreement with the
schedules and exhibits thereto constitutes the entire agreement of the parties
hereto with respect to the subject matter hereof and thereof and supersedes all
prior agreements and undertakings, both written and oral, among the parties
hereto with respect to the subject matter hereof and thereof.
SECTION 13.07. Assignment. This Agreement may not be assigned
by operation of law or otherwise without the express written consent of all
parties hereto or, with respect to the Sellers only, of the Sellers'
Representative (which consent may be granted or withheld in the sole discretion
of any party). Any assignment made in violation of the preceding sentence shall
be void.
SECTION 13.08. No Third Party Beneficiaries. This Agreement
shall be binding upon and inure solely to the benefit of the parties hereto and
their permitted assigns and nothing herein, express or implied, is intended to
or shall confer upon any other Person any legal or equitable right, benefit or
remedy of any nature whatsoever under or by reason of this Agreement;
provided,however, that the holders of capital stock of MS as of the date hereof,
shall be deemed third party beneficiaries hereunder with respect to the
representations and warranties of SOFEDIT only, as if such representations and
warranties had been made to the holders of capital stock of MS as of the date
hereof. This agreement shall not be construed so as to give any rights to the
holders of capital stock of MS against any party hereto other than SOFEDIT.
SECTION 13.09. Amendment. This Agreement may not be amended or
modified except (a) by an instrument in writing signed by all parties hereto or,
with respect to the Sellers only, by the Sellers' Representative, or (b) by a
waiver in accordance with Section 12.03.
SECTION 13.10. Governing Law. This Agreement shall be governed
by, and construed in accordance with, the laws of New York.
<PAGE> 81
74
SECTION 13.11. Dispute Resolution and Arbitration. (a)
Dispute. In the event of any dispute, controversy or claim (each, a "Dispute")
arising under or in connection with this Agreement or any breach, invalidity or
termination hereof, prior to the commencement of an arbitration proceeding
pursuant to clause (b) of this Section 13.11, MS and the Sellers'
Representative, on behalf of the Sellers, shall in good faith use their best
efforts for a 15-day period commencing on the date one party has notified the
other of a Dispute to resolve such Dispute. In the event that such efforts do
not resolve such Dispute, either MS or the Sellers' Representative may commence
an arbitration proceeding pursuant to clause (b) of this Section 13.11.
(b) ICC Rules. In the event a Dispute has not been resolved
pursuant to the procedure set forth in Section 13.11(a), all Disputes arising
under or in connection with this Agreement or any breach, invalidity or
termination hereof shall be finally settled under the Rules of Conciliation and
Arbitration of the International Chamber of Commerce (the "ICC Rules") by one or
more arbitrators appointed in accordance with the ICC Rules. The seat of the
arbitration shall be in Brussels, Belgium. The arbitration proceedings shall be
conducted, and the award shall be rendered in writing, in the English language.
Except to the extent allowed by the ICC Rules for the sole purpose of seeking
interim relief, no party shall be entitled to commence proceedings before the
courts of any jurisdiction, in connection with the conduct of the arbitration
proceedings, provided that the parties shall be free to commence proceedings
before such courts for the purpose of enforcing any arbitral award.
(c) Confidentiality. All arbitration proceedings under this
Section 13.11 shall be confidential and the arbitrators may issue appropriate
protective orders to safeguard the confidential information of any party. Except
as required by applicable Law, none of the parties to the arbitration
proceedings shall make (or request any arbitrator to make) any public
announcement with respect to the proceedings or decisions of the arbitrators
without the prior written consent of the other party or parties thereto. The
existence of any Dispute submitted to arbitration, and the award of the
arbitrators, shall be kept in strict confidence, except as required in
connection with the enforcement of such award or as otherwise required by
applicable Law.
SECTION 13.12. Counterparts. This Agreement may be executed in
one or more counterparts, and by the different parties hereto in separate
counterparts, each of which when executed shall be deemed to be an original but
all of which taken together shall constitute one and the same agreement.
SECTION 13.13. Specific Performance. The parties hereto agree
that irreparable damage would occur in the event any provision of this Agreement
was not performed in accordance with the terms hereof and that the parties shall
be entitled to specific performance of the terms hereof, in addition to any
other remedy at law or equity.
SECTION 13.14. Limited Recourse. Notwithstanding anything in
this Agreement or any other document, agreement, or instrument contemplated
hereby to the contrary, (i) the obligations
<PAGE> 82
75
of MS, SOFEDIT, BDHI or CIBA hereunder shall be without recourse to any director
or stockholder of MS, SOFEDIT, BDHI or CIBA, respectively, or any stockholder,
partner, member, officer, director, manager, employee or agent of such
stockholder or such Affiliate, and shall be limited to the assets of MS,
SOFEDIT, BDHI or CIBA, respectively; and (ii) other than the representations,
warranties and covenants expressly made by the stockholders of SOFEDIT, BDHI and
CIBA herein, the stockholders of MS, SOFEDIT, BDHI and CIBA have made no (and
shall not be deemed to have made any) representations, warranties or covenants
(express or implied) under, or in connection with, this Agreement.
<PAGE> 83
IN WITNESS WHEREOF, each of the parties hereto has executed,
or has caused to be executed by its duly authorized representative, this
Agreement as of the date first written above.
SOFEDIT
By: /s/ Francis Barge
---------------------------
Name: Francis Barge
Title: President and Director
MS
By: /s/ Harold Brown
---------------------------
Name: Harold Brown
Title: Senior VP and CFO
BDHI
By: /s/ Francis Barge
---------------------------
Name: Francis Barge
Title: President and Director
<PAGE> 84
CIBA
By: /s/ Francis Barge
---------------------------
Name: Francis Barge
Title: President and Director
CEFI
By: /s/ Francis Barge
---------------------------
Name: Francis Barge
Title: President and Director
YACESE
By: /s/ Felix Domenech
---------------------------
Name: Felix Domenech
Title: President
JRMH
By: /s/ Jean-Rene Hergoulac'h
---------------------------
Name: Jean-Rene Hergoulac'h
Title: President
<PAGE> 85
H.H.A.WAY
By: /s/ Jean-Rene Hergoualc'h
---------------------------
Name: Jean-Rene Hergoualc'h
Title: President
<PAGE> 86
Francis Barge
By: /s/ Francis Barge
---------------------------
Colette Barge
By: /s/ Francis Barge
---------------------------
Name: Francis Barge
Jerome Barge
By: /s/ Francis Barge
---------------------------
Name: Francis Barge
Felix Domenech
By: /s/ Felix Domenech
---------------------------
Josette Domenech
By: /s/ Felix Domenech
---------------------------
Name: Felix Domenech
Sebastien Domenech
By: /s/ Felix Domenech
---------------------------
Name: Felix Domenech
<PAGE> 87
Cecile Domenech
By: /s/ Felix Domenech
---------------------------
Name: Felix Domenech
<PAGE> 88
81
COMPAGNIE DE FINANCEMENT
INDUSTRIEL S.A.
By: /s/ Patrick Lente
---------------------------
Name: Patrick Lente
Title: Director
JAFCO I SAINT HONORE S.A.
By: /s/ Pierre Passy
---------------------------
Name: Pierre Passy
Title:
JAFCO II SAINT HONORE S.A.
By: /s/ Pierre Passy
---------------------------
Name: Pierre Passy
Title:
TOCQUEVILLE EUROPE L.P.
By: /s/ Felix Domenech
---------------------------
Name: Felix Domenech
Title: President
<PAGE> 89
82
BIDASSOA INVESTISSEMENTS S.C.A.
By: /s/ Felix Domenech
---------------------------
Name: Felix Domenech
Title:
CININDEV S.A.
By: /s/ Blain Kevin
---------------------------
Name: Blain Kevin
Title: Director
CFJPE S.A.
By: /s/ Jean Delveaux
---------------------------
Name: Jean Delveaux
Title:
OBERON S.A.
By: /s/ Felix Domenech
---------------------------
Name: Felix Domenech
Title:
<PAGE> 90
EURO SYNERGIES INVESTMENTS S.C.A.
By: /s/ Jean De Severac
---------------------------
Name: Jean De Severac
Title:
VENTADOUR INVESTISSEMENTS S.A.
By: /s/ F. Neave
---------------------------
Name: F. Neave
Title:
COGEPA S.A.
By: /s/ Thierry Martinez
---------------------------
Name: Thierry Martinez
Title:
SOFEDICI S.C.
By: /s/ Francis Barge
---------------------------
Name: Francis Barge
Title:
<PAGE> 91
84
APAX PARTNER CLUB
By: /s/ R. Lambert
---------------------------
Name: R. Lambert
Title:
ALTAMIR & CIE
By: /s/ R. Lambert
---------------------------
Name: R. Lambert
Title:
APAX FRANCE IV
By: /s/ R. Lambert
---------------------------
Name: R. Lambert
Title:
<PAGE> 92
CCT Partners III, LP
By: /s/ Thomas H. Sanders
---------------------------
Name: Thomas H. Sanders
Title: General Partner
<PAGE> 93
EXHIBIT 1
OWNERSHIP OF CIBA
Name Number of Shares of CIBA
---- ------------------------
- Mr. Francis Barge 2.079
- Mrs. Colette Barge 2.270
- Mr. Jerome Barge 4.340
- CEFI S.A. 10.411
------
Total: 19.100
------
<PAGE> 94
EXHIBIT 2
MEMBERS OF THE DOMENECH GROUP OF SELLERS
Name Number of shares of BDHI
(as of the date hereof)
- Mr. Felix Domenech 2.921
- Mrs. Josette Domenech 1.405
- Mr. Sebastien Domenech 469
- Ms. Cecile Domenech 469
- YACESE S.A. 5.036
------
Total: 10.300
------
<PAGE> 95
EXHIBIT 2.02 (A)
FORM OF PROMISSORY NOTE
<PAGE> 96
EXHIBIT 2.02 (B)
TABLES OF ALLOCATION OF
THE PROMISSORY NOTES, THE MS COMMON SHARES
AND THE MS PREFERRED SHARES
AMONG THE SELLERS
<PAGE> 97
EXHIBIT 3
LIST OF SOFEDIT FINANCIAL SHAREHOLDERS
COMPAGNIE DE FINANCEMENT INDUSTRIEL S.A.
JAFCO I SAINT HONORE S.A.
JAFCO II SAINT HONORE S.A.
TOCQUEVILLE EUROPE L.P.
BIDASSOA INVESTISSEMENTS S.C.A.
CININDEV S.A.
CFJPE S.A.
OBERON S.A.
EURO SYNERGIES S.C.A.
VENTADOUR INVESTISSEMENTS S.A.
COGEPA S.A.
SOFEDICI S.C.
APAX PARTNER CLUB
ALTAMIR & CIE
APAX FRANCE IV
<PAGE> 98
EXHIBIT 4
SHARES OF BDHI OWNED BY JRMH AND H.H.A.WAY
Name Number of shares of BDHI
(as of the Closing Date)
- JRMH 2.549
- H.H.A. WAY S.A. 3.051
-----
Total: 5.600
-----
<PAGE> 99
EXHIBIT 5
INDIVIDUAL SHAREHOLDERS OF BDHI
As of the signing date:
NAME NUMBER OF SHARES HELD
- Mr. Francis Barge 1
- Mr. Felix Domenech 2.921
- Mr. Jean-Rene Hergoualc'h 1
- Mr. Jerome Barge 1
- Mrs.Josette Domenech 1.405
- Mr. Sebastien Domenech 469
- Ms. Cecile Domenech 469
-----
TOTAL 5.267
As of the Closing Date:
NAME NUMBER OF SHARES HELD
- Mr. Francis Barge 1
- Mr. Felix Domenech 2.343
- Mrs.Josette Domenech 1.405
- Mr. Sebastien Domenech 469
- Ms. Cecile Domenech 469
---
TOTAL 4.687
<PAGE> 1
EXHIBIT 4.2
EXECUTION COPY
STOCKHOLDERS AGREEMENT DATED AS OF
APRIL 9, 1998
AMONG
MS ACQUISITION CORP.
AND
ITS STOCKHOLDERS
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
RECITALS......................................................................................................... 1
ARTICLE I
CERTAIN DEFINITIONS....................................................................................... 2
1.1 Defined Terms.................................................................................. 2
ARTICLE II
TRANSFERS OF RESTRICTED SECURITIES........................................................................ 11
2.1 Restrictions Generally; Securities Act......................................................... 11
2.2 Legend......................................................................................... 11
2.3 Limitations on Repurchases, Dividends, Etc. ................................................... 12
2.4 Transfers by Stockholders...................................................................... 12
2.5 Right of First Offer........................................................................... 13
2.6 Involuntary Transfers.......................................................................... 15
2.7 Drag Along Sale................................................................................ 17
ARTICLE III
RIGHTS OF INCLUSION....................................................................................... 19
3.1 Rights of Inclusion............................................................................ 19
3.2 Article III Sales.............................................................................. 19
3.3 Certain Transfers.............................................................................. 20
ARTICLE IV
REPURCHASE OF RESTRICTED SECURITIES OWNED BY MANAGEMENT STOCKHOLDERS OR ADDITIONAL STOCKHOLDERS........... 21
4.1 Sale Event..................................................................................... 21
4.2 Purchase Price................................................................................. 21
4.3 Closing........................................................................................ 22
4.4 Postponement................................................................................... 22
ARTICLE V
CERTAIN COVENANTS OF THE PARTIES.......................................................................... 23
5.1 Registration of Common Stock................................................................... 23
5.2 Management Stockholders; Additional Stockholders............................................... 23
5.3 Stockholders List; Certain Notices............................................................. 23
5.4 Regulatory Compliance Cooperation.............................................................. 24
5.5 Financial Disclosure........................................................................... 25
5.6 Purchaser Representative....................................................................... 26
</TABLE>
-i-
<PAGE> 3
<TABLE>
<S> <C>
ARTICLE VI
RIGHT OF OFFER............................................................................................ 26
6.1 Rights of Offer................................................................................ 26
ARTICLE VII
MISCELLANEOUS............................................................................................. 28
7.1 Governing Law.................................................................................. 28
7.2 Entire Agreement; Amendments................................................................... 28
7.3 Term........................................................................................... 29
7.4 Certain Actions................................................................................ 29
7.5 Inspection..................................................................................... 30
7.6 Recapitalization, Exchanges, Etc., Affecting Restricted Securities............................. 30
7.7 Compliance with Regulations.................................................................... 31
7.8 Waiver......................................................................................... 31
7.9 Successors and Assigns......................................................................... 31
7.10 Remedies....................................................................................... 31
7.11 Income Tax Withholding......................................................................... 32
7.12 Invalid Provisions............................................................................. 32
7.13 Headings....................................................................................... 32
7.14 Further Assurances............................................................................. 32
7.15 Gender......................................................................................... 32
7.16 Counterparts................................................................................... 33
7.17 Notices........................................................................................ 33
7.18 Consent to Jurisdiction and Service of Process................................................. 37
7.19 Waiver of Jury Trial........................................................................... 37
7.20 No Other Understanding......................................................................... 38
Annex I - Ownership Chart
Exhibit A - Form of Joinder Agreement
</TABLE>
-ii-
<PAGE> 4
STOCKHOLDERS AGREEMENT (this "Agreement") dated as of April
9, 1998, by and among MS Acquisition Corp., a Delaware corporation ("Holding"),
Aetna Holdings, Inc., a Delaware corporation ("Aetna Holdings"), each of the
Persons whose name appears under the heading "Former Sofedit Investor" on the
signature pages hereto (individually, a "Former Sofedit Investor", and
collectively, the "Former Sofedit Investors"), each of the Persons whose name
appears under the heading "Former Sofedit Institutional Investor" on the
signature pages hereto (individually, a "Former Sofedit Institutional Investor",
and collectively, the "Former Sofedit Institutional Investors"), Citicorp
Venture Capital, Ltd., a New York corporation ("CVC"), and each of the Persons
whose name appears under the heading "CVC Co-investors" on the signature pages
hereto (together with CVC, the "CVC Investors", and individually a "CVC
Investor"), The Berkshire Fund, a Massachusetts limited partnership
("Berkshire"), each of the Persons whose name appears under the heading
"Berkshire Group" on the signature pages hereto (individually, a "Berkshire
Group Member" and collectively, the "Berkshire Group"), The Prudential Insurance
Company of America, a New Jersey mutual insurance company ("Prudential"), Pruco
Life Insurance Company, an Arizona corporation ("Pruco"), and the entities
comprising the various retirement systems of the State of Michigan listed on the
signature pages hereto (the "State of Michigan"; and together with Berkshire,
the Berkshire Group, Prudential and Pruco, the "Institutional Investors"), each
of the individuals whose name appears under the heading "Former Management
Group" on the signature pages hereto (individually, a "Former Management Group
Member" and collectively, the "Former Management Group"), and each of the
individuals whose name appears under the heading "Management Group" on the
signature pages hereto (individually, a "Management Group Member" and
collectively, the "Management Group"). Capitalized terms used and not otherwise
defined herein have the respective meanings ascribed thereto in Article I.
RECITALS
WHEREAS, Holding and certain of the Stockholders are parties
to that certain Stockholders Agreement, dated as of August 13, 1996 (the
"Original Agreement");
WHEREAS, the Original Agreement shall terminate in accordance
with its terms upon the consummation of the transactions contemplated by that
certain Stock Purchase Agreement dated April __, 1998 among SOFEDIT S.A., a
French societe anonyme, Holding, the Former Sofedit Investors, the Former
Sofedit Institutional Investors and the other parties thereto (the "Stock
Purchase Agreement") as a result which of all of the issued and outstanding
capital stock of Holding shall be owned as set forth in Annex I hereto;
WHEREAS, each of the Stockholders and Holding desires to enter
into this Agreement to regulate certain aspects of their relationship and to
provide for, among other things, restrictions on the transfer or other
disposition of securities of Holding.
NOW, THEREFORE, the parties hereto hereby agree as follows:
<PAGE> 5
ARTICLE I
CERTAIN DEFINITIONS
1.1 Defined Terms.
(a) The following capitalized terms, when used in
this Agreement, have the respective meanings set forth below:
"Additional Stockholder" means any Person (other than any
Aetna Stockholder, any Sofedit Stockholder or any Sofedit Institutional
Stockholder) to whom Holding issues or sells or Aetna Holdings sells
Restricted Securities after the date hereof other than pursuant to a
public offering registered under the Securities Act, in each case who
has executed a Joinder Agreement as an Additional Stockholder pursuant
to Section 5.2, and its direct and indirect Permitted Transferees, so
long as any such Person shall hold Restricted Securities.
"Aetna Holdings" means Aetna Holdings, Inc., a Delaware
corporation and a wholly-owned subsidiary of Holding.
"Aetna Stockholders" means the CVC Stockholders, the
Institutional Stockholders, the Management Stockholders and the Former
Management Stockholders.
"Affiliate" means, with respect to any Person, any other
Person that controls, is controlled by or is under common control with
such Person. For the purposes of this definition, "control" (including,
with its correlative meanings, the terms "controlled by" and "under
common control with"), as used with respect to any Person, shall mean
the possession, directly or indirectly, of the power to direct or cause
the direction of the management and policies of such Person, whether
through the ownership of securities, by contract or otherwise.
"Associate" means, (a) with respect to any Person, (i) any
other Person of which such Person or the Persons described in Clause
(iii) below is an officer, member or partner or is, directly or
indirectly, the beneficial owner of five percent (5%) or more of any
class of equity securities or equivalent economic interest; (ii) any
trust, estate, or similar organization in which such Person has a
substantial beneficial interest or as to which such Person serves as
trustee or in a similar fiduciary capacity; and (iii) any spouse or
other relative of such Person, or any relative of such spouse and (b)
with respect to any Person which is a Sofedit Institutional
Stockholder, any other Person which is a partner or other equity
investor (whether with limited or unlimited liability) in such Person,
holding an equity participation of at least five percent (5%) in such
Person.
-2-
<PAGE> 6
"Berkshire Stockholder" means Berkshire, each Berkshire Group
Member and each of their respective direct and indirect Permitted
Transferees, so long as any such Person shall hold Restricted
Securities.
"Board" means the Board of Directors of Holding.
"Cause" means, with respect to a Management Stockholder or
Additional Stockholder, (i) a material breach by such Management
Stockholder or Additional Stockholder of this Agreement or any
employment or confidentiality agreement to which such Management
Stockholder or Additional Stockholder is a party or (ii) the commission
by such Management Stockholder or Additional Stockholder of a felony, a
crime involving moral turpitude or other act causing material harm to
the standing and reputation of Holding or any of its Subsidiaries.
"Certificate" means the Restated Certificate of Incorporation
of Holding, as the same may be amended and restated as of the Closing
Date and as the same thereafter may be amended or restated from time to
time.
"Class A Common" means Holding's Class A Common Stock, par
value $.01 per share, and any securities into which such Class A Common
shall have been changed or any securities resulting from any
reclassification or recapitalization of such Class A Common.
"Class B Common" means Holding's Class B Common Stock, par
value $.01 per share, and any securities into which such Class B Common
shall have been changed or any securities resulting from any
reclassification or recapitalization of such Class B Common.
"Closing Date" is the date on which the Closing under the
Stock Purchase Agreement occurs.
"Commission" means the Securities and Exchange Commission and
any other similar or successor agency of the federal government
administering the Securities Act or the Exchange Act.
"Common Stock" means the Class A Common and the Class B
Common, any securities into which such Class A Common or Class B Common
shall have been changed or any securities resulting from any
reclassification or recapitalization of such Class A Common or Class B
Common, and all other securities of any class or classes or series
(however designated) of Holding the holders of which have the right,
without limitation as to amount, after payment on any securities
entitled to a preference on
-3-
<PAGE> 7
dividends or other distributions upon any dissolution, liquidation or
winding-up, either to
-4-
<PAGE> 8
all or to a share of the balance of payments upon such dissolution,
liquidation or winding-up.
"CVC Stockholders" means the CVC Investors and each of their
respective direct and indirect Permitted Transferees, so long as any
such Person shall hold Restricted Securities.
"Debentures" means Aetna Holdings' Junior Subordinated Notes
due 2007.
"Equity Equivalents" means securities exercisable, convertible
or exchangeable for or into Common Stock, including, without
limitation, the Options.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations of the Commission thereunder.
"Fair Market Value" means, with respect to each share of
Common Stock as of a particular date, the average of the closing prices
of such Common Stock on the New York Stock Exchange, Inc., on each of
the thirty (30) trading days next preceding such date or, if such
Common Stock is not then listed or admitted to trading on such
exchange, on the principal national securities exchange on which such
Common Stock is listed or admitted to trading or, if not listed or
admitted to trading on any national securities exchange, on the Nasdaq
National Market, or if such Common Stock is not then listed or admitted
to trading on a national securities exchange or quoted on the Nasdaq
National Market, the average of the closing bid and asked prices in the
over-the-counter market as furnished by any New York Stock Exchange
member firm selected by Holding or if no such prices are available, the
fair market value per share as determined in good faith by the Board.
"Former Management Stockholders" means the Former Management
Group and each of their respective direct or indirect Permitted
Transferees, so long as any such Person shall hold Restricted
Securities.
"Fully Diluted Basis" means, with respect to the calculation
of the number of shares of Common Stock, (i) all shares of Common Stock
outstanding at the time of determination (other than shares of Common
Stock owned by Aetna Holdings) and (ii) all shares of Common Stock
issuable upon the exercise, conversion or exchange of Equity
Equivalents.
"Guaranties" means those guaranties delivered by Holding,
Aetna Holdings and certain other parties in connection with Holding's
exchange offer of its 11 7/8% senior notes due 2006.
"Institutional Stockholder" means the Institutional Investors
and each of their respective direct and indirect Permitted Transferees,
if any, so long as any such Person shall hold Restricted Securities.
-5-
<PAGE> 9
"Involuntary Transfer" means, with respect to Restricted
Securities of any Management Stockholder or Additional Stockholder, any
involuntary Transfer or Transfer by operation of law of such Restricted
Securities (other than to a Permitted Transferee of such Management
Stockholder or Additional Stockholder) by or in which such Management
Stockholder or Additional Stockholder shall be deprived or divested of
any right, title or interest in or to Restricted Securities, including,
without limitation, by seizure under levy of attachment or execution,
by foreclosure upon a pledge, in connection with any voluntary or
involuntary bankruptcy or other court proceeding to a debtor in
possession, trustee in bankruptcy or receiver or other officer or
agency, pursuant to any statute pertaining to escheat or abandoned
property, pursuant to a divorce or separation agreement or a final
decree of a court in a divorce action, upon or occasioned by the
incompetence of any Management Stockholder or Additional Stockholder
and to a legal representative of any Management Stockholder or
Additional Stockholder.
"Joinder Agreement" means a Joinder Agreement substantially in
the form attached hereto as Exhibit A.
"Lien" means any lien, claim, change, encumbrance, security
interest or other adverse claim of any kind.
"Management Representative" means such Person as is designated
as "Management Representative" by the affirmative vote of the holders
of shares of Common Stock representing more than fifty percent (50%) of
the Common Stock on a Fully Diluted Basis then held by the Management
Stockholders as a group in a written notice to the other Stockholders
and Holding.
"Management Stockholders" means the Management Group and their
respective Permitted Transferees, so long as any such Person shall hold
Restricted Securities.
"New Common Stock" means any Common Stock or Equity Equivalent
other than any (i) Common Stock and Equity Equivalents issued in
connection with any stock split, stock dividend or reclassification of
any Restricted Securities or Equity Equivalents; (ii) Common Stock or
Equity Equivalents issuable in a public offering registered under the
Securities Act; (iii) Common Stock or Equity Equivalents issuable upon
conversion of the Class A Common or Class B Common or upon exercise of
the Options; (iv) issuance of Options; or (v) issuances of Common Stock
to employees of Holding and its Subsidiaries with respect to shares of
Common Stock repurchased by Holding under Article IV.
"Officer's Certificate" means a certificate signed by the
Chief Financial Officer of Holding stating that (i) the officer signing
such certificate has made or has caused to be made such investigations
as are necessary in order to permit him or her to verify the accuracy
of the information set forth in such certificate or any documents
accompanying
-6-
<PAGE> 10
such certificate and (ii) such certificate does not misstate any
material fact and does not omit to state any fact necessary to make the
certificate not misleading.
"Options" means options to purchase Common Stock granted to
employees of Holding or any of its Subsidiaries pursuant to any plan
approved by the Board and any Options issued upon subdivision or
combination, or in substitution thereof.
"Original Cost" means, (i) as to each share of Common Stock
purchased or otherwise acquired from Holding or owned by any
Stockholder on August 13, 1996, $1.419520803 and (ii) as to each share
of Common Stock purchased or otherwise acquired from Holding after
August 13, 1996, the price paid to Holding therefor, in each case
appropriately adjusted to reflect all stock splits, stock dividends,
recapitalizations or similar events affecting the Common Stock
subsequent to the date of purchase thereof.
"Permitted Transferee" means:
(i) as to any Stockholder who is a natural
person, (a) the spouse or any lineal
descendant (including by adoption) of such
Stockholder, or (b) any trust (i) (including
a charitable trust) of which such
Stockholder is the trustee or (ii) which is
established solely for the benefit of any
such Stockholder or such Stockholder's
spouse or any lineal descendant (including
by adoption) and in the case of each of
(b)(i) or (b)(ii) above the terms of any
such trust is not inconsistent with the
terms of this Agreement, or (c) any
partnership whose terms are not inconsistent
with the terms of this Agreement, the
general partner(s) and limited partner(s)
(if any) of which are one or more Persons
identified in this clause (i)(a);
(ii) as to any CVC Stockholder, any other CVC
Stockholder; any director, officer,
employee, Associate or Affiliate of CVC; any
director, officer, employee, member or
partner of any such Affiliate; and any
trust, a majority in interest of the
beneficiaries of which, or corporation,
limited liability company, or partnership, a
majority in interest of the stockholders,
members or limited partners of which, or
partnership, the managing general partner of
which, are (or is) one or more of the
Persons identified in this clause (ii), the
spouse of any such Person and/or such
Person's lineal descendants (including by
adoption);
(iii) as to any Institutional Stockholder, any
Affiliate or Associate of such Institutional
Stockholder; provided, that with respect to
the State of Michigan, Permitted Transferee
also means any successor fiduciary for the
State of Michigan;
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(iv) as to any Berkshire Stockholder, any other
Berkshire Stockholder; any director,
officer, employee, general partner or
limited partner, or Affiliate of Berkshire;
any director, officer, employee, general
partner or limited partner of any such
Affiliate; and any trust, a majority in
interest of the beneficiaries of which, or
corporation or partnership, a majority in
interest of the stockholders or limited
partners of which, or partnership, the
managing general partner of which, are (or
is) one or more of the Persons identified in
this clause (ii), the spouse of any such
Person and/or such Person's lineal
descendants (including by adoption);
(v) as to Prudential and Pruco, any trust
managed by Prudential;
(vi) as to any Sofedit Stockholder, any Affiliate
or Associate of any such Sofedit
Stockholder; and
(vii) as to any Sofedit Institutional Stockholder,
(a) any Affiliate or Associate of any such
Sofedit Institutional Stockholder, which
shall include, without limitation, any
investment fund controlled by or under
common control with such Sofedit
Institutional Stockholder, such Affiliate or
such Associate or (b) with respect to the
Series B Preferred, any Sofedit Stockholder.
"Person" means an individual, partnership, corporation, trust,
unincorporated organization, limited liability company, joint venture,
government (or agency or political subdivision thereof) or any other
entity of any kind.
"Preferred Stock" means the Series A Preferred and the Series
B Preferred.
"Pro Rata" means, with respect to one or more Stockholders or
Option holders, (i) as it relates to Common Stock, in proportion to the
number of shares of Common Stock on a Fully Diluted Basis owned by such
Stockholder or Stockholders or which may be acquired by any Stockholder
or by any Option holder pursuant to any Option, and (ii) as it relates
to Preferred Stock, in proportion to the aggregate stated value plus
accrued and unpaid dividends of the Preferred Stock owned by such
Stockholder or Stockholders.
"Pruco Stockholder" means Pruco and each of its Permitted
Transferees, so long as any such Person shall hold Restricted
Securities.
"Prudential Stockholder" means Prudential and each of its
Permitted Transferees, so long as any such Person shall hold Restricted
Securities.
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<PAGE> 12
"Qualifying Offering" means the consummation of an
underwritten primary or secondary public offering of Common Stock
pursuant to an effective registration statement under the Securities
Act as a result of which (i) (together with all similar previous public
offerings) at least $50 million of aggregate net proceeds are raised
for Holding, and (ii) the Common Stock is listed on The New York Stock
Exchange, the American Stock Exchange or the Nasdaq National Market.
"Registration Rights Agreement" means the Registration Rights
Agreement, dated as of the date hereof, among Holding and the parties
hereto, as the same may be amended from time to time.
"Restricted Securities" means the Common Stock and the
Options, and any securities issued with respect thereto as a result of
any stock dividend, stock split, reclassification, recapitalization,
reorganization, merger, consolidation or similar event or upon the
conversion, exchange or exercise thereof.
"Sale of the Company" means the sale of Holding (whether by
merger, consolidation, recapitalization, reorganization, sale of
securities, sale of assets or otherwise) in one transaction or a series
of related transactions to a Person or Persons that is not an Affiliate
or Associate of any Sofedit Stockholder or any Sofedit Institutional
Stockholder pursuant to which such Person or Persons acquires (i)
securities representing at least a majority of the voting power of all
securities of Holding, assuming the conversion, exchange or exercise of
all securities convertible, exchangeable or exercisable for or into
voting securities, or (ii) all or substantially all of the business or
assets of Holding and its Subsidiaries.
"Securities Act" means the Securities Act of 1933, as amended,
and the rules and regulations of the Commission thereunder.
"Senior Debt" means (i) the "Obligations" as such term is
defined in the Guaranties by Holding or any of its Subsidiaries,
including without limitation any interest accruing on any Obligation
after the date of filing of a petition in any bankruptcy, insolvency,
arrangement, reorganization and receivership proceeding involving
Holding or any of its Subsidiaries (or any other obligor with respect
to the underlying debt), whether or not such interest is an allowed
claim in such proceeding, and (ii) any and all refundings, renewals,
refinancings, replacements and extensions of any Senior Debt described
in clause (i) above, whether or not with the original lender or holders
thereof.
"Series A Preferred" means Holding's Series A Preferred Stock,
par value $.01 per share.
"Series B Preferred" means Holding's Series B Preferred Stock,
par value $.01 per share.
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"Sofedit Institutional Stockholders" means the Former Sofedit
Institutional Investors and each of their respective direct and
indirect Permitted Transferees, so long as such Person shall hold
Restricted Securities.
"Sofedit Stockholders" means the Former Sofedit Investors and
each of their respective direct and indirect Permitted Transferees, so
long as any such Person shall hold Restricted Securities.
"State of Michigan Stockholders" means the State of Michigan
and each of its Permitted Transferees, so long as any such Person shall
hold Restricted Securities.
"Stockholders" means each of the CVC Stockholders, the Sofedit
Stockholders, the Sofedit Institutional Stockholders, the Institutional
Stockholders, the Former Management Stockholders, the Management
Stockholders and the Additional Stockholders.
"Subsidiary" means, with respect to any Person, any other
Person in which such Person, directly or indirectly through
Subsidiaries or otherwise, owns more than fifty percent (50%) of either
the equity interests or the voting power.
"Transfer" means, directly or indirectly, any sale, transfer,
assignment, hypothecation, pledge or other disposition of any
Restricted Securities or any interests therein.
(b) Unless otherwise provided herein, all accounting
terms used in this Agreement shall be interpreted in accordance with generally
accepted accounting principles as in effect from time to time, applied on a
consistent basis.
(c) The following terms, when used in this Agreement,
shall have the meanings defined for such terms in the Section set forth below:
Term Section
---- -------
"Acceptance Date" 6.1
"Acceptance Notice" 6.1
"Acquiror" 2.7(a)
"Agreement" Preamble
"Article III Offer" 3.1(a)
"Berkshire" Preamble
"Berkshire Group" Preamble
"Berkshire Group Member" Preamble
"Buyer" 3.1(a)
"Control Person" 2.4(b)
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<PAGE> 14
"CVC" Preamble
"CVC Co-Investors" Preamble
"CVC Investors" Preamble
"Drag-Along Right" 2.7(a)
"Drag-Along Sale" 2.7(a)
"Former Management Group" Preamble
"Former Management Group Member" Preamble
"Former Sofedit Institutional Investors" Preamble
"Former Sofedit Investor" Preamble
"Holding" Preamble
"Holding Designee" 4.1
"Holding Notice" 2.5(b)
"Inclusion Notice" 3.1(a)
"Inclusion Right" 3.1(b)
"Institutional Investors" Preamble
"Management Group" Preamble
"Management Group Member" Preamble
"New Common Stock Notice" 6.1
"New Common Stock Offer" 6.1
"New Common Stock Offerees" 6.1
"New Common Stock Units" 6.1
"Notice of Intention" 2.5(a)
"Offer Price" 2.5(a)
"Offered Securities" 2.5(a)
"Offerees" 3.1(a)
"Original Agreement" Recital
"Prospective Buyers" 2.5(a)
"Prospective Buyer Notice" 2.5(c)
"Pruco" Preamble
"Prudential" Preamble
"Purchase Notice" 4.1
"Regulatory Problem" 5.4(c)
"Sale Event" 4.1
"Sellers" 4.1
"Selling Stockholder" 2.5(a)
"State of Michigan" Preamble
"Stock Purchase Agreement" Recital
"Third Party" 2.5(e)
"Transferor" 3.1(a)
"Transferor Shares" 3.1(a)
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<PAGE> 15
ARTICLE II
TRANSFERS OF RESTRICTED SECURITIES
2.1 RESTRICTIONS GENERALLY; SECURITIES ACT. (a) Each
Stockholder agrees that it will not, directly or indirectly, Transfer any
Restricted Securities except in accordance with the terms of this Agreement. Any
attempt to Transfer any Restricted Securities not in accordance with the terms
of this Agreement shall be null and void and neither the issuer of such
securities nor any transfer agent of such securities shall give any effect to
such attempted Transfer in its stock records.
(b) Each Stockholder agrees that, in addition to the other
requirements herein, it will not Transfer any Restricted Securities except
pursuant to an effective registration statement under the Securities Act, or
upon receipt by Holding of an opinion of counsel to the Stockholder reasonably
satisfactory to Holding or, if agreed by the Board, counsel to Holding, or a
no-action letter from the Commission addressed to Holding, to the effect that no
registration statement is required because of the availability of an exemption
from registration under the Securities Act or to the effect that such Transfer
is not subject to the requirements of the Securities Act.
2.2 LEGEND. (a) Each certificate representing Restricted
Securities or Preferred Stock shall be endorsed with the following legends and
such other legends as may be required by applicable state securities laws:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO
THE RESTRICTIONS, RIGHTS TO REPURCHASE AND TO REQUIRE
TRANSFERS CONTAINED IN THE STOCKHOLDERS AGREEMENT, DATED AS OF
APRIL __, 1998, AMONG MS ACQUISITION CORP. (THE "COMPANY") AND
ITS STOCKHOLDERS, AS MAY BE AMENDED FROM TIME TO TIME AND MAY
NOT BE TRANSFERRED, SOLD, ASSIGNED, PLEDGED, HYPOTHECATED OR
OTHERWISE DISPOSED OF (A "TRANSFER") EXCEPT IN ACCORDANCE WITH
THE PROVISIONS THEREOF, AND ANY TRANSFEREE OF THESE SECURITIES
SHALL BE SUBJECT TO THE TERMS OF SUCH AGREEMENT, AS SUCH
AGREEMENT MAY BE AMENDED OR MODIFIED FROM TIME TO TIME. COPIES
OF THE STOCKHOLDERS AGREEMENT, AS AMENDED OR MODIFIED, ARE
MAINTAINED WITH THE CORPORATE RECORDS OF THE COMPANY AND ARE
AVAILABLE FOR INSPECTION AT THE PRINCIPAL EXECUTIVE OFFICES OF
THE COMPANY.
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
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<PAGE> 16
AS AMENDED (THE "ACT"), OR STATE SECURITIES LAWS, AND
NO TRANSFER OF THESE SECURITIES MAY BE MADE EXCEPT (A)
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT,
(B) PURSUANT TO AN EXEMPTION THEREFROM OR IN A TRANSACTION NOT
SUBJECT THERETO, WITH RESPECT TO WHICH THE COMPANY MAY REQUIRE
AN OPINION OF COUNSEL FOR THE HOLDER THAT SUCH TRANSFER IS
EXEMPT FROM OR NOT SUBJECT TO THE REQUIREMENTS OF THE ACT, AS
PROVIDED BY THE TERMS OF THE STOCKHOLDERS AGREEMENT DESCRIBED
ABOVE.
THE POWERS, DESIGNATIONS, PREFERENCES AND RELATIVE
PARTICIPATING, OPTIONAL OR OTHER SPECIAL RIGHTS, AND THE
QUALIFICATIONS, LIMITATIONS, OR RESTRICTIONS OF SUCH
PREFERENCES AND/OR RIGHTS OF EACH CLASS OR SERIES OF CAPITAL
STOCK OF THE COMPANY ARE SET FORTH IN THE RESTATED CERTIFICATE
OF INCORPORATION. THE CORPORATION WILL FURNISH A COPY OF THE
RESTATED CERTIFICATE OF INCORPORATION TO THE HOLDER OF THIS
CERTIFICATE WITHOUT CHARGE UPON REQUEST.
(b) Any certificate issued at any time in exchange or
substitution for any certificate bearing such legends (except a new certificate
issued upon the completion of a Transfer pursuant to a registered public
offering under the Securities Act and made in accordance with the Securities
Act) shall also bear such legends, unless in the opinion of counsel for Holding,
the Restricted Securities or Preferred Stock represented thereby are no longer
subject to the provisions of this Agreement or the restrictions imposed under
the Securities Act or state securities laws, in which case the applicable legend
(or legends) shall at the request of Holder be removed.
2.3 LIMITATIONS ON REPURCHASES, DIVIDENDS, ETC. Each
Stockholder understands that Holding is entering or has entered into certain
financing agreements which will or do contain prohibitions, restrictions and
limitations, among other things, on the ability of Holding to purchase any
Restricted Securities or Preferred Stock (whether pursuant to this Agreement or
otherwise), to pay dividends and to waive, modify or discharge any rights or
obligations under this Agreement.
2.4 TRANSFERS BY STOCKHOLDERS. (a) Each of the Stockholders
severally agrees that it will not Transfer any Restricted Securities, except (i)
to a Permitted Transferee who shall have executed a Joinder Agreement and
thereby become a party to this Agreement; (ii) pursuant to the exercise of any
rights such Stockholder may have under the Registration Rights Agreement; (iii)
pursuant to Section 2.7 or Article III (in the capacity of a Transferor (subject
to compliance with the requirements of Section 2.5) or an Offeree thereunder)
or, with respect to
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<PAGE> 17
Management Stockholders and Additional Stockholders, Section 2.6 or Article IV;
(iv) pursuant to Section 2.5 (and to the extent applicable in the capacity of a
Transferor under Article III); provided, however, that none of the Management
Stockholders or Additional Stockholders shall Transfer any Restricted Securities
pursuant to Section 2.5 prior to August 12, 2001, and none of the Management
Stockholders or Additional Stockholders shall transfer any Options except
pursuant to Section 2.6, 2.7 or 3.2 or Article IV; or (v) after April __, 2008.
In addition, no Sofedit Institutional Stockholder shall transfer any shares of
Series B Preferred other than to a Permitted Transferee. Notwithstanding
anything to the contrary contained herein, no Transfer (including without
limitation any Involuntary Transfer but excluding any Transfer made in
accordance with this Agreement in connection with a Sale of the Company) or
entry into any agreement or arrangements with respect to Transfer will be
permitted or will be effective (other than any Transfer pursuant to Inclusion
Rights exercised in connection with an Article III Offer or in connection with
any registered public offering) to the extent such Transfer, agreement or other
arrangement would result in a change of control, event of default or other
prepayment obligation by Holding (or any of its Subsidiaries) under (A) any
agreement or instrument evidencing Senior Debt or the Preferred Stock or (B) any
successor agreement or instrument with respect to Senior Debt that contains such
a provision which is no more restrictive of the rights of any Aetna Stockholder
to transfer the securities of Holding or any Subsidiary than the most
restrictive provision contained in the agreements and instruments referred to in
clause (A) above.
(b) Each of the Stockholders hereby agrees that the following
events shall be deemed a Transfer of Restricted Securities owned or held of
record by such Stockholder for purposes of this Agreement: (i) the transfer of
all or a material part of the assets of such Stockholder or any Control Person
of such Stockholder to any Person that would not qualify as a Permitted
Transferee of such Stockholder, (ii) the transfer or issuance of any securities
of such Stockholder or such Control Person representing a majority of the voting
power or economic interest of all such securities to any Person that would not
qualify as a Permitted Transferee of such Stockholder or (iii) any other change
of control with respect to such Stockholder or such Control Person, whereby the
Person obtaining such control would not otherwise qualify as a Permitted
Transferee of such Stockholder, except, with respect to any Sofedit
Institutional Stockholder, if such change of control results from a
privitization of such Sofedit Institutional Stockholder, from a public tender
offer for the shares of the ultimate parent of such Sofedit Institutional
Stockholder or from a sale or exchange of shares on a regulated stock exchange.
"Control Person" means any person that possesses, directly or indirectly, the
power to direct or to cause the direction of the management and policies of any
other Person, whether through the ownership of securities, by contract or
otherwise.
2.5 RIGHT OF FIRST OFFER. (a) Except for Transfers permitted
pursuant to clauses (i), (ii), (iii) (in the capacity of an Offeree under
Article III or pursuant to Section 2.7) and (v) of Section 2.4(a), if any
Stockholder (a "Selling Stockholder") desires to Transfer any Restricted
Securities (the "Offered Securities"), prior to any Transfer it shall give
written notice of the proposed Transfer (the "Notice of Intention") to Holding
and to the other Stockholders (the "Prospective Buyers"), specifying the type
and number of Offered Securities which such Selling
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<PAGE> 18
Stockholder wishes to Transfer, the proposed purchase price (or the Fair Market
Value in the case of any deemed transfer under Section 2.4(b)) (the "Offer
Price") therefor and all other material terms and conditions of the proposed
Transfer.
(b) For a period of twenty (20) days following its receipt of
the Notice of Intention, Holding shall have an irrevocable right to purchase all
or any portion of the Offered Securities at the Offer Price and on the other
terms specified in the Notice of Intention, exercisable by delivery of notice
(the "Holding Notice") to the Selling Stockholder, with a copy to each of the
Prospective Buyers, specifying the number of Offered Securities with respect to
which Holding is exercising its option.
(c) For a period of twenty (20) days following its receipt of
the Holding Notice or, if no Holding Notice is so received, for a period of
forty-five (45) days following its receipt of the Notice of Intention, each of
the Prospective Buyers shall have the irrevocable right to purchase at the Offer
Price and on the other terms required to be specified in the Notice of Intention
addressed to it, any or all of the Offered Securities which Holding has elected
not to purchase, Pro Rata among the Prospective Buyers; provided, however, that
in the event any Prospective Buyer does not purchase any or all of its Pro Rata
portion of the Offered Securities, the other Prospective Buyers shall have the
right to purchase such portion, Pro Rata, until all of such Offered Securities
are purchased or until such other Prospective Buyers do not desire to purchase
any more Offered Securities. The right of the Prospective Buyers pursuant to
this Section 2.5(c) shall be exercisable by delivery of a notice (the
"Prospective Buyer Notice") setting forth the maximum number of Offered
Securities that such Prospective Buyer wishes to purchase, including any number
which would be allocated to such Prospective Buyer in the event any other
Prospective Buyer does not purchase all or any portion of its Pro Rata portion,
to the Selling Stockholder, Holding and the other Prospective Buyers and shall
expire if unexercised within such 20-day or 45-day period, as applicable.
(d) Notwithstanding the foregoing provisions of this Section
2.5, unless the Selling Stockholder shall have consented to the purchase of less
than all of the Offered Securities, neither Holding nor any Prospective Buyer
may purchase any Offered Securities unless all of the Offered Securities are to
be purchased (whether by Holding or the Prospective Buyers, or any combination
thereof).
(e) If all notices required to be given pursuant to this
Section 2.5 have been duly given and (i) Holding and the Prospective Buyers
determine not to exercise their respective options to purchase the Offered
Securities at the Offer Price and on the other terms specified in the Notice of
Intention or (ii) Holding and the Prospective Buyers determine, with the consent
of the Selling Stockholder, to exercise their options to purchase less than all
of the Offered Securities or (iii) Holding or any Stockholder that is a
Prospective Buyer fails to purchase any Offered Securities pursuant to and in
accordance with this Section 2.5 other than as a result of a breach of this
Section 2.5 by the Selling Stockholder, then the Selling Stockholder shall have
the right, for a period of one hundred (100) days from the earlier of (A) the
expiration of the last
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<PAGE> 19
applicable option period pursuant to this Section 2.5 or (B) the date on which
such Selling Stockholder receives notice from Holding and the Prospective Buyers
that they will not exercise in whole or in part the options granted pursuant to
this Section 2.5, to sell to a third party that is neither an Associate or an
Affiliate of the Selling Stockholder in a bona fide sale (a "Third Party") the
Offered Securities remaining unsold under this Section 2.5 at a price not less
than the Offer Price and on other terms which shall not be materially more
favorable in the aggregate than those set forth in the Notice of Intention;
provided that prior to any such Transfer to a Third Party, such Third Party
executes and delivers to Holding, for the benefit of Holding and all
Stockholders, a Joinder Agreement and thereby becomes a party to this Agreement
and such Selling Stockholder first complies with the provisions of Article III.
(f) The closing of any purchase and sale to Holding or any
Prospective Buyer pursuant to this Section 2.5 shall take place on such date,
not later than fifteen (15) business days after the later of delivery to the
Selling Stockholder of (i) the Holding Notice and (ii) the Prospective Buyer
Notice, as Holding and the Selling Stockholder shall select. At the closing of
such purchase and sale, the Selling Stockholder shall deliver certificates
evidencing the Offered Securities being sold duly endorsed, or accompanied by
written instruments of transfer in form satisfactory to the purchasers thereof,
duly executed by the Selling Stockholder, free and clear of any Liens, against
delivery of the Offer Price therefor.
(g) Any Transfer by a Stockholder which is subject to the
requirements of Section 2.5 (including to Holding, another Stockholder or to a
Third Party) shall be subject to each other Stockholder's rights of inclusion
under Article III, and prior to any transfer, the Selling Stockholder, if
applicable, shall deliver to the other Stockholders an Inclusion Notice pursuant
to Section 3.1(a).
2.6 INVOLUNTARY TRANSFERS. (a) Upon the occurrence of any
event which would cause any Restricted Securities owned by a Management
Stockholder or by an Additional Stockholder to be Transferred by Involuntary
Transfer, such Management Stockholder or Additional Stockholder (or his or her
legal representative or successor) shall give Holding written notice thereof
stating the terms of such Involuntary Transfer, the identity of the transferee
or proposed transferee, the price or other consideration, if readily
determinable, for which the Restricted Securities are proposed to be or have
been Transferred and the number of Restricted Securities which are the subject
of such Transfer, and Holding shall notify all of the Stockholders of the same.
After its receipt of such notice or, failing such receipt, after Holding
otherwise obtains actual knowledge of such a proposed or completed Involuntary
Transfer, Holding shall have the right and option to purchase (or to have any
designee approved by the Board purchase) all or any portion of such Restricted
Securities, which right shall be exercised by written notice given by Holding to
the transferor (or transferee following the occurrence of any Involuntary
Transfer) within sixty (60) days following the later of (i) Holding's receipt of
such notice or, failing such receipt, Holding's obtaining actual knowledge of
such proposed or completed Transfer and (ii) the date of such Involuntary
Transfer.
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(b) Any purchase pursuant to this Section 2.6 shall be at the
price and on the terms applicable to such Involuntary Transfer; provided,
however, that if the nature of the event giving rise to such Involuntary
Transfer is such that no readily determinable consideration is to be paid for or
assigned to the Transfer of the Restricted Securities, the price to be paid by
Holding and the applicable terms shall be the purchase price and terms
applicable to a Sale Event pursuant to Section 4.2. The closing of the purchase
and sale of such Restricted Securities pursuant to this Section 2.6 shall be
held at the place and on the date established by Holding, which in no event
shall be less than ten (10) nor more than forty-five (45) days from the date on
which Holding gives notice of its election to purchase such Restricted
Securities, and such purchase price shall be determined as of the date of the
notice of election to purchase such Restricted Securities. At such closing, the
Management Stockholder or Additional Stockholder (or his or her legal
representative or successor) shall deliver the certificates evidencing the
Restricted Securities to be purchased by Holding, as applicable, accompanied by
stock powers, duly endorsed in blank, or duly executed instruments of transfer,
and any other documents that are necessary to Transfer to Holding good title to
such Restricted Securities free and clear of all Liens and, concurrently with
such delivery, Holding shall deliver to the transferor thereof the full amount
of the purchase price therefor by certified or bank cashier's check.
(c) Notwithstanding anything to the contrary contained herein,
in the event a purchase (or the payment of the purchase price) by Holding
pursuant to this Section 2.6 would violate or conflict with any statute, rule,
injunction, regulation, order, judgment or decree applicable to Holding or any
of its Subsidiaries or by which any of them or their respective properties may
be bound or affected or would result in any breach of, or constitute a default
(or an event which with notice or lapse of time, or both, would become a
default) under, or give to others any rights of termination, amendment,
acceleration or cancellation of, or result in the creation of a Lien on any of
the property or assets of Holding or any of its Subsidiaries pursuant to any
note, bond, mortgage, indenture, contract, agreement, lease, license, franchise
or other instrument or obligation to which Holding or any of its Subsidiaries is
a party or by which any of their respective properties is bound or affected, the
rights of Holding to purchase (or to have any designee purchase) the Restricted
Securities of any Management Stockholder or Additional Stockholder shall be
suspended until the date which falls thirty (30) days following such time as
such prohibition first lapses or is waived and no such default would be caused.
For the purposes of this Section 2.6 only, the date of such lapse or waiver
shall be deemed the date of the Involuntary Transfer for purposes of the
purchase and sale of Restricted Securities pursuant to this Section 2.6 and such
purchase price shall be determined as of the date such prohibition lapses or is
waived. Holding shall use its reasonable efforts to obtain a waiver of any such
prohibition but shall not be obligated to incur any additional interest or other
costs or charges or to make any prepayment with respect to any indebtedness in
connection with such efforts.
(d) Notwithstanding anything to the contrary contained in this
Section 2.6, any event giving rise to an Involuntary Transfer which is also
subject to the provisions of Article IV shall be governed by the provisions of
Article IV.
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2.7 DRAG ALONG SALE. (a) If the Sofedit Stockholders, so long
as they own in the aggregate at least thirty-five percent (35%) of the shares of
Common Stock on a Fully Diluted Basis, (i) propose to Transfer to a third party
(which is not an Associate or an Affiliate of any of such Sofedit Stockholders)
(the "Acquiror") all of their Restricted Securities, the Sofedit Stockholders
shall have the right, subject to Section 2.7(f), to require all the other
Stockholders to sell or transfer all (but not less than all) of their Restricted
Securities to such third party on the same terms; or (ii) propose the Transfer
of all or substantially all of the assets or business (whether by merger, sale
or otherwise) of Holding to any such third party, the Sofedit Stockholders shall
have the right, subject to Section 2.7(f) (a "Drag-Along Right"), to require (x)
the Stockholders to take all action necessary or appropriate in order to cause
Holding to take all action necessary or appropriate to give effect to such
transaction and (y) the Stockholders to approve such transaction in their
capacity as stockholders of Holding (a transaction described in clause (i) or
(ii), a "Drag-Along Sale"); provided that upon the consummation of any
transaction resulting in a sale or transfer of all or substantially all of the
assets or business of Holding (whether by merger, sale or otherwise) Holding
will immediately distribute all of the net proceeds of such transaction to the
Stockholders, in accordance with their respective rights and privileges.
(b) Notwithstanding the foregoing, in the event that (i)
pursuant to an exercise of the Drag-Along Rights Holding (or one or more of its
Subsidiaries) proposes to voluntarily sell all or substantially all of the
consolidated assets of Holding to a third party in a transaction and (ii)
Holding intends to pay the net proceeds therefrom to its stockholders in a
distribution which is taxable as a dividend (and not pursuant to a plan of
liquidation) resulting in disparate tax treatment to the Stockholders, then the
Sofedit Stockholders shall only have the right to effect such transaction if the
Aetna Stockholders have consented thereto (which consent shall not be
unreasonably withheld or delayed).
(c) In order to exercise a Drag-Along Right, the Sofedit
Stockholders shall notify each Stockholder, such notice to set forth the terms
and conditions of such proposed sale. Subject to Section 2.7(b), each such
Stockholder will take all actions reasonably requested by the Sofedit
Stockholders in connection with the consummation of such sale, and within twenty
(20) business days of the receipt of such notice (or such longer period of time
as the Sofedit Stockholders shall designate in such notice), if such transaction
is structured as a sale of assets or a merger, such Stockholders shall approve
the transaction in their capacities as stockholders of Holding (subject to
Section 2.7(b)), and if such transaction is a sale of Restricted Securities,
such Stockholders shall cause all of their respective Restricted Securities to
be sold to the designated purchaser on the same terms and conditions and for the
same per share consideration as the Restricted Securities being sold by the
Sofedit Stockholders; provided, however, that if any of such Restricted
Securities are Equity Equivalents, the purchase price of such Equity Equivalents
shall equal the aggregate price that would be paid for the shares of Common
Stock issuable upon the exercise thereof minus the aggregate exercise or
conversion price under such Equity Equivalents for such shares of Common Stock
and if any Stockholders are given a choice as to the type or amount of
consideration to be received in respect of a specific security of Holding, all
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Stockholders will be given the same choice. In furtherance of, and not in
limitation of the foregoing, in connection with a Drag-Along Sale, subject to
Section 2.7(b) and Section 2.7(e) each Stockholder will (i) raise no objections
against the Drag-Along Sale or the process pursuant to which it was arranged,
(ii) waive any appraisal rights under Section 262 of the Delaware General
Corporation Law and other similar rights, and (iii) execute all documents
containing such terms and conditions as those executed by other Stockholders as
reasonably directed by the Sofedit Stockholders.
(d) In a transaction effected pursuant to the exercise of the
Drag-Along Rights pursuant to this Section 2.7, the Aetna Stockholders and/or
the Sofedit Institutional Stockholders may elect, upon notice to the Sofedit
Stockholders and Holding, to require that there be delivered to the Aetna
Stockholders and/or the Sofedit Institutional Stockholders, as applicable, a
fairness opinion, addressed to the Aetna Stockholders, of an internationally
recognized investment banking firm jointly selected by the Sofedit Stockholders
and the Aetna Stockholders and/or the Sofedit Institutional Stockholders, as
applicable (which selection shall be made promptly and in good faith by such
Stockholders and whose reasonable fees and expenses shall be paid by the Aetna
Stockholders and/or the Sofedit Institutional Stockholders, as applicable), to
the effect that the consideration to be paid to the Stockholders is fair. Such
notice must be given within ten (10) days after receipt of the notice of
exercise of Drag-Along Rights under Section 2.7(c). If the consideration
proposed to be paid to the Stockholders in respect of the Drag Along Sale is
less than the valuation established by such investment banking firm, then the
Sofedit Stockholders shall not have the right to effect such Drag-Along Sale
pursuant to this Section 2.7 without the consent of the Aetna Stockholders
and/or the Sofedit Institutional Stockholders, as applicable. The fees and
expenses of such investment banking firm shall be treated as a transaction
expense.
(e) Unless otherwise agreed by any Stockholder with respect to
the obligations of such Stockholder, all contractual indemnification and
contribution payments required to be made by any Stockholder in connection with
any Drag-Along Sale shall be limited to payments made from the proceeds of such
Drag-Along Sale set aside in an escrow account or similar arrangement, except
with respect to indemnification or contribution payments which arise from a
misrepresentation or breach by such Stockholder with respect to matters of title
to such Stockholders' securities and valid authorization by such Stockholder
with respect to the Drag-Along Sale. The amount of proceeds payable to each
Stockholder so set aside in respect of any such indemnification or contribution
payments shall be proportionate to the amount of consideration received or to be
received by such Stockholder in relation to all Stockholders. All Stockholders
will bear their pro rata share of the costs and expenses incurred in connection
with a Drag-Along Sale to the extent such costs are incurred for the benefit of
all Stockholders and are not otherwise paid by Holding or the purchaser and so
long as such costs and expenses are reimbursed solely out of the proceeds of
such Drag-Along Sale. Costs incurred by any Stockholder on its own behalf will
not be shared by any other Stockholder.
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(f) Notwithstanding anything contained herein to the contrary,
no Drag-Along Sale may be consummated unless prior to or contemporaneously
therewith, all of the outstanding Preferred Stock and Debentures have been paid
or redeemed in full in cash.
ARTICLE III
RIGHTS OF INCLUSION
3.1 RIGHTS OF INCLUSION. (a) If any Stockholder, other than
any Sofedit Institutional Stockholder or any Institutional Stockholder, (the
"Transferor") proposes to Transfer (subject to compliance with the requirements
of Section 2.5) any Restricted Securities and/or shares of Preferred Stock
("Transferor Shares") to any Person (the "Buyer"), other than as permitted by
Section 3.3, then, as a condition to such Transfer, the Transferor shall cause
the Buyer to include an offer (the "Article III Offer") to each of the other
Stockholders (collectively, the "Offerees"), to sell to the Buyer, at the option
of each Offeree, that number of shares of Restricted Securities and/or Preferred
Stock determined in accordance with Section 3.1(b), at the same time(s) and on
the same terms and conditions as are applicable to the Transferor Shares. The
Transferor shall provide a written notice (the "Inclusion Notice") of the
Article III Offer to each Offeree.
(b) Each Offeree shall have the right (an "Inclusion Right")
to sell pursuant to the Article III Offer part or all of a Pro Rata number of
its shares of Restricted Securities and/or Preferred Stock as is sold by the
Transferor, provided, however, that in the event any Offeree does not exercise
his, her or its Inclusion Right as to any or all of its Pro Rata portion of its
Restricted Securities and/or Preferred Stock, the other Offerees shall have the
right to sell their Restricted Securities and/or Preferred Stock, Pro Rata, in
an amount equal to such remaining portion of Restricted Securities and/or
Preferred Stock not being sold by such non-exercising Offeree until all of such
remaining portion is eliminated or until such other Offerees do not desire to
sell any more of their Restricted Securities and/or Preferred Stock. The
Inclusion Right shall be exercisable by delivery of a notice by each Offeree,
setting forth the number of Restricted Securities and/or Preferred Stock that
such Offeree wishes to sell, including any number which would be allocated to
such Offeree in the event any other Offeree does not exercise his, her or its
Inclusion Right as to all or any of its Pro Rata portion, to the Transferor
within twenty (20) days of delivery of the Inclusion Notice. The Transferor
shall have the right to sell the balance of the shares of Restricted Securities
and/or Preferred Stock not being sold by such Offerees as provided for above and
no other Offeree shall have any Inclusion Right with respect thereto. Any
Offeree which owns Options may exercise and sell shares of Common Stock pursuant
to the Article III Offer, and the purchase price therefor shall equal the
aggregate price that would be paid for the shares of Common Stock issuable upon
the exercise thereof minus the aggregate exercise price under such Option for
such shares of Common Stock.
3.2 ARTICLE III SALES. (a) Upon its exercise of an Inclusion
Right, each Offeree shall deliver to the Transferor a certificate or
certificates representing the shares of
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Restricted Securities and/or Preferred Stock to be sold or otherwise disposed of
pursuant to the Article III Offer by such Offeree, free and clear of all Liens,
and a limited power-of-attorney authorizing the Transferor to sell or otherwise
dispose of such shares of Restricted Securities and/or Preferred Stock pursuant
to the terms of the Article III Offer; provided, however, for so long as they
own Restricted Securities and/or Preferred Stock and are subject to this
Agreement, Prudential and the State of Michigan shall not be required to execute
a limited power-of-attorney; and provided, further, Prudential and the State of
Michigan hereby agree to take all reasonable actions to effectuate a sale by
such Stockholder pursuant to an Article III Offer.
The Transferor shall have one hundred (100) days, commencing
on the expiration of the Inclusion Rights, in which to sell or otherwise dispose
of, on behalf of itself and the Offerees, up to the number of Restricted
Securities and/or Preferred Stock covered by the Article III Offer (and the
number of Transferor Shares) to the Buyer. If all such shares are not sold to
the Buyer, the Transferor, at its option, may elect to sell on behalf of itself
and the Offerees such number of shares as the Buyer will purchase, Pro Rata
among the Transferor and the Offerees, as nearly as practicable. The material
terms of such sale, including, without limitation, price and form of
consideration, shall be as set forth in the Inclusion Notice. If at the end of
such 100-day period the Transferor has not completed the sale or other
disposition of all the Transferor Shares and all the Offerees' Restricted
Securities and/or Preferred Stock (if any) proposed to be sold, the Transferor
shall return to each of the Offerees its respective certificates, if any,
representing Restricted Securities and/or Preferred Stock which the Offerees
delivered for sale or other disposition pursuant to this Article III and which
were not sold pursuant thereto and the provisions of this Article III shall
continue to be in effect.
(b) Promptly after the consummation of the sale or other
disposition of the Transferor Shares and Restricted Securities and/or Preferred
Stock of the Offerees to the Buyer pursuant to the Article III Offer, the
Transferor shall notify the Offerees thereof, and the Buyer shall pay to the
Transferor and each of the Offerees their respective portions of the sales price
of the Restricted Securities and/or Preferred Stock sold or otherwise disposed
of pursuant thereto, and shall furnish such other evidence of the completion of
such sale or other disposition and the terms thereof as may be reasonably
requested by the Offerees.
(c) Notwithstanding anything to the contrary contained in this
Article III, except for the Transferor's obligation to return to each Offeree
any certificates representing the Restricted Securities and/or Preferred Stock,
there shall be no liability on the part of the Transferor to any Stockholder in
the event that the proposed sale pursuant to this Article III is not consummated
for whatever reason. Whether a sale of Restricted Securities and/or Preferred
Stock is effected pursuant to this Article III by the Transferor is in the sole
and absolute discretion of the Transferor.
3.3 CERTAIN TRANSFERS. The provisions of this Article III
shall apply to any Transfer or proposed Transfer of Restricted Securities and/or
Preferred Stock by any Stockholder other than: (a) pursuant to a registration
statement filed under the Securities Act, (b) to a
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Permitted Transferee who shall have executed a Joinder Agreement and thereby
become a party to this Agreement and (c) to any Person who shall have executed a
Joinder Agreement and thereby become a party to this Agreement, if such
Transfer, taken together with all other Transfers of Restricted Securities
and/or Preferred Stock by such Stockholder (not including Transfers described in
clauses (a) or (b) above), represent, in the aggregate, less than five percent
(5%) of the Common Stock, on a Fully Diluted Basis, or of the Preferred Stock,
as the case may be, held in the aggregate by such Stockholder on the Closing
Date, appropriately adjusted to reflect any stock split, stock dividend,
recapitalization or similar event.
ARTICLE IV
REPURCHASE OF RESTRICTED SECURITIES OWNED
BY MANAGEMENT STOCKHOLDERS OR ADDITIONAL STOCKHOLDERS
4.1 SALE EVENT. In the event that any Management Stockholder
shall cease to be employed by Holding or any of its Subsidiaries for any reason,
or any Additional Stockholder that is a director of Holding or any of its
Subsidiaries shall cease to be such a director for any reason, or in each case,
including death, permanent disability, termination for cause or without cause,
retirement or otherwise (such termination being referred to herein as a "Sale
Event"), but in each case subject to Section 4.4, such Management Stockholder
(or his or her personal representative) or Additional Stockholder (or his or her
personal representative) shall promptly notify Holding and each other
Stockholder of the applicable Sale Event and, within ninety (90) days after
Holding's receipt of such notice, Holding or, at the option of Holding, any
employee, director or other designee of Holding, which employee, director or
other designee shall have been designated by a unanimous vote of the Board (a
"Holding Designee") may, at its option elect to purchase, exercisable by written
notice (a "Purchase Notice") delivered to such Management Stockholder (or his or
her personal representative) or Additional Stockholder (or his or her personal
representative) and, in each case, his or her respective Permitted Transferees
who hold Restricted Securities (collectively, "Sellers") (with a copy to the
Aetna Stockholders and the Sofedit Stockholders), and upon the giving of such
notice, Sellers shall be obligated to sell those Restricted Securities of
Sellers which are designated in the Purchase Notice.
4.2 PURCHASE PRICE. The purchase price for each share of
Common Stock to be purchased pursuant to Section 4.1 shall be (a) if the Sale
Event did not occur as a result of a termination for Cause the Fair Market Value
thereof as of the date of the Sale Event, (b) if the Sale Event occurred as a
result of a termination for Cause the lower of (x) the Fair Market Value thereof
as of the date of the Sale Event and (y) the Original Cost thereof. Such
purchase price shall be paid in cash or by certified or cashier's bank check.
Notwithstanding anything to the contrary contained herein, no provision of this
Agreement shall prevent or otherwise restrict the Board from determining (in its
discretion) that Holding will purchase Restricted Securities from Management
Stockholders or Additional Stockholders pursuant to Section 4.1 at a price per
share in excess of the purchase price specified in this Section 4.2.
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4.3 CLOSING. Subject to Section 4.4, the closing for all
purchases and sales of Restricted Securities provided for in this Article IV
shall be held at the principal executive offices of Holding at 10:00 a.m., local
time, on the 30th day after the determination of the purchase price in respect
thereof determined in accordance with Section 4.2 or at such other date and time
as shall have been agreed to by the Board and the Seller; provided, however,
that if any Seller who has become obligated to sell Restricted Securities is
deceased on such 30th day as aforesaid and such deceased person's personal
representative shall not have been appointed and qualified by such date, then
unless otherwise agreed to as provided above, the closing shall be postponed
until the 10th day after the appointment and qualification of such personal
representative.
All Restricted Securities to be sold pursuant to this Article
IV shall be delivered to the purchaser at the aforesaid closing free and clear
of all Liens. The purchaser will be entitled to receive customary
representations as to title, authority and capacity to sell and to require a
guaranteed signature of the Seller, as applicable. Each Seller hereby appoints
Holding as attorney-in-fact to transfer such Restricted Securities on the books
of Holding in the event of a sale pursuant to this Article IV. Such Sellers
shall take all such actions as Holding or any other purchaser shall request as
necessary to vest in Holding or any other purchaser at such closing good title
to such Restricted Securities, free and clear of all Liens.
4.4 POSTPONEMENT. Notwithstanding anything to the contrary
contained herein, in the event a purchase (or the payment of the purchase price)
by Holding pursuant to this Article IV would (a) violate or conflict with any
statute, rule, injunction, regulation, order, judgment or decree applicable to
Holding or any of its Subsidiaries or by which any of them or their respective
properties may be bound or affected, (b) result in any breach of, or constitute
a default (or an event which with notice or lapse of time, or both, would become
a default) under, or give to others any rights of termination, amendment,
acceleration or cancellation of, or result in the creation of a Lien on any of
the property or assets of Holding or any of its Subsidiaries pursuant to any
note, bond, mortgage, indenture, contract, agreement, lease, license, franchise
or other instrument or obligation to which Holding or any of its Subsidiaries is
a party or by which any of their respective properties is bound or affected or
(c) in the judgment of the Board, jeopardize the financial health of Holding or
its Subsidiaries or otherwise have a material adverse effect on the business,
condition (financial or otherwise), results of operations or assets or
properties of Holding, the rights of Holding to purchase the Restricted
Securities of the Sellers with respect to whom the Sale Event has occurred
pursuant to this Article IV shall be suspended, in the case of clauses (a) or
(b) above, until the date which falls thirty (30) days following such time as
such prohibition first lapses or is waived and no such default would be caused
and in the case of clause (c) above, until the date which falls thirty (30) days
following such time as the Board determines that such purchase (or payment of
the purchase price) would no longer jeopardize the financial health of Holding
on a consolidated basis or otherwise have a material adverse effect on Holding
on a consolidated basis. For the purposes of this Section 4.4 only, the date of
such lapse, waiver or determination shall be deemed the date of the relevant
Sale Event
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for purposes of the purchase and sale and determination of the Purchase Price of
Restricted Securities pursuant to this Article IV. Holding shall use its
reasonable efforts to obtain a waiver of any such prohibition but shall not be
obligated to incur any additional interest or other costs or charges or to make
any prepayment with respect to any indebtedness in connection with such efforts.
ARTICLE V
CERTAIN COVENANTS OF THE PARTIES
5.1 REGISTRATION OF COMMON STOCK. In the event of, and in
order to facilitate, a registration by Holding of Common Stock under the
Securities Act which will constitute a Qualifying Offering, each Stockholder
shall, at a meeting convened for the purpose of amending the Certificate, vote
(which vote shall become effective immediately prior to the closing of the sale
of Common Stock pursuant to such registration by Holding): (a) to remove from
the Certificate requirements, if any such requirements are at such time imposed
thereby, relating to preemptive rights with respect to Common Stock; and (b) to
increase the number of authorized shares of Common Stock and, if necessary,
change the number of issued and outstanding shares of Common Stock, whether by
stock split, stock dividend or otherwise, or change its par value or effect any
other reclassification, recapitalization or similar event relating to the Common
Stock; in the case of each of clauses (a) and (b) above, as recommended by a
majority of the members of the Board to facilitate such registration.
Notwithstanding the foregoing, nothing set forth herein shall be construed to
allow any stock of any class or series to be treated differently from any other
stock of the same class or series or to reduce the rights afforded under Article
VI hereof.
5.2 MANAGEMENT STOCKHOLDERS; ADDITIONAL STOCKHOLDERS. The
parties hereto agree that as a condition precedent to the issuance by Holding of
shares of Common Stock or of Equity Equivalents to any Person other than any
Aetna Stockholder, any Sofedit Stockholder or any Sofedit Institutional
Stockholder, Holding shall require such Person to execute a Joinder Agreement
and thereby enter into and become a party to this Agreement. From and after such
time, the term "Additional Stockholder" shall be deemed to include such other
Person. Nothing contained herein nor the ownership of any Restricted Securities
shall confer upon any Management Stockholder or Additional Stockholder the right
to employment or to remain in the employ of Holding or any of its Subsidiaries.
Notwithstanding the foregoing, to the extent approved by a majority of the Board
and specified in any Joinder Agreement (or amendment thereto) pursuant to which
any Additional Stockholder may become a party hereto, the provisions of this
Agreement may be varied to be more or less restrictive with respect to any such
Additional Stockholder or to reduce the rights afforded by Article VI hereof.
5.3 STOCKHOLDERS LIST; CERTAIN NOTICES. Upon the request of
any Sofedit Stockholder, Sofedit Institutional Stockholder, CVC Stockholder,
Prudential, Pruco, Berkshire or
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the State of Michigan, Holding shall deliver promptly to such Sofedit
Stockholder, Sofedit Institutional Stockholder, CVC Stockholder, Prudential,
Pruco, Berkshire or the State of Michigan, respectively, as the case may be, a
list setting forth the names of all Stockholders and the number of shares of
each series of Class A Common and Class B Common owned by each Stockholder. In
addition, Holding shall give each of the CVC Stockholders, each of the Sofedit
Stockholders and each of the Sofedit Institutional Stockholders prior written
notice of (a) the conversion of any shares of any class or series of Common
Stock or any Preferred Stock and (b) any record transfer of Restricted
Securities, setting forth the name of the transferee and the number and type of
Restricted Securities being so transferred.
5.4 REGULATORY COMPLIANCE COOPERATION.
(a) Before Holding redeems, purchases or otherwise
acquires, directly or indirectly, or converts or takes any action with respect
to the voting rights of, any shares of any class or series of its capital stock
or any securities convertible, exchangeable or exercisable for or into any
shares of any class or series of its capital stock, Holding will give written
notice of such pending action to CVC. Upon the written request of any CVC
Stockholder made within twenty (20) days after its receipt of any such notice,
stating that after giving effect to such action such CVC Stockholder would have
a Regulatory Problem (as defined below), Holding will defer taking such action
for such period (not to extend beyond forty-five (45) days after such CVC
Stockholder's receipt of Holding's original notice) as such CVC Stockholder
requests to permit it and its Affiliates to reduce the quantity of securities
owned by them in order to avoid the Regulatory Problem. In the event Holding or
any CVC Stockholder is precluded from taking any action under this Agreement
within any allotted period of time as a consequence of this Section, such period
of time shall be extended by the number of days during which Holding or such CVC
Stockholder is precluded from acting.
(b) In the event that CVC determines that it has a
Regulatory Problem, Holding agrees to take all such actions as are reasonably
requested by CVC in order to (i) effectuate and facilitate any transfer by the
CVC Stockholders of any securities of Holding then held by the CVC Stockholders
to any Person designated by CVC, such transfer to be at the expense of CVC only
to the extent that the expenses in facilitating such transfer were incurred
solely to cure a Regulatory Problem, (ii) permit the CVC Stockholders (or any of
their Affiliates) to exchange all or a portion of any voting security then held
by them on a share-for-share basis for shares of a non-voting security of
Holding, which non-voting security shall be identical in all respects to the
voting security exchanged for it, except that it shall be non-voting and shall
be convertible into a voting security on such terms as are requested by the CVC
Stockholders in light of regulatory considerations then prevailing, and (iii)
continue and preserve the respective allocation of the voting interests with
respect to Holding provided for herein, and with respect to CVC's ownership of
Holding's securities. Such actions may include, but shall not necessarily be
limited to, entering into such additional agreements, adopting such amendments
to the Certificate and By-laws of Holding and taking such additional actions as
are reasonably requested by CVC in order to effectuate the intent of the
foregoing.
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(c) In addition, Holding will not be a party to any
merger, consolidation, recapitalization or other transaction pursuant to which
CVC would be required to take any voting securities, or any securities
convertible, exchangeable or exercisable for or into voting securities, which
might reasonably be expected to cause CVC to have a Regulatory Problem. For
purposes of this Agreement, "Regulatory Problem" means any set of facts or
circumstances wherein it has been asserted by any governmental agency or other
authority or CVC reasonably believes that, such Person and such Person's
Affiliates own, control or have power over a greater quantity of securities of
any kind issued by Holding than are permitted under any requirement of any
governmental authority.
5.5 FINANCIAL DISCLOSURE. For so long as any of the Sofedit
Stockholders, Sofedit Institutional Stockholders, CVC, Prudential, Pruco,
Berkshire, the State of Michigan, Jerome Singer, Douglas A. Thal, Robert J.
Klein or Steven Singer owns any Restricted Securities or Equity Equivalents,
Holding shall deliver to the Sofedit Stockholders, Sofedit Institutional
Stockholders, CVC, Prudential, Pruco, Berkshire, the State of Michigan, Jerome
Singer, Douglas A. Thal, Robert J. Klein or Steven Singer, as the case may be:
(a) as soon as available but in any event within thirty (30) days after the end
of each monthly accounting period in each fiscal year, unaudited consolidating
and consolidated statements of income and cash flows of Holding and its
Subsidiaries for such monthly period and for the period from the beginning of
the fiscal year to the end of such month, and unaudited consolidating and
consolidated balance sheets of Holding and its Subsidiaries as of the end of
such monthly period, setting forth in each case comparisons to the annual budget
and to the corresponding period in the preceding fiscal year, and all such
statements shall be prepared in accordance with generally accepted accounting
principles, consistently applied, subject to the absence of footnote disclosures
and to normal year-end adjustments, and shall be accompanied by an Officer's
Certificate; (b) within forty-five (45) days after the end of each quarterly
accounting period in each fiscal year, unaudited consolidating and consolidated
statements of income and cash flows of Holding and its Subsidiaries for such
quarterly period, and unaudited consolidating and consolidated balance sheets of
Holding and its Subsidiaries as of the end of such quarterly period, setting
forth in each case comparisons to the annual budget and to the corresponding
period in the preceding fiscal year, and all such statements shall be prepared
in accordance with generally accepted accounting principles, consistently
applied, subject to the absence of footnote disclosures and to normal year-end
adjustments, and shall be accompanied by an Officer's Certificate; (c) within
ninety (90) days after the end of each fiscal year, audited consolidating and
consolidated statements of income and cash flows of Holding and its Subsidiaries
for such fiscal year, and audited consolidating and consolidated balance sheets
of Holding and its Subsidiaries as of the end of such fiscal year, setting forth
in each case comparisons to the annual budget and to the preceding fiscal year,
all prepared in accordance with generally accepted accounting principles,
consistently applied, and accompanied by (i) with respect to the consolidated
portions of such statements, an opinion of an independent accounting firm of
recognized national standing, (ii) a certificate from such accounting firm,
addressed to the Board, stating that in the course of its examination nothing
came to its attention that caused it to believe that there was any default by
Holding or any Subsidiary in the fulfillment of or compliance with any of the
terms, covenants, provisions or
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conditions of any material agreement to which Holding or any Subsidiary is a
party or, if such accountants have reason to believe any default by Holding or
any Subsidiary exists, a certificate specifying the nature and period of
existence thereof and (iii) a copy of such firm's annual management letter to
the Board; (d) promptly upon receipt thereof, any additional reports, management
letters or other detailed information concerning significant aspects of the
operations or financial affairs of Holding given to Holding by its independent
accountants (and not otherwise contained in other materials provided hereunder);
(e) at least thirty (30) days prior to the end of each fiscal year, an annual
budget prepared on a monthly basis for Holding and its Subsidiaries for the
following fiscal year (displaying anticipated statements of income and cash
flows and balance sheets), and following preparation thereof quarterly revisions
of such budget and any other significant budgets prepared by Holding or its
Subsidiaries, and within thirty (30) days after any monthly period in which
there is a material adverse deviation from the annual budget, an Officer's
Certificate explaining the deviation and what actions Holding has taken and
proposes to take with respect thereto; (f) promptly upon their becoming
available drafts of the annual financial statements of Holding and its
Subsidiaries, together with a draft report of Holding's independent public
accountants thereon, and will afford CVC reasonable opportunity to review and
comment on such drafts; and (g) with reasonable promptness, such other
information and financial data concerning Holding and its Subsidiaries as any
Person entitled to receive information under this Section 5.5 may reasonably
request (provided that any Stockholders may elect in writing not to receive any
such financials described in this Section 5.5). Additionally, a designee of the
Aetna Stockholders shall have the right to inspect all books and records of
Holding and its Subsidiaries.
5.6 PURCHASER REPRESENTATIVE. If Holding enters into any
negotiation or transaction involving the issuance of securities of another
Person to the Stockholders for which Rule 506 (or any similar rule then in
effect) promulgated under the Securities Act by the Commission may be available
with respect to such negotiation or transaction (including a merger,
consolidation or other reorganization), each Stockholder that is a natural
person will, at the request of Holding, appoint a purchaser representative (as
such term is defined in Rule 501 under the Securities Act) reasonably acceptable
to Holding. If any such Stockholder appoints the purchaser representative
designated by Holding, Holding will pay the fees of such purchaser
representative, but if any such Stockholder declines to appoint the purchaser
representative designated by Holding, such Stockholder will appoint, at his or
her own expense, another purchaser representative reasonably acceptable to
Holding.
ARTICLE VI
RIGHT OF OFFER
6.1 RIGHTS OF OFFER. Prior to Holding issuing or selling, or
Aetna Holdings selling, any New Common Stock to any Person, Holding or Aetna
Holdings, as the case may be, shall offer (the "New Common Stock Offer") each
Stockholder (the "New Common Stock
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Offerees") an opportunity to purchase any or all of its Pro Rata portion of such
New Common Stock on the same terms and conditions as the New Common Stock being
offered and, if such New Common Stock is to be issued as a part of a unit of
securities, Holding or Aetna Holdings, as the case may be, shall offer each such
New Common Stock Offeree an opportunity to purchase any or all of its Pro Rata
portion of such unit of securities (together with the New Common Stock, the "New
Common Stock Units") on the same terms and conditions as the New Common Stock
being offered; provided, however, that in the event any New Common Stock Offeree
does not purchase any or all of its Pro Rata portion of either New Common Stock
or New Common Stock Units, as the case may be, the other New Common Stock
Offerees shall have the right to purchase such portion, Pro Rata, until all of
such New Common Stock or New Common Stock Units, as the case may be, are
purchased or until such other New Common Stock Offerees or the CVC Stockholders
do not desire to purchase any more New Common Stock or New Common Stock Units,
as the case may be. Holding shall make such New Common Stock Offer by providing
each New Common Stock Offeree with a notice (the "New Common Stock Notice")
setting forth (i) each New Common Stock Offeree's Pro Rata portion of such New
Common Stock or of such New Common Stock Units, as the case may be, (ii) the
consideration to be paid for each share of New Common Stock or each unit of New
Common Stock Units, as the case may be, and (iii) all other material terms of
such New Common Stock Offer.
Notwithstanding the foregoing, if the issuance and sale is to any Sofedit
Stockholder, any Sofedit Institutional Stockholder or CVC and is in conjunction
with the borrowing of money from such Sofedit Stockholder, Sofedit Institutional
Stockholder, CVC or any of their respective Affiliates or the guaranteeing of
debt of Holding or its Subsidiaries by such Sofedit Stockholder, Sofedit
Institutional Stockholder, CVC or such Affiliate, then no New Common Stock
Offeree shall have any preemptive rights as set forth herein unless such New
Common Stock Offeree purchases or participates, on a pro rata basis, in the
related financing or guarantee, as the case may be, on the same terms as such
Sofedit Stockholder, Sofedit Institutional Stockholder, CVC, or such Affiliate,
as the case may be.
In order for any New Common Stock Offerees to accept the New
Common Stock Offer, such New Common Stock Offeree shall on or before twenty (20)
days following its receipt of a New Common Stock Notice deliver written notice
of its acceptance ("Acceptance Notice") to Holding and the other New Common
Stock Offerees (the expiration of such twenty (20) days being referred to herein
as the "Acceptance Date"). The Acceptance Notice shall set forth the maximum
number of New Common Stock or New Common Stock Units, as the case may be, that
such New Common Stock Offeree wishes to purchase, including any number which
would be allocated to such New Common Stock Offeree in the event any other New
Common Stock Offeree does not purchase all or any portion of its Pro Rata
portion.
Within one hundred twenty (120) days following the Acceptance
Date, Holding or Aetna Holdings, as the case may be, (i) shall issue or sell New
Common Stock or New Common Stock Units, as the case may be, to each New Common
Stock Offeree who timely accepted such New Common Stock Offer upon the terms
specified in such New Common Stock Offer, if
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<PAGE> 32
applicable, and (ii) may issue or sell New Common Stock or New Common Stock
Units, as the case may be, to any other Person or Persons in an amount not to
exceed the aggregate amount offered pursuant to the New Common Stock Offer (less
the aggregate amount of shares of New Common Stock or units of New Common Stock
Units, as the case may be, issued or sold to New Common Stock Offerees pursuant
to the foregoing clause (i)) and for a price which equals or exceeds the price
per share of New Common Stock or per unit of New Common Stock Units, as the case
may be, specified in the New Common Stock Offer.
ARTICLE VII
MISCELLANEOUS
7.1 GOVERNING LAW. The construction, validity and
interpretation of this Agreement shall be governed and construed in accordance
with the domestic laws of the State of New York, without giving effect to any
choice of law or conflict of law provision or rule (whether of the State of New
York or any other jurisdiction) that would cause the application of the laws of
any jurisdiction other than the State of New York, except to the extent that the
General Corporation Law of the State of Delaware applies as a result of Holding
being incorporated in the State of Delaware, in which case the General
Corporation Law shall apply.
7.2 ENTIRE AGREEMENT; AMENDMENTS. This Agreement constitutes
the entire agreement of the parties with respect to the subject matter hereof
and may be amended, modified or supplemented only by a written instrument duly
executed by Holding, the Sofedit Stockholders and the Aetna Stockholders;
provided that Holding shall provide twenty (20) days' prior written notice of
any such amendment not governed by the next proviso; and provided further that
(a) any amendment, modification or supplement that adversely and
disproportionately affects, in their capacity as Stockholders, the Sofedit
Institutional Stockholders, the Institutional Stockholders, Former Management
Stockholders, Management Stockholders or Additional Stockholders, as the case
may be, shall also require the consent of the Sofedit Institutional
Stockholders, the Institutional Stockholders, Former Management Stockholders,
Management Stockholders or Additional Stockholders, respectively, and (b) any
amendment, modification or supplement that adversely and disproportionately
affects less than all of the Sofedit Stockholders, Sofedit Institutional
Stockholders, Aetna Stockholders or Additional Stockholders, as the case may be,
shall also require the consent of the Sofedit Stockholders, Sofedit
Institutional Stockholders, Aetna Stockholders, or Additional Stockholders so
affected. In the event of an amendment, modification or supplement of this
Agreement in accordance with its terms, the Stockholders shall cause the Board
to meet within thirty (30) calendar days following such amendment, modification
or supplement, or as soon thereafter as is practicable for the purpose of
adopting any amendment to the Certificate and By-Laws of Holding that may be
required as a result of such amendment, modification or supplement to this
Agreement, and, if required, proposing such amendments to the stockholders
entitled to vote thereon. The Stockholders
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<PAGE> 33
hereby agree to vote their shares of voting Common Stock to approve such
amendments to the Certificate and By-Laws of Holding.
7.3 TERM. This Agreement shall terminate upon the earliest to
occur of (i) a Qualifying Offering, (ii) a Sale of the Company pursuant to
clause (i) of the definition of "Sale of the Company", and (iii) upon the
distribution of any proceeds from a Sale of the Company to the Stockholders
pursuant to clause (ii) of the definition of "Sale of the Company".
7.4 CERTAIN ACTIONS. Unless otherwise expressly provided
herein, whenever any action is required under this Agreement by:
(i) the CVC Stockholders (as a group, as opposed to the
exercise by any such Stockholder of its individual rights hereunder),
it shall be by the affirmative vote of the holders of shares of Common
Stock representing more than fifty percent (50%) of the Common Stock
then held by the CVC Stockholders as a group, or as otherwise agreed in
writing by the CVC Stockholders as a group.
(ii) the Berkshire Stockholders (as a group, as opposed to the
exercise by any such Stockholder of its individual rights hereunder),
it shall be by the affirmative vote of the holders of shares of Common
Stock representing more than fifty percent (50%) of the Common Stock on
a Fully Diluted Basis then held by the Berkshire Stockholders, as a
group;
(iii) the Prudential Stockholders (as a group, as opposed to
the exercise by any such Stockholder of its individual rights
hereunder), it shall be by the affirmative vote of the holders of
shares of Common Stock representing more than fifty percent (50%) of
the Common Stock on a Fully Diluted Basis then held by the Prudential
Stockholders, as a group;
(iv) the Pruco Stockholders (as a group, as opposed to the
exercise by any such Stockholder of its individual rights hereunder),
it shall be by the affirmative vote of the holders of shares of Common
Stock representing more than fifty percent (50%) of the Common Stock on
a Fully Diluted Basis then held by the Pruco Stockholders, as a group;
(v) the Former Management Stockholders (as a group, as opposed
to the exercise by any such Stockholder of its individual rights
hereunder), it shall be by the affirmative vote of the holders of
shares of Common Stock representing more than fifty percent (50%) of
the Common Stock on a Fully Diluted Basis then held by the Former
Management Stockholders, as a group;
(vi) the Sofedit Stockholders (as a group, as opposed to the
exercise by any such Stockholder of its individual rights hereunder),
it shall be by the affirmative vote of the holders of shares of Common
Stock representing more than fifty percent (50%) of the
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<PAGE> 34
Common Stock then held by the Sofedit Stockholders as a group, or as
otherwise agreed in writing by the Sofedit Stockholders as a group;
(vii) the Sofedit Institutional Stockholders (as a group, as
opposed to the exercise by any such Stockholder of its individual
rights hereunder), it shall be by the affirmative vote of the holders
of shares of Common Stock representing more than fifty percent (50%) of
the Common Stock then held by the Sofedit Institutional Stockholders as
a group, or as otherwise agreed in writing by the Sofedit Institutional
Stockholders as a group;
(viii) the Aetna Stockholders (as a group, as opposed to the
exercise by any such Stockholder of its individual rights hereunder),
it shall be by the affirmative vote of the holders of shares of Common
Stock representing more than fifty percent (50%) of the Common Stock
then held by the Aetna Stockholders as a group, or as otherwise agreed
in writing by the Aetna Stockholders as a group;
(ix) the State of Michigan Stockholders (as a group, as
opposed to the exercise by any such Stockholder of its individual
rights hereunder), it shall be by the affirmative vote of the holders
of shares of Common Stock representing more than fifty percent (50%) of
the Common Stock on a Fully Diluted Basis then held by the State of
Michigan Stockholders as a group;
(x) the Management Stockholders (as a group, as opposed to the
exercise by any such Stockholder of its individual rights hereunder),
it shall be by the Management Representative; or
(xi) the Additional Stockholders (as a group, as opposed to
the exercise by any such Stockholder of its individual rights
hereunder), it shall be by the affirmative vote of the holders of
shares of Common Stock representing more than fifty percent (50%) of
the Common Stock on a Fully Diluted Basis then held by the Additional
Stockholders as a group.
7.5 INSPECTION. For so long as this Agreement shall remain in
effect, this Agreement shall be made available for inspection by any Stockholder
at the principal executive offices of Holding.
7.6 RECAPITALIZATION, EXCHANGES, ETC., AFFECTING RESTRICTED
SECURITIES. The provisions of this Agreement shall apply, to the full extent set
forth herein with respect to the Restricted Securities, to any and all shares of
Holding capital stock or any successor or assign of Holding (whether by merger,
consolidation, sale of assets, or otherwise, including shares issued by a parent
corporation in connection with a triangular merger) which may be issued in
respect of, in exchange for, or in substitution of, Restricted Securities and
shall be appropriately adjusted
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<PAGE> 35
for any stock dividends, splits, reverse splits, combinations, reclassifications
and the like occurring after the date hereof.
7.7 COMPLIANCE WITH REGULATIONS. Whenever a Stockholder is
entitled to purchase Restricted Securities pursuant to the provisions of this
Agreement, any closing time period specified in such provision shall be tolled
until any necessary governmental approval is received including without
limitation, approval under the Hart-Scott-Rodino Antitrust Improvements Act of
1976, provided that such tolling period shall not exceed sixty (60) days.
7.8 WAIVER. No waiver by any party of any term or condition of
this Agreement, in one or more instances, shall be valid unless in writing, and
no such waiver shall be deemed to be construed as a waiver of any subsequent
breach or default of the same or similar nature.
7.9 SUCCESSORS AND ASSIGNS. Except as otherwise expressly
provided herein, this Agreement shall be binding upon and inure to the benefit
of the parties hereto and their respective heirs, personal representatives,
successors and permitted assigns (including without limitation transferees of
Restricted Securities); provided, however, that (a) nothing contained herein
shall be construed as granting any Stockholder the right to transfer any of its
Restricted Securities except in accordance with this Agreement, (b) any Third
Party which acquires Restricted Securities in accordance with Section 2.5 shall
be bound by and have the benefits of the provisions of Sections 2.1, 2.2, 2.4,
2.5, 2.6, 2.7, Article III, Sections 5.1, 5.5, 5.6 and 6.1 and Article VII, to
the same extent as the transferor of such Restricted Securities, but the
remaining provisions of this Agreement shall not inure to the benefit of, and
the provisions of Article IV shall not apply to the Restricted Securities of,
such Third Party, (c) none of the provisions of this Agreement shall apply to
any Transfer of Restricted Securities subsequent to a Transfer pursuant to a
registered public offering under the Securities Act made in accordance with the
Securities Act, (d) notwithstanding any Transfer of Restricted Securities by any
Stockholder to any other Stockholder, only the provisions of this Agreement
which are expressly applicable to CVC Stockholders, Sofedit Stockholders,
Sofedit Institutional Stockholders, Berkshire Stockholders, Prudential
Stockholders, Pruco Stockholders, State of Michigan Stockholders, Former
Management Stockholders or Additional Stockholders, respectively, shall be
applicable to such CVC Stockholders, Sofedit Stockholders, Sofedit Institutional
Stockholders, Berkshire Stockholders, Prudential Stockholders, Pruco
Stockholders, State of Michigan Stockholders, Former Management Stockholders,
Management Stockholders or Additional Stockholders, respectively, and to such
Restricted Securities in the hands of such CVC Stockholders, Sofedit
Stockholders, Sofedit Institutional Stockholders, Berkshire Stockholders,
Prudential Stockholders, Pruco Stockholders, State of Michigan Stockholders,
Former Management Stockholder, Management Stockholder or Additional Stockholder,
respectively.
7.10 REMEDIES. In the event of a breach by any party to this
Agreement of its obligations under this Agreement, any party injured by such
breach, in addition to being entitled to exercise all rights granted by law,
including recovery of damages and costs (including
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<PAGE> 36
reasonable attorneys' fees), will be entitled to specific performance of its
rights under this Agreement. The parties agree that the provisions of this
Agreement shall be specifically enforceable, it being agreed by the parties that
the remedy at law, including monetary damages, for breach of any such provision
will be inadequate compensation for any loss and that any defense in any action
for specific performance that a remedy at law would be adequate is waived.
7.11 INCOME TAX WITHHOLDING. Each Management Stockholder and
Additional Stockholder authorizes Holding to make any required withholding from
such Management Stockholder's (or the Additional Stockholder, as the case may
be) compensation for the payment of any and all income taxes and other sums that
may be due any governmental authority as a result of the receipt by either the
Management Stockholders of compensation income under Section 83 of the Internal
Revenue Code of 1986, as amended, or similar provisions of state or local law,
if required by applicable law, and agrees, if requested by Holding, and in lieu
of all or a portion of such withholding, to pay Holding in a lump sum such
amounts as Holding may be required to remit to any governmental authority on
behalf of Management Stockholder (or Additional Stockholder, as the case may be)
in respect of any such taxes and other sums.
7.12 INVALID PROVISIONS. If any provision of this Agreement is
held to be illegal, invalid or unenforceable under any present or future law,
and if the rights or obligations of any party hereto under this Agreement will
not be materially and adversely affected thereby, (a) such provision will be
fully severable, (b) this Agreement will be construed and enforced as if such
illegal, invalid or unenforceable provision had never comprised a part hereof,
(c) the remaining provisions of this Agreement will remain in full force and
effect and will not be affected by the illegal, invalid or unenforceable
provision or by its severance here from and (d) in lieu of such illegal, invalid
or unenforceable provision, there will be added automatically as a part of this
Agreement a legal, valid and enforceable provision as similar in terms to such
illegal, invalid or unenforceable provision as may be possible.
7.13 HEADINGS. The headings used in this Agreement have been
inserted for convenience of reference only and do not define or limit the
provisions hereof.
7.14 FURTHER ASSURANCES. Each party hereto shall cooperate and
shall take such further action and shall execute and deliver such further
documents as may be reasonably requested by any other party in order to carry
out the provisions and purposes of this Agreement. Any provision herein that by
its terms requires a Subsidiary of Holding to take any action or refrain from
taking any action shall be interpreted to require Holding to cause such
Subsidiary to take such action or to refrain from taking such action,
respectively, to the fullest extent permitted by law.
7.15 GENDER. Whenever the pronouns "he" or "his" are used
herein, they shall also be deemed to mean "she" or "hers" or "it" or "its"
whenever applicable. Words in the
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<PAGE> 37
singular shall be read and construed as though in the plural, and words in the
plural shall be construed as though in the singular in all cases where they
would so apply.
7.16 COUNTERPARTS. This Agreement may be executed in any
number of counterparts, each of which will be deemed an original, but all of
which together will constitute one and the same instrument.
7.17 NOTICES. (a) All notices, requests and other
communications hereunder must be in writing and will be deemed to have been duly
given only if delivered personally against written receipt or by facsimile
transmission or mailed (by registered or certified mail, return receipt
requested) or by reputable overnight courier, fee prepaid to the parties at the
following addresses or facsimile numbers:
(i) If to any CVC Stockholder, to:
Citicorp Venture Capital, Ltd.
399 Park Avenue
New York, New York 10043
Facsimile No.: 212-888-2940
Attn: David Y. Howe
with a copy to:
Morgan, Lewis & Bockius LLP
101 Park Avenue
New York, New York 10178
Facsimile No.: 212-309-6273
Attn: Philip H. Werner
(ii) If to any Berkshire Stockholder, to:
Berkshire Partners
One Boston Place, Suite 3425
Boston, MA 02108
Facsimile No.: 617-227-6105
Attn: Russell L. Epker
with a copy to:
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<PAGE> 38
Goodwin, Procter & Hoar LLP
Exchange Place
Boston, MA 02109-2881
Facsimile No.: 617-523-1231
Attn: Stephen W. Carr, P.C.
(iii) If to any Prudential Stockholder, to:
The Prudential Insurance Company of America
c/o Financial Restructuring Group
Gateway Center Four
100 Mulberry Street
Newark, NJ 07102
Facsimile No.: 201-802-2662
Attn: Managing Director
with copies to:
Willkie Farr & Gallagher
One Citicorp Center
153 East 53rd Street
New York, NY 10022
Facsimile No.: 212-821-8111
Attn: Duncan J. Stewart
The Prudential Insurance Company of America
c/o Law Department
Gateway Center Four
100 Mulberry Street
Newark, NJ 07102
Facsimile No.: 201-802-3853
Attn: Jack Pfeilsticker
(iv) If to any Pruco Stockholder, to
Pruco Life Insurance Company
c/o Financial Restructuring Group
Gateway Center Four
100 Mulberry Street
Newark, NJ 07102
Facsimile No.: 201-802-2662
Attn: Managing Director
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<PAGE> 39
with copies to:
Willkie Farr & Gallagher
One Citicorp Center
153 East 53rd Street
New York, NY 10022
Facsimile No.: 212-821-8111
Attn: Duncan J. Stewart
Pruco Life Insurance Company
c/o Law Department
Gateway Center Four
100 Mulberry Street
Newark, NJ 07102
Facsimile No.: 201-802-3853
Attn: Jack Pfeilsticker
(v) If to any State of Michigan Stockholder, to
Michigan Department of Treasury
450 West Allegan
Lansing, MI 48922
Facsimile No.: 517-335-3668
Attn: Thomas Hufnagel
with a copy to:
Willkie Farr & Gallagher
One Citicorp Center
153 East 53rd Street
New York, NY 10022
Facsimile No.: 212-821-8111
Attn: Duncan J. Stewart
(vi) If to the Aetna Stockholders, to the Persons set
forth in clauses (i) through (v) above and, in the
case of the Former Management Stockholders and the
Management Stockholders, to the address of such
Person set forth in the stock records of Holding
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<PAGE> 40
(vii) If to the Sofedit Stockholders, to:
MS Acquisition Corp.
c/o Aetna Industries, Inc.
24331 Sherwood Avenue
Centerline, MI 48015-0067
Facsimile No.: 816-759-2209
Attn: Francis Barge
(viii) If to the Sofedit Institutional Stockholders, to:
MS Acquisition Corp.
c/o Aetna Industries, Inc.
24331 Sherwood Avenue
Centerline, MI 48015-0067
Facsimile No.: 816-759-2209
Attn: Francis Barge
(ix) If to Holding, to:
MS Acquisition Corp.
c/o Aetna Industries, Inc.
24331 Sherwood Avenue
Centerline, MI 48015-0067
Facsimile No.: 816-759-2209
Attn: Chief Executive Officer
with copies to:
Citicorp Venture Capital, Ltd.
399 Park Avenue - 14th Floor
New York, NY 10043
Facsimile No.: 212-888-2940
Attn: David Y. Howe
and
Morgan, Lewis & Bockius LLP
101 Park Avenue
New York, NY 10178
Facsimile No.: 212-309-6273
Attn: Philip H. Werner
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<PAGE> 41
(x) If to a Stockholder other than an Aetna Stockholder,
Sofedit Stockholder or Sofedit Institutional
Stockholder, to the address of such Person set forth
in the stock records of Holding.
(b) All such notices, requests and other communications will
(w) if delivered personally to the address as provided in this Section 7.17 be
deemed given upon delivery, (x) if delivered by facsimile transmission to the
facsimile number as provided in this Section 7.17 be deemed given upon receipt,
(y) if delivered by mail in the manner described above to the address as
provided in this Section 7.17, be deemed given upon the earlier of the third
business day following mailing or upon receipt and (z) if delivered by reputable
overnight courier to the address as provided in this Section 7.17, be deemed
given upon the earlier of the first business day following the date sent by such
reputable overnight courier or upon receipt (in each case regardless of whether
such notice, request or other communication is received by any other Person to
whom a copy of such notice is to be delivered pursuant to this Section 7.17).
Any party from time to time may change its address, facsimile number or other
information for the purpose of notices to that party by giving notice specifying
such change to the other parties hereto.
7.18 CONSENT TO JURISDICTION AND SERVICE OF PROCESS.
EACH OF THE PARTIES HERETO, OTHER THAN THE STATE OF MICHIGAN,
CONSENTS TO THE JURISDICTION OF ANY STATE OR FEDERAL COURT LOCATED WITHIN THE
COUNTY OF NEW YORK, STATE OF NEW YORK, AND IRREVOCABLY AGREES THAT ALL ACTIONS
OR PROCEEDINGS RELATING TO THIS AGREEMENT MAY BE LITIGATED IN SUCH COURTS. EACH
SUCH PARTY ACCEPTS FOR ITSELF AND IN CONNECTION WITH ITS PROPERTIES, GENERALLY
AND UNCONDITIONALLY, THE NONEXCLUSIVE JURISDICTION OF THE AFORESAID COURTS AND
WAIVES ANY DEFENSE OF FORUM NON CONVENIENS, AND IRREVOCABLY AGREES TO BE BOUND
BY ANY JUDGMENT RENDERED THEREBY IN CONNECTION WITH THIS AGREEMENT. EACH SUCH
PARTY FURTHER IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OUT OF ANY OF THE
AFOREMENTIONED COURTS IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF COPIES
THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO THE PARTY AT THE
ADDRESS SPECIFIED IN THIS AGREEMENT, SUCH SERVICE TO BECOME EFFECTIVE FIFTEEN
(15) DAYS AFTER SUCH MAILING. NOTHING HEREIN SHALL IN ANY WAY BE DEEMED TO LIMIT
THE ABILITY OF ANY PARTY HERETO TO SERVE ANY SUCH LEGAL PROCESS, SUMMONS,
NOTICES AND DOCUMENTS IN ANY OTHER MANNER PERMITTED BY APPLICABLE LAW OR TO
OBTAIN JURISDICTION OVER OR TO BRING ACTIONS, SUITS OR PROCEEDINGS AGAINST ANY
OF THE OTHER PARTIES HERETO IN SUCH OTHER JURISDICTIONS, AND IN SUCH MANNER, AS
MAY BE PERMITTED BY ANY APPLICABLE LAW.
\
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<PAGE> 42
7.19 WAIVER OF JURY TRIAL.
EACH PARTY, OTHER THAN THE STATE OF MICHIGAN, HEREBY WAIVES
ITS RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON
OR ARISING OUT OF THIS AGREEMENT. EACH SUCH PARTY ALSO WAIVES ANY BOND OR SURETY
OR SECURITY UPON SUCH BOND WHICH MIGHT, BUT FOR THIS WAIVER, BE REQUIRED OF SUCH
PARTY. THE SCOPE OF THIS WAIVER IS INTENDED TO BE ALL-ENCOMPASSING OF ANY AND
ALL DISPUTES THAT MAY BE FILED IN ANY COURT AND THAT RELATE TO THE SUBJECT
MATTER OF THIS AGREEMENT, INCLUDING WITHOUT LIMITATION CONTRACT CLAIMS, TORT
CLAIMS, BREACH OF DUTY CLAIMS AND ALL OTHER COMMON LAW AND STATUTORY CLAIMS.
EACH SUCH PARTY WARRANTS AND REPRESENTS THAT IT HAS REVIEWED THIS WAIVER WITH
ITS LEGAL COUNSEL AND THAT IT KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL
RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL. THIS WAIVER IS IRREVOCABLE,
MEANING THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING, AND THIS WAIVER
SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS
TO THIS AGREEMENT. IN THE EVENT OF LITIGATION, THIS AGREEMENT MAY BE FILED AS A
WRITTEN CONSENT TO A TRIAL BY THE COURT.
7.20 NO OTHER UNDERSTANDING. Each of the Sofedit Stockholders
and the Sofedit Institutional Stockholders represents, warrants and covenants
that no agreement or understanding (whether written or oral) exists or shall
exist between or among any Sofedit Stockholder, on the one hand, and any Sofedit
Institutional Stockholder, on the other hand, with respect to the voting of any
shares of capital stock of Holding.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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<PAGE> 43
IN WITNESS WHEREOF, the parties hereto have executed and
delivered this Agreement as of the date first above written.
MS ACQUISITION CORP.
By:___________________________
Name:
Title:
AETNA HOLDINGS, INC.
By:___________________________
Name:
Title:
FORMER SOFEDIT INVESTORS
CEFI
By:___________________________
Name:
Title:
YACESE S.A.
By:___________________________
Name:
Title:
H.H.A. WAY
By:___________________________
Name:
Title:
[Signature Page to Stockholders Agreement]
<PAGE> 44
FORMER SOFEDIT INSTITUTIONAL
INVESTORS
COMPAGNIE DE FINANCEMENT
INDUSTRIEL S.A.
By:___________________________
Name:
Title:
JAFCO I SAINT HONORE S.A.
By:___________________________
Name:
Title:
JAFCO II SAINT HONORE S.A.
By:___________________________
Name:
Title:
TOCQUEVILLE EUROPE L.P.
By:___________________________
Name:
Title:
BIDASSOA INVESTISSEMENTS S.A.
By:___________________________
Name:
Title:
[Signature Page to Stockholders Agreement]
<PAGE> 45
CININDEV
By:___________________________
Name:
Title:
CFJPE S.A.
By:___________________________
Name:
Title:
OBERON S.A.
By:___________________________
Name:
Title:
EURO SYNERGIES S.A.
By:___________________________
Name:
Title:
VENTADOUR INVESTISSEMENTS S.A.
By:___________________________
Name:
Title:
COGEPA S.A.
By:___________________________
Name:
Title:
[Signature Page to Stockholders Agreement]
<PAGE> 46
SOFEDICI S.C.
By:___________________________
Name:
Title:
APAX PARTNER CLUB S.A.
By:___________________________
Name:
Title:
ALTAMIR S.A.
By:___________________________
Name:
Title:
APAX FRANCE IV S.A.
By:___________________________
Name:
Title:
CVC
CITICORP VENTURE CAPITAL, LTD.
By:___________________________
Name:
Title:
[Signature Page to Stockholders Agreement]
<PAGE> 47
CVC CO-INVESTORS
___________________________________
WILLIAM T. COMFORT
___________________________________
RICHARD M. CASHIN
___________________________________
DAVID F. THOMAS
___________________________________
THOMAS F. McWILLIAMS
___________________________________
DAVID Y. HOWE
___________________________________
MICHAEL A. DELANEY
___________________________________
JOHN WEBER
___________________________________
JAMES URRY
___________________________________
JOSEPH SILVESTRI
___________________________________
CHARLES CORPENING
[Signature Page to Stockholders Agreement]
<PAGE> 48
PRUDENTIAL
THE PRUDENTIAL INSURANCE
COMPANY OF AMERICA
By:________________________________
Name:
Title:
PRUCO
PRUCO LIFE INSURANCE COMPANY
By:________________________________
Name:
Title:
BERKSHIRE FUND
THE BERKSHIRE FUND,
A LIMITED PARTNERSHIP
By: BERKSHIRE CAPITAL
ASSOCIATES,
LIMITED PARTNERSHIP
Its General Partner
By:_________________________________
A General Partner
BERKSHIRE GROUP
___________________________________
BRADLEY M. BLOOM
___________________________________
J. CHRISTOPHER CLIFFORD
___________________________________
RUSSELL L. EPKER
[Signature Page to Stockholders Agreement]
<PAGE> 49
___________________________________
CARL FERENBACH
___________________________________
RICHARD K. LUBIN
___________________________________
LEA ANNE S. OTTINGER
___________________________________
KEVIN T. CALLAGHAN
STATE OF MICHIGAN
STATE TREASURER OF THE
STATE OF MICHIGAN, AS
CUSTODIAN OF THE PUBLIC
SCHOOL EMPLOYEES'
RETIREMENT SYSTEM; STATE
EMPLOYEES' RETIREMENT
SYSTEM; MICHIGAN STATE
POLICE RETIREMENT SYSTEM;
JUDGES' RETIREMENT SYSTEM;
AND PROBATE JUDGES'
RETIREMENT SYSTEM
By:________________________________
Name:
Title:
[Signature Page to Stockholders Agreement]
<PAGE> 50
FORMER MANAGEMENT GROUP
___________________________________
JEROME SINGER
___________________________________
DOUGLAS A. THAL
___________________________________
ROBERT J. KLEIN
___________________________________
STEVEN SINGER
MANAGEMENT GROUP
___________________________________
UELI SPRING
___________________________________
HAROLD BROWN
___________________________________
GARY EASTERLY
___________________________________
EDWARD LAWSON
___________________________________
DANIEL PIERCE
[Signature Page to Stockholders Agreement]
<PAGE> 51
___________________________________
DAVID THAL
___________________________________
RALPH BREDENBECK
[Signature Page to Stockholders Agreement]
<PAGE> 52
CVC CO-INVESTORS, CONTINUED
CCT PARTNERS III, L.P.,
by its General Partner
By:____________________________
Name:
Title:
[Signature Page to Stockholders Agreement]
<PAGE> 53
ANNEX I
<TABLE>
<CAPTION>
Preferred Stock Common Stock
Holder Promissory Note (Series) (Series)
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CEFI - 86,713(B) 963,433(A-1)
YACESE S.A. - 46,768(B) 427,760(A-1)
H.H.A. WAY S.A. - 25,422(B) 282,525(A-1)
Compagnie de Financement Industriel 2,562,055 13,052(B) 236,793(A-2)
Jafco I Saint Honore S.A. 980,488 4,995(B) 55,494(A-2)
Jafco II Saint Honore S.A. 902,132 4,596(B) 51,084(A-2)
Toqueville Europe LP 980,488 4,995(B) 55,494(A-2)
Bidassoa Investissements S.A. 1,070,702 5,454(B) 60,639(A-2)
Cinindev 837,695 4,267(B) 47,409(A-2)
CFJPE S.A. 3,957,009 20,158(B) 223,999(A-2)
Oberon S.A. 270,639 1,379(B) 15,344(A-2)
Euro Synergies S.A. 3,703,381 18,867(B) 209,574(A-2)
Ventadour Investissements S.A. 738,717 3,763(B) 41,804(A-2)
Cogepa S.A. 2,409,981 12,277(B) 136,439(A-2)
Sofedit S.C. 773,256 3,939(B) 43,734(A-2)
Apax Partner Club FPCR 36,601 187(B) 2,113(A-2)
Altamir SCA 387,659 1,975(B) 21,959(A-2)
Apax France IV FCPR 2,197,078 11,193(B) 124,403(A-2)
Fracis Barge 2,501,769 - -
Colette Barge 2,731,609 - -
Jerome Barge 5,222,547 - -
Felix Domenech 2,819,331 - -
Josette Demenech 1,690,636 - -
Cecile Domenech 564,348 - -
- ---------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 54
<TABLE>
<CAPTION>
Preferred Stock Common Stock
Holder Promissory Note (Series) (Series)
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Sebastien Domeneeh 564,348 - -
JRMH 3,065,531 - -
Citicorp Venture Capital, Ltd. - 81,000(A) 634,015(A-3)
William T. Comfort - 2,385(A) 18,668(A-3)
Richard M. Cashin - 2,385(A) 18,668(A-3)
David F. Thomas - 2,340(A) 18,316(A-3)
Thomas F. McWilliams - 675(A) 5,283(A-3)
David Howe - 540(A) 4,227(A-3)
Michael Delaney - 315(A) 2,466(A-3)
John Weber - 135(A) 1,057(A-3)
James Urry - 135(A) 1,057(A-3)
Joseph Silvestri - 45(A) 352(A-3)
Charles Corpening - 45(A) 352(A-3)
The Prudential Insurance Company of
America - 8,321.96(A) 65,175(A-3)
Pruco Life Insurance Company - 626.32(A) 4,905(A-3)
The Berkshire Fund, a Limited Partnership - 7,614.63(A) 59,636(A-3)
Bradley M. Bloom - 61(A) 478(A-3)
J. Christopher Clifford - 61(A) 478(A-3)
Russell L. Epker - 61(A) 478(A-3)
Carl Ferenbach - 61(A) 478(A-3)
Richard K. Lubin - 61(A) 478(A-3)
Lea Anne S. Ottinger - 27.66(A) 217(A-3)
Kevin T. Callaghan - 14.82(A) 116(A-3)
State of Michigan - 3,457.38(A) 27,077(A-3)
- ---------------------------------------------------------------------------------------------------
</TABLE>
2
<PAGE> 55
<TABLE>
<CAPTION>
Preferred Stock Common Stock
Holder Promissory Note (Series) (Series)
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Jerome Singer - 1,083.79(A) 8,488(A-3)
Douglas A. Thal - 1,083.79(A) 8,488(A-3)
Robert J. Klein - 650.28(A) 5,093(A-3)
Steven Singer - 433.52(A) 3,395(A-3)
Ueli Spring - 650.27(A) 5,093(A-3)
Harold Brown - 234.10(A) 1,834(A-3)
Gary Easterly - 125.72(A) 984(A-3)
Edward Lawson - 125.72(A) 984(A-3)
Daniel Pierce - 125.72(A) 984(A-3)
David Thal - 59.61(A) 467(A-3)
Ralph Bredenbeck - 27.09(A) 212(A-3)
- ---------------------------------------------------------------------------------------------------
</TABLE>
3
<PAGE> 56
Exhibit A
Form of Joinder Agreement
Attention: Chief Executive Officer
Gentlemen:
In consideration of the [transfer][issuance] to the
undersigned of [a Warrant to purchase] _____ shares of [Class A] [Class B]
Common Stock, par value $.01 per share, [Describe any other security being
transferred] of MS Acquisition Corp., a Delaware corporation (the "Company"),
the undersigned [represents that it is a Permitted Transferee of [Insert name of
transferor] and]* agrees that, as of the date written below, [he] [she] [it]
shall become a party to[, and a Permitted Transferee as defined in,]* that
certain Stockholders Agreement dated as of April __, 1998, as such agreement may
have been amended from time to time (the "Agreement"), among the Company and the
persons named therein, and [as a Permitted Transferee shall be fully bound by,
and subject to, all of the covenants, terms and conditions of the Agreement that
were applicable to the undersigned's transferor,]* [shall be fully bound by, and
subject to, the provisions of Sections 2.1, 2.2, 2.4, 2.5, 2.6, 2.7 and 3.2 of
the Agreement that were applicable to the undersigned's transferor,]** [shall be
fully bound by, and subject to, all of the covenants, terms and conditions of
the Agreement,]*** as though an original party thereto and shall be deemed a
[CVC Stockholder] [Management Stockholder] [Institutional Stockholder] [Former
Management Stockholder] [Additional Stockholder] [Sofedit Stockholder] [Sofedit
Institutional Stockholder] for [all]* [solely for]** [all]*** purposes thereof.
Executed as of the day of , .
TRANSFEREE: __________________
Address: _____________________
_____________________
ACKNOWLEDGED AND ACCEPTED:
MS ACQUISITION CORP.
By: _______________________
Name:
Title:
* Include if transferee is a Permitted Transferee
** Include if transferee is a Third Party
*** Include if transferee is an Additional Stockholder
<PAGE> 1
EXHIBIT 4.3
EXECUTION COPY
MS ACQUISITION CORP.
REGISTRATION RIGHTS AGREEMENT RELATING TO THE
COMMON STOCK OF MS ACQUISITION CORP.,
DATED AS OF APRIL 9, 1998
<PAGE> 2
TABLE OF CONTENTS
Page
RECITALS .................................................................1
ARTICLE I
DEFINITIONS......................................................2
1.1 Defined Terms in Stockholders Agreement.................2
1.2 Definitions.............................................2
1.3 Cross-References........................................4
ARTICLE II
DEMAND REGISTRATIONS.............................................5
2.1 Requests for Registration...............................5
2.2 Long-Form Registrations.................................6
2.3 Short-Form Registrations................................6
2.4 Effective Registration Statement........................6
2.5 Priority on Demand Registrations........................7
2.6 Selection of Underwriters...............................8
2.7 Black-Out Rights and Postponement.......................8
ARTICLE III
PIGGYBACK REGISTRATIONS..........................................9
3.1 Right to Piggyback......................................9
3.2 Piggyback Expenses......................................9
3.3 Priority on Primary Registrations.......................9
3.4 Priority on Secondary Registrations....................10
ARTICLE IV...............................................................11
HOLDBACK AGREEMENTS.............................................11
4.1 Holdback...............................................11
4.2 Company Holdback.......................................11
ARTICLE V................................................................11
REGISTRATION PROCEDURES.........................................11
ARTICLE VI...............................................................15
REGISTRATION EXPENSES...........................................15
6.1 Fees Generally.........................................15
6.2 Counsel Fees...........................................16
- i -
<PAGE> 3
Page
ARTICLE VII..............................................................16
UNDERWRITTEN OFFERINGS..........................................16
7.1 Demand Underwritten Offerings..........................16
7.2 Incidental Underwritten Offerings......................16
ARTICLE VIII.............................................................17
INDEMNIFICATION.................................................17
8.1 Indemnification by the Company.........................17
8.2 Indemnification by a Selling Stockholder...............18
8.3 Indemnification Procedure..............................19
8.4 Underwriting Agreement.................................20
8.5 Contribution...........................................20
8.6 Periodic Payments......................................21
ARTICLE IX...............................................................21
RULE 144 .......................................................21
ARTICLE X................................................................21
PARTICIPATION IN UNDERWRITTEN REGISTRATIONS.....................21
ARTICLE XI...............................................................22
MISCELLANEOUS...................................................22
11.1 No Inconsistent Agreements.............................22
11.2 Adjustments Affecting Registrable Securities...........22
11.3 Specific Performance...................................22
11.4 Actions Taken; Amendments and Waivers..................22
11.5 Successors and Assigns.................................23
11.6 Notices................................................23
11.7 Headings. ............................................23
11.8 Gender.................................................24
11.9 Invalid Provisions.....................................24
11.10 Governing Law..........................................24
11.11 Counterparts...........................................24
11.12 Consent to Jurisdiction and Service of Process.........24
11.13 Waiver of Jury Trial...................................25
Exhibit A - Original Registration Rights Agreement
Exhibit B - Form of Registration Rights Joinder Agreement
Exhibit C - Waiver Agreement
- ii -
<PAGE> 4
REGISTRATION RIGHTS AGREEMENT (this "Agreement") dated as of April 9,
1998 by and among, MS Acquisition Corp., a Delaware corporation (the "Company"),
each of the Persons whose name appears under the heading "Former Sofedit
Investor" on the signature pages hereto (individually, a "Former Sofedit
Investor", and collectively, the "Former Sofedit Investors"), each of the
Persons whose name appears under the heading "Former Sofedit Institutional
Investor" on the signature pages hereto (individually, a "Former Sofedit
Institutional Investor", and collectively, the "Former Sofedit Institutional
Investors"), Citicorp Venture Capital, Ltd., a New York corporation ("CVC"), and
each of the Persons whose name appears under the heading "CVC Co-investors" on
the signature pages hereto (together with CVC, the "CVC Investors", and
individually a "CVC Investor"), The Berkshire Fund, a Massachusetts limited
partnership ("Berkshire"), and each of the individuals listed under the heading
"Berkshire Group" on the signature pages hereto (individually, a "Berkshire
Group Member" and collectively, with Berkshire, the "Berkshire Group"), The
Prudential Insurance Company of America, a New Jersey mutual insurance company
("Prudential"), Pruco Life Insurance Company, an Arizona corporation ("Pruco"),
the various retirement systems of the State of Michigan listed on the signature
pages hereto under the heading "State of Michigan" (the "State of Michigan"; and
together with Berkshire, the Berkshire Group, Prudential and Pruco, the
"Institutional Investors"), each of the individuals whose name appears under the
heading "Former Management Group" on the signature pages hereto (individually, a
"Former Management Group Member" and collectively, the "Former Management
Group"), and each of the individuals whose name appears under the heading
"Management Group" on the signature pages hereto (individually, a "Management
Group Member" and collectively, the "Management Group". Capitalized terms used
and not otherwise defined herein have the respective meanings ascribed thereto
in Article I.
RECITALS
WHEREAS, the Company has executed and delivered that certain
Registration Rights Agreement dated August 13, 1996 among the Company and the
parties named on the signature pages thereto with respect to the capital stock
of the Company (the "Original Registration Rights Agreement"), a copy of which
is attached hereto as Exhibit A;
WHEREAS, the Original Registration Rights Agreement remains in
full force and effect as of the date hereof, subject to the waiver of certain
rights thereunder by certain of the parties hereto pursuant to a waiver
agreement (the "Waiver Agreement"), a copy of which is attached hereto as
Exhibit B.
WHEREAS, contemporaneously with the execution and delivery of
this Agreement, the parties hereto are executing and delivering a Stockholders
Agreement among the parties hereto and dated the date hereof (as amended,
modified or supplemented from time to time, the "Stockholders Agreement"), and
in connection therewith, the Company has agreed to provide the other parties
hereto with the registration rights set forth in this Agreement;
2
<PAGE> 5
NOW THEREFORE, in connection with the Stockholders Agreement
and for other good and valuable consideration, the receipt and sufficiency of
which is hereby acknowledged, the parties hereto hereby agree as follows:
ARTICLE I
DEFINITIONS
1.1 DEFINED TERMS IN STOCKHOLDERS AGREEMENT.
Unless otherwise defined herein, defined terms used in this
Agreement shall have the meanings set forth in the Stockholders Agreement.
1.2 DEFINITIONS.
The following capitalized terms, when used in this Agreement,
have the respective meanings set forth below (such definitions to be equally
applicable to both singular and plural forms of the terms defined):
"Additional Stockholder" means any Person who has executed a
Joinder Agreement pursuant to the Stockholders Agreement, and its direct and
indirect Permitted Transferees, so long as any such Person shall hold (either
directly or indirectly) Registrable Securities, and only to the extent that (i)
the Company has granted such person registration rights as a Stockholder
hereunder and (ii) such Person has executed a Registration Rights Joinder
Agreement.
"Commission" means the Securities and Exchange Commission and
any other similar or successor agency of the federal government administering
the Securities Act or the Exchange Act.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended from time to time, and the rules and regulations of the Commission
thereunder.
"Initial Public Offering" means the first time a registration
statement filed under the Securities Act with the Commission respecting an
offering, whether primary or secondary, of Common Stock of the Company (or
securities convertible, exercisable or exchangeable for or into Common Stock of
the Company or rights to acquire Common Stock of the Company or such
securities), which is underwritten on a firmly committed basis, is declared
effective and the securities so registered are issued and sold.
"Registrable Securities" means, at any time, the shares of
Common Stock then issued and outstanding or which are issuable upon conversion,
exercise or exchange of the Series A Preferred Stock, the Series B Preferred
Stock, the Options or any other Equity
3
<PAGE> 6
Equivalents and any securities into which such Common Stock shall have been
changed or any securities resulting from any reclassification or
recapitalization of such Common Stock; provided, that "Registrable Securities"
shall not include any shares of Common Stock obtained or transferred pursuant to
an effective registration statement under the Securities Act or in a Rule 144
Transaction, and provided, further, that "Registrable Securities" shall not
include any shares of Common Stock which are held by a Person who is not a
Stockholder.
"Registration Rights Joinder Agreement" means the Registration
Rights Joinder Agreement in the form attached hereto as Exhibit C.
"Required CVC Stockholders" means, as of the date of any
determination thereof, CVC and CVC Stockholders that hold Registrable Securities
representing at such time at least a majority (by number of shares) of the
Registrable Securities, on a fully diluted basis, held by all CVC Stockholders.
"Required Institutional Stockholders" means, as of the date of
any determination thereof, Institutional Stockholders that hold Registrable
Securities representing at such time at least a majority (by number of shares)
of the Registrable Securities, on a fully diluted basis, held by all
Institutional Stockholders.
"Required Sofedit Stockholders" means, as of the date of any
determination thereof, the Sofedit Stockholders that hold Registrable Securities
representing at such time at least a majority (by number of shares) of the
Registrable Securities, on a fully diluted basis, held by all Sofedit
Stockholders.
"Required Sofedit Institutional Stockholders" means, as of the
date of any determination thereof, the Sofedit Institutional Stockholders that
hold Registrable Securities representing at such time at least a majority (by
number of shares) of the Registrable Securities, on a fully diluted basis, held
by all Sofedit Institutional Stockholders.
"Rule 144 Transaction" means a transfer of Restricted
Securities (A) complying with Rule 144 under the Securities Act as such Rule is
in effect on the date of such transfer (but not including a sale other than
pursuant to a "brokers transaction" as defined in clauses (1) and (2) of
paragraph (g) of such Rule as in effect on the date hereof) and (B) occurring at
a time when Restricted Securities are registered pursuant to Section 12 of the
Exchange Act (or any successor to such Section).
"Stockholders" means the Sofedit Stockholders, Sofedit
Institutional Stockholders, CVC Stockholders, Institutional Stockholders, the
Former Management Stockholders, the Management Stockholders, the Additional
Stockholders and each other Person party to the Original Registration Rights
Agreement and any transferee of any of the foregoing persons who has acquired
Registrable Securities in accordance with the Stockholders Agreement and who has
executed a Registration Rights Joinder Agreement.
4
<PAGE> 7
1.3 CROSS-REFERENCES.
The following defined terms, when used in this Agreement,
shall have the meaning ascribed to them in the corresponding Sections of this
Agreement listed below:
"Berkshire" -- Preamble
"Berkshire Group" -- Preamble
"Berkshire Group Member" -- Preamble
"Black-Out Notice" -- Section 2.7(b)
"Company" -- Preamble
"Controlling Person" -- Section 8.1
"CVC" -- Preamble
"CVC Co-investors" -- Preamble
"CVC Investor" -- Preamble
"Demand Registrations" -- Section 2.1
"Former Management Group" -- Preamble
"Former Management Group Member" -- Preamble
"Former Sofedit Institutional Investors" -- Preamble
"Former Sofedit Investor" -- Preamble
"Institutional Investors" -- Preamble
"Long-Form Registrations" -- Section 2.1
"Management Group" -- Preamble
"Management Group Member" -- Preamble
"Original Registration Rights Agreement" -- Recitals
"Piggyback Holders" -- Section 3.1
"Piggyback Registration" -- Section 3.1
"Pruco" -- Preamble
"Prudential" -- Preamble
"Registration Expenses" -- Section 6.1
"Requesting Investor" -- Section 2.1(a)
"Short-Form Registrations" -- Section 2.1
"State of Michigan" -- Preamble
"Stockholders Agreement" -- Recitals
"Waiver Agreement" -- Recitals
5
<PAGE> 8
ARTICLE II
DEMAND REGISTRATIONS
2.1 REQUESTS FOR REGISTRATION.
(a) As provided in Sections 2.2 and 2.3, from and after the
date that is ninety-one (91) days after the closing of an Initial Public
Offering, the Required Sofedit Stockholders, the Required Sofedit Institutional
Stockholders, the Required CVC Stockholders or the Required Institutional
Stockholders (each of which being, a "Requesting Investor") shall be entitled to
request registration under the Securities Act of all or part of their
Registrable Securities (i) on Form S-1 or any similar long-form registration
("Long-Form Registrations"), and (ii) on Form S-2 or S-3 or any similar
short-form registration ("Short-Form Registrations") if the Company qualifies to
use such short form; provided, however, that (a) prior to the date that is one
(1) year and ninety-one (91) days after the closing of an Initial Public
Offering, the Sofedit Institutional Stockholders shall not be entitled to
request registration as a Requesting Investor with respect to more than
thirty-five percent (35%) of the Registrable Securities held by the Sofedit
Institutional Stockholders as a group on the date hereof and (b) prior to the
date that is two (2) years and ninety-one (91) days after the closing of an
Initial Public Offering, the Sofedit Institutional Stockholders shall not be
entitled to request registration as a Requesting Investor with respect to more
than seventy percent (70%) of the Registrable Securities held by the Sofedit
Institutional Stockholders on the date hereof; provided, further, that the above
proviso shall in no way limit the rights of the Sofedit Institutional
Stockholders under Article III or the rights of the Sofedit Institutional
Stockholders to request inclusion in any Demand Registration requested by the
Sofedit Stockholders or the CVC Stockholders under this Section 2.1(a). Within
ten (10) days after receipt of any such request, the Company will give written
notice of such request to all Stockholders holding Registrable Securities.
Thereafter, the Company will use all reasonable efforts to effect the
registration under the Securities Act on the form requested by the applicable
Requesting Investors and will include in such registration all Registrable
Securities with respect to which the Company has received written requests for
inclusion therein by any Stockholder within thirty (30) days after the receipt
of the Company's notice, subject to the provisions of Section 2.5. All
registrations requested pursuant to this Section 2.1 are referred to herein as
"Demand Registrations."
(b) Any Requesting Investor that requests a Demand
Registration under this Article II may, at any time prior to the effective date
of the registration statement relating to such registration, revoke such request
by providing written notice to the Company; provided, however, that
notwithstanding such revocation, such Demand Registration shall be deemed a
request for purposes of Section 2.2 or 2.4 unless, after consultation with the
Company and any proposed underwriter, the Requesting Investor in good faith
determines that the Registrable Securities that it has requested to be
registered would not be sold pursuant to such Demand Registration within a
reasonable amount of time or at a price acceptable to such Requesting Investor.
6
<PAGE> 9
(c) Any request for a Demand Registration pursuant to this
Article II shall specify the number of shares of Registrable Securities proposed
to be sold by the Requesting Investor and the intended method of disposition
thereof.
(d) Notwithstanding the provisions of Section 2.1(a), (i) the
Required Sofedit Stockholders or (ii) the Required CVC Stockholders may request
that the Company effect an Initial Public Offering with gross proceeds to the
Company in the amount requested by the Required Sofedit Stockholders or the
Required CVC Stockholders, as the case may be, and the Company shall use all
reasonable efforts to effect such Initial Public Offering within ninety (90)
days after receipt of such request. No such request shall count toward the limit
on Long-Form Registrations provided in Section 2.2.
2.2 LONG-FORM REGISTRATIONS.
The Required Sofedit Stockholders will be entitled to request
pursuant to this Article II up to three (3) Long-Form Registrations, the
Required Sofedit Institutional Stockholders will be entitled to request pursuant
to this Article II up to three (3) Long-Form Registrations, the Required CVC
Stockholders will be entitled to request pursuant to this Article II up to three
(3) Long-Form Registrations, and the Required Institutional Stockholders will be
entitled to request pursuant to this Article II one (1) Long-Form Registration.
The Company will pay all Registration Expenses in connection with any such
Long-Form Registrations. All Long-Form Registrations (unless otherwise requested
by the relevant Requesting Investor) shall be underwritten registrations.
2.3 SHORT-FORM REGISTRATIONS.
In addition to the Long-Form Registrations provided pursuant
to Section 2.2, each of the Required Sofedit Stockholders, the Required Sofedit
Institutional Stockholders and the Required CVC Stockholders will be entitled to
request an unlimited number of Short-Form Registrations, and the Required
Institutional Stockholders will be entitled to request three (3) Short-Form
Registrations. The Company will pay all Registration Expenses in connection with
any Short-Form Registrations. Demand Registrations will be Short-Form
Registrations whenever the Company is qualified to use any applicable short
form. Once the Company has become subject to the reporting requirements of the
Exchange Act, the Company will use its reasonable best efforts to make
Short-Form Registrations available for the sale of Registrable Securities.
2.4 EFFECTIVE REGISTRATION STATEMENT.
No Demand Registration shall be deemed to have been effected
for purposes of Section 2.2:
7
<PAGE> 10
(i) unless a registration statement with respect thereto has
become effective;
(ii) if, after it has become effective, any stop order,
injunction or other order or requirement of the Commission or
other governmental agency or court for any reason, affecting
any of the securities covered by such registration statement,
is issued or threatened by the Commission or other
governmental agency or court;
(iii) if the Company delivers a Black-Out Notice with respect
to such requested registration;
(iv) if the conditions to closing specified in the purchase
agreement or underwriting agreement entered into in connection
with such registration are not satisfied by reason of a
failure by or inability of the Company to satisfy any of such
conditions, or the occurrence of an event outside the
reasonable control of the relevant Requesting Investor;
(v) the revocation notice described in the proviso to Section
2.1(b) has been delivered by the Requesting Investor; or
(vi) if the Requesting Investor is not able to register and
sell at least ninety percent (90%) of the amount of
Registrable Securities which were requested to be included by
it in such registration;
provided that the Company will pay all Registration Expenses in connection with
any registration if pursuant to this Section 2.4 the registration is deemed not
to have been effected.
2.5 PRIORITY ON DEMAND REGISTRATIONS.
(a) The Company will not include in any Demand Registration
any securities which are not Registrable Securities without the written consent
of the Required Sofedit Stockholders (if the Required Sofedit Stockholders have
requested such Demand Registration), the Required Sofedit Institutional
Stockholders (if the Required Sofedit Institutional Stockholders have requested
such Demand Registration), the Required CVC Stockholders (if the Required CVC
Stockholders have requested such Demand Registration) or the Required
Institutional Stockholders (if the Required Institutional Stockholders have
requested such Demand Registration).
(b) If the Requesting Investors and other holders of
Registrable Securities request Registrable Securities to be included in a Demand
Registration that is an underwritten
8
<PAGE> 11
offering and the managing underwriters advise the Company in writing that in
their opinion the number of Registrable Securities requested to be included
exceeds the number of Registrable Securities that can be sold in such offering
within a price range acceptable to the Requesting Investors who have made such
Demand Registration, then the Company will include any securities to be sold in
such Demand Registration in the following order and priority:
(A) (i) first, the Registrable Securities owned by the
Requesting Investors that have requested such
registration, provided, that if the managing
underwriters determine in good faith that a lower
number of Registrable Securities should be included,
then only that lower number of Registrable Securities
requested to be included by the Requesting Investors
shall be included in such registration, and the
Requesting Investors shall participate in the
registration pro rata based upon their total
ownership, on a fully diluted basis, of Registrable
Securities, (ii) second, the number of Registrable
Securities requested to be included by other
Stockholders (whether requested pursuant to this
Agreement or the Original Registration Rights
Agreement), which, in the opinion of such
underwriters, can be sold, pro rata among the
respective holders based upon their total ownership,
on a fully diluted basis, of Registrable Securities
and provided, further, that if the managing
underwriters determine in good faith that a lower
number of Registrable Securities held by Management
Stockholders (as defined herein and as defined in the
Original Registration Rights Agreement) and/or
Additional Stockholders (as defined herein and as
defined in the Original Registration Rights
Agreement) than such pro rata portion should be
included, then such lower number shall be included
and, as a result thereof, a greater number of
Registrable Securities owned by the other
Stockholders may be sold; (iii) third, the securities
the Company proposes to sell and (iv) fourth, any
securities other than Registrable Securities to be
sold by Persons other than the Company included
pursuant to Section 2.5(a) hereof.
(B) Any Person other than Stockholders including any
securities in such registration pursuant to Article
II hereof must pay its share of the Registration
Expenses as provided in Article VI hereof.
2.6 SELECTION OF UNDERWRITERS.
The Requesting Investors that have requested such registration
will have the right to select the underwriters and the managing underwriter to
administer any Demand Registration (which underwriters and managing underwriter
shall be reasonably acceptable to the Company).
9
<PAGE> 12
2.7 BLACK-OUT RIGHTS AND POSTPONEMENT.
(a) The Company shall not be required to provide a Demand
Registration if the Company, within the 90-day period preceding the date of a
request for a Demand Registration, has effected a registration of securities in
which the Requesting Investors were entitled to participate without cutback
pursuant to Demand Registration rights under Article II hereof or Piggyback
Registration rights under Article III hereof.
(b) The Company may, upon written notice (a "Black-Out
Notice") to each Requesting Investor requesting a Demand Registration, require
such Requesting Investor to withdraw such Demand Registration upon the good
faith determination by the Company that such postponement is necessary (i) to
avoid disclosure of material non-public information or (ii) as a result of a
pending material financing or acquisition transaction. In each case, each of the
Requesting Investors may not request another Demand Registration for a period of
up to sixty (60) days, as specified by the Company in such Black-Out Notice. The
Company may only give a Black-Out Notice where the giving of such notice has
been specifically approved by the Company's Board of Directors. Upon receipt of
a Black-Out Notice, the Demand Registration shall be deemed to be rescinded and
retracted and shall not be counted as a Demand Registration for any purpose. The
Company may not deliver more than one Black-Out Notice in any twelve-month
period.
ARTICLE III
PIGGYBACK REGISTRATIONS
3.1 RIGHT TO PIGGYBACK.
Whenever the Company proposes (other than pursuant to a Demand
Registration or an Initial Public Offering (unless otherwise agreed by the
Company)) to register any of its equity securities under the Securities Act
(whether for the Company's own account (other than on Forms S-4 or S-8 or any
successor forms), or for the account of any other Person) (a "Piggyback
Registration"), the Company will give prompt written notice to each Stockholder
(the "Piggyback Holders") of its intention to effect such a registration, and
such notice shall offer the Piggyback Holders the opportunity to register on the
same terms and conditions such number of shares of Registrable Securities as
such Piggyback Holder may request. The Company will include in such registration
all Registrable Securities with respect to which the Company has received
written requests for inclusion therein within 30 days after the receipt by such
Piggyback Holder of the Company's notice, subject to the provisions of Sections
3.3 and 3.4.
3.2 PIGGYBACK EXPENSES.
The Registration Expenses of the holders of Registrable
Securities will be paid by the Company in all Piggyback Registrations.
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3.3 PRIORITY ON PRIMARY REGISTRATIONS.
If a Piggyback Registration is an underwritten primary
registration on behalf of the Company, and the managing underwriters advise the
Company in writing that in their opinion the number of securities requested to
be included in such registration are such that the success of the offering would
be materially and adversely affected, the Company will include any securities to
be sold in such registration in the following order: (i) first, the securities
the Company proposes to sell, (ii) second, the Registrable Securities requested
to be included in such registration by the Piggyback Holders, provided that, if
the managing underwriters in good faith determine that a lower number of
Registrable Securities should be included, then the Company shall be required to
include in such registration only that lower number of Registrable Securities,
and the Piggyback Holders shall participate in the registration pro rata based
upon their total ownership, on a fully diluted basis, of Registrable Securities,
provided, further, that if the managing underwriters determine in good faith
that a lower number of Registrable Securities held by Management Stockholders
(as defined herein and as defined in the Original Registration Rights Agreement)
and/or Additional Stockholders (as defined herein and as defined in the Original
Registration Rights Agreement) than such pro rata portion should be included,
then such lower number shall be included and, as a result thereof, a greater
number of Registrable Securities owned by the other Stockholders shall be
included and (iii) third, other securities requested to be included in such
registration.
3.4 PRIORITY ON SECONDARY REGISTRATIONS.
If a Piggyback Registration is an underwritten secondary
registration on behalf of holders of the Company's securities and the managing
underwriters advise the Company in writing that in their opinion the number of
securities requested to be included in such registration are such that the
success of the offering would be materially and adversely affected, the Company
will include any securities to be sold in such registration in the following
order: (i) first, the securities of such holders, (ii) second, the Registrable
Securities requested to be included in such registration by the Piggyback
Holders pursuant to Section 3.1 hereof, provided that, if the managing
underwriters in good faith determine that a lower number of Registrable
Securities should be included, then the Company shall be required to include in
such registration only that lower number of Registrable Securities, and the
Piggyback Holders shall participate in the registration pro rata based upon
their total ownership, on a fully diluted basis, of Registrable Securities,
provided, further, that if the managing underwriters determine in good faith
that a lower number of Registrable Securities held by Management Stockholders
(as defined herein and as defined in the Original Registration Rights Agreement)
and/or Additional Stockholders (as defined herein and as defined in the Original
Registration Rights Agreement) than such pro rata portion should be included,
then such lower number shall be included and, as a result thereof, a greater
number of Registrable Securities owned by the other Stockholders may be sold and
(iii) third, other securities requested to be included in such registration.
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ARTICLE IV
HOLDBACK AGREEMENTS
4.1 HOLDBACK.
Each holder of Registrable Securities agrees not to effect any
public sale or distribution of Registrable Securities, or any securities
convertible, exchangeable or exercisable for or into such securities, during the
seven days prior to, and the 90-day period beginning on, the effective date of
an Initial Public Offering or any underwritten Demand Registration or any
underwritten Piggyback Registration in which such holder had an opportunity to
participate without cutback under Article III hereof (in each case except as
part of such underwritten registration), unless the managing underwriters of the
registered public offering otherwise agree.
4.2 COMPANY HOLDBACK.
The Company agrees (i) not to effect any public sale or
distribution of its equity securities, or any securities convertible,
exchangeable or exercisable for or into such securities, during the fourteen
(14) days prior to, and during the 90-day period beginning on, the effective
date of any underwritten Demand Registration or any underwritten Piggyback
Registration in which holders of Registrable Securities are selling stockholders
(except as part of such underwritten registration or pursuant to registrations
on Forms S-4 or S-8 or any successor form), unless the managing underwriters of
such underwritten Demand Registration or underwritten Piggyback Registration
otherwise agree, and (ii) to use all reasonable efforts to cause each holder of
at least five percent (5%) (on a fully diluted basis) of its equity securities,
or any securities convertible, exchangeable or exercisable for or into such
securities, to agree not to effect any public sale or distribution of any such
securities during such period (except as part of such underwritten registration,
if otherwise permitted), unless the managing underwriters of such underwritten
Demand Registration or underwritten Piggyback Registration otherwise agree.
ARTICLE V
REGISTRATION PROCEDURES
Whenever the Stockholders have requested that any Registrable
Securities be registered pursuant to this Agreement, the Company will use all
reasonable efforts to effect the registration and the sale of such Registrable
Securities in accordance with the intended method of disposition thereof, and
pursuant thereto the Company will as expeditiously as possible (or, in the case
of clause (p) below, will not):
(a) prepare and file with the Commission a registration
statement with respect to such Registrable Securities (such registration
statement to include all information which the holders of the Registrable
Securities to be registered thereby shall reasonably request) and use all
reasonable efforts to cause such registration statement to become effective,
provided that as
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promptly as practicable before filing a registration statement or prospectus or
any amendments or supplements thereto, the Company will (i) furnish to counsel
selected by the holders of a majority (by number of shares) of the Registrable
Securities covered by such registration statement (and, if any Sofedit
Stockholders or any CVC Stockholders have requested inclusion of any Registrable
Securities pursuant to Article II or Article III, to one counsel for such
Sofedit Stockholders and to one counsel for such CVC Stockholders) copies of all
such documents proposed to be filed, and the Company shall not file any such
documents to which such counsel shall have reasonably objected on the grounds
that such document does not comply in all material respects with the
requirements of the Securities Act, and (ii) notify each holder of Registrable
Securities covered by such registration statement of (x) any request by the
Commission to amend such registration statement or amend or supplement any
prospectus or (y) any stop order issued or threatened by the Commission, and
take all reasonable actions required to prevent the entry of such stop order or
to remove it if entered;
(b) (i) prepare and file with the Commission such amendments
and supplements to such registration statement and the prospectus used in
connection therewith as may be necessary to keep such registration statement
effective until all Registrable Securities covered by such Registration
Statement are sold in accordance with the intended plan of distribution set
forth in such Registration Statement and (ii) comply with the provisions of the
Securities Act with respect to the disposition of all securities covered by such
registration statement during such period in accordance with the intended
methods of disposition by the sellers thereof set forth in such registration
statement;
(c) furnish to each seller such number of conformed copies of
such registration statement, each amendment and supplement thereto, the
prospectus included in such registration statement (including each preliminary
prospectus and, in each case, including all exhibits thereto and documents
incorporated by reference therein) and such other documents as such seller may
reasonably request in order to facilitate the disposition of the Registrable
Securities owned by such seller;
(d) use its best efforts to register or qualify such
Registrable Securities under such other securities or blue sky laws of such
jurisdictions as any seller thereof shall reasonably request, to keep such
registration or qualification in effect for so long as such registration
statement remains in effect and do any and all other acts and things which may
be reasonably necessary or advisable to enable such seller to consummate the
disposition in such jurisdictions of the Registrable Securities owned by such
seller, provided, however, that the Company will not be required to (i) qualify
generally to do business in any jurisdiction where it would not otherwise be
required to qualify but for this clause (d), (ii) subject itself to taxation in
any such jurisdiction or (iii) consent to general service of process in any such
jurisdiction;
(e) furnish to each seller of Registrable Securities a signed
copy, addressed to such seller (and the underwriters, if any) of an opinion of
counsel for the Company or special counsel to the selling stockholders, dated
the effective date of such registration statement (and, if
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such registration statement includes an underwritten public offering, dated the
date of the closing under the underwriting agreement), reasonably satisfactory
in form and substance to such seller, covering substantially the same matters
with respect to such registration statement (and the prospectus included
therein) as are customarily covered in opinions of issuer's counsel delivered to
the underwriters in underwritten public offerings, and such other legal matters
as the seller (or the underwriters, if any) may reasonably request;
(f) notify each seller of Registrable Securities, at any time
when a prospectus relating thereto is required to be delivered under the
Securities Act, of the occurrence of any event known to the Company as a result
of which the prospectus included in such registration statement, as then in
effect, contains an untrue statement of a material fact or omits to state any
fact required to be stated therein or necessary to make the statements therein
not misleading in light of the circumstances under which they were made, and, at
the request of any such seller, the Company will prepare and furnish to such
seller a reasonable number of copies of a supplement to or an amendment of such
prospectus as may be necessary so that, as thereafter delivered to the
purchasers of such Registrable Securities, such prospectus shall not include an
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein not misleading in
the light of the circumstances under which they were made and in the event the
Company shall give such notice, the Company shall extend the period during which
such registration statement shall be maintained effective by the number of days
during the period from and including the date of the giving of such notice to
such seller to the date when the Company made available to such seller an
appropriately amended or supplemented prospectus;
(g) cause all such Registrable Securities to be listed on each
securities exchange on which similar securities issued by the Company are then
listed and to enter into such customary agreements as may be required in
furtherance thereof, including without limitation listing applications and
indemnification agreements in customary form;
(h) provide a transfer agent and registrar for all such
Registrable Securities not later than the effective date of such registration
statement;
(i) enter into such customary arrangements and take all such
other actions as the holders of a majority (by number of shares) of the
Registrable Securities being sold or the underwriters, if any, reasonably
request in order to expedite or facilitate the disposition of such Registrable
Securities (including without limitation use of its best efforts to effect a
stock split or a combination of shares);
(j) make available for inspection by any seller of Registrable
Securities, any underwriter participating in any disposition pursuant to such
registration statement and any attorney, accountant or other agent retained by
any such seller or underwriter, all financial and other records, pertinent
corporate documents and properties of the Company, and cause the Company's
officers, directors, employees and independent accountants to supply all
information
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reasonably requested by any such seller, underwriter, attorney, accountant or
agent in connection with such registration statement;
(k) subject to other provisions hereof, use all reasonable
efforts to cause such Registrable Securities covered by such registration
statement to be registered with or approved by such other governmental agencies
or authorities or self-regulatory organizations as may be necessary to enable
the sellers thereof to consummate the disposition of such Registrable
Securities;
(l) use all reasonable efforts to obtain a "comfort" letter,
dated the effective date of such registration statement (and, if such
registration includes an underwritten offering, dated the date of the closing
under the underwriting agreement), signed by the independent public accountants
who have certified the Company's financial statements, addressed to each seller,
and to the underwriters, if any, covering substantially the same matters with
respect to such registration statement (and the prospectus included therein) and
with respect to events subsequent to the date of such financial statements, as
are customarily covered in accountants' letters delivered to the underwriters in
underwritten public offerings of securities and such other financial matters as
such seller (or the underwriters, if any) may reasonably request;
(m) otherwise use all reasonable efforts to comply with all
applicable rules and regulations of the Commission and make available to its
security holders, in each case as soon as practicable, an earnings statement
covering a period of at least twelve months, beginning with the first month
after the effective date of the registration statement, which earnings statement
shall satisfy the provisions of Section 11(a) of the Securities Act;
(n) permit any holder of Registrable Securities, if such
holder determines, in its sole judgment, exercised in good faith, that it might
be deemed to be a controlling person of the Company (within the meaning of the
Securities Act or the Exchange Act), to participate in the preparation of any
registration statement covering such holder's Registrable Securities and to
include therein material, furnished to the Company in writing, which in the
reasonable judgment of such holder should be included and which is reasonably
acceptable to the Company;
(o) use all reasonable efforts to obtain the lifting at the
earliest possible time of any stop order suspending the effectiveness of any
registration statement or of any order preventing or suspending the use of any
preliminary prospectus;
(p) at any time file or make any amendment to a registration
statement, or any amendment of or supplement to a prospectus (including
amendments of the documents incorporated by reference into the prospectus), of
which each seller of Registrable Securities or the managing underwriters shall
not have previously been advised and furnished a copy or to which any sellers of
Registrable Securities, the managing underwriters, or counsel for such sellers
or for the underwriters shall reasonably object;
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(q) make such representations and warranties (subject to
appropriate disclosure schedule exceptions) to sellers of Registrable Securities
and the underwriters, if any, in form, substance and scope as are customarily
made by issuers to underwriters and selling holders, as the case may be, in
underwritten public offerings of substantially the same type; and
(r) if any proposed registration statement refers to any
holder by name or otherwise as the holder of any securities of the Company then
(whether or not such holder is or might be deemed to be a controlling person of
the Company), (i) the Company shall be required at the request of such holder to
insert therein language, in form and substance reasonably satisfactory to such
holder, the Company and the managing underwriters, to the effect that the
holding by such holder of such securities is not to be construed as a
recommendation by such holder of the investment quality of the Company's
securities covered thereby and that such holding does not imply that such holder
will assist in meeting any future financial requirements of the Company, or (ii)
in the event that such reference to such holder by name or otherwise is not
required by the Securities Act, any similar Federal or state statute, or any
rule or regulation of any other regulatory body having jurisdiction over the
offering, then in force, the Company shall be required at the request of such
holder to delete the reference to such holder.
ARTICLE VI
REGISTRATION EXPENSES
6.1 FEES GENERALLY.
All expenses incident to the Company's performance of or
compliance with this Agreement, including without limitation internal expenses
(including without limitation all salaries and expenses of its officers and
employees performing legal or accounting duties), the expense of any annual
audit or quarterly review, the expense of any liability insurance, the expenses
and fees for listing the securities to be registered on each securities exchange
on which similar securities issued by the Company are then listed, all
registration and filing fees, fees and expenses of compliance with securities or
blue sky laws (including without limitation reasonable fees and disbursements of
counsel in connection with blue sky qualifications of the Registrable
Securities), printing expenses, messenger and delivery expenses, and fees and
disbursements of counsel for the Company and all independent certified public
accountants, underwriters (excluding discounts and commissions) and other
Persons retained by the Company (all such expenses being herein called
"Registration Expenses") shall be borne as provided for in Sections 2.2, 2.3,
2.4, 2.5, 3.2 and this Article VI; provided, that each Stockholder shall pay any
underwriting fees, discounts or commissions attributable to the sale of its
Registrable Securities.
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6.2 COUNSEL FEES.
In connection with each Demand Registration, the Company will
reimburse the Requesting Investor for such Demand Registration for the
reasonable fees and disbursements of one counsel chosen by the relevant
Requesting Investor.
ARTICLE VII
UNDERWRITTEN OFFERINGS
7.1 DEMAND UNDERWRITTEN OFFERINGS.
If requested by the underwriters for any underwritten
offerings of Registrable Securities pursuant to a Demand Registration, the
Company will enter into an underwriting agreement with such underwriters for
such offering, such agreement to be satisfactory in substance and form to a
majority (by number of shares) of holders of Registrable Securities being
offered and the underwriters, and to contain such representations and warranties
by the Company and such other terms as are generally included in agreements of
this type, including without limitation indemnities customarily included in such
agreements. The holders of the Registrable Securities will cooperate in good
faith with the Company in the negotiation of the underwriting agreement. The
holders of Registrable Securities to be distributed by such underwriters may be
parties to such underwriting agreement and may, at their option, require that
any or all of the representations and warranties by, and the other agreements on
the part of, the Company to and for the benefit of such underwriters shall also
be made to and for the benefit of such holders of Registrable Securities and
that any or all of the conditions precedent to the obligations of such
underwriters under such underwriting agreement be conditions precedent to the
obligations of such holders of Registrable Securities. The Company shall
cooperate with any such holder of Registrable Securities in order to limit any
representations or warranties to, or agreements with, the Company or the
underwriters to be made by such holder only to those representations, warranties
or agreements regarding such holder, such holder's Registrable Securities and
such holder's intended method of distribution and any other representation
required by applicable law.
7.2 INCIDENTAL UNDERWRITTEN OFFERINGS.
If the Company at any time proposes to register any of its
securities under the Securities Act as contemplated by Article III of this
Agreement and such securities are to be distributed by or through one or more
underwriters, the Company will, if requested by any holder of Registrable
Securities as provided in Article III of this Agreement, arrange for such
underwriters to include all the Registrable Securities to be offered and sold by
such holder, subject to the limitations set forth in Article III hereof, among
the securities to be distributed by such underwriters. The holders of
Registrable Securities to be distributed by such underwriters shall be parties
to the underwriting agreement between the Company and such underwriters, and
may, at their option, require that any or all of the representations and
warranties by, and the other
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agreements on the part of, the Company to and for the benefit of such
underwriters shall also be made to and for the benefit of such holders of
Registrable Securities and that any or all of the conditions precedent to the
obligations of such underwriters under such underwriting agreement be conditions
precedent to the obligations of such holders of Registrable Securities. The
Company shall cooperate with any such holder of Registrable Securities in order
to limit any representations or warranties to, or agreements with, the Company
or the underwriters to be made by such holder only to those representations,
warranties or agreements regarding such holder, such holder's Registrable
Securities and such holder's intended method of distribution and any other
representation required by applicable law.
ARTICLE VIII
INDEMNIFICATION
8.1 INDEMNIFICATION BY THE COMPANY.
The Company agrees to indemnify and hold harmless, to the
fullest extent permitted by law, each of the holders of any Registrable
Securities covered by such registration statement, each other Person, if any,
who controls such holder within the meaning of the Securities Act or the
Exchange Act (each such Person, a "Controlling Person"), and each of their
respective directors, officers, managers, partners, members, stockholders and
other Controlling Persons, as follows:
(i) against any and all loss, liability, claim, damage or
expense arising out of or based upon an untrue statement or
alleged untrue statement of a material fact contained in any
registration statement (or any amendment or supplement
thereto), including all documents incorporated therein by
reference, or in any preliminary prospectus or final or
summary prospectus (or any amendment or supplement thereto) or
the omission or alleged omission therefrom of a material fact
required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which
they were made, not misleading;
(ii) against any and all loss, liability, claim, damage and
expense to the extent of the aggregate amount paid in
settlement of any litigation, investigation or proceeding by
any governmental agency or body, commenced or threatened, or
of any claim whatsoever based upon any such untrue statement
or omission or any such alleged untrue statement or omission,
if such settlement is effected with the written consent of the
Company; and
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(iii) against any and all expense incurred by them in
connection with investigating, preparing or defending against
any litigation, or investigation or proceeding by any
governmental agency or body, commenced or threatened, or any
claim whatsoever based upon any such untrue statement or
omission or any such alleged untrue statement or omission, to
the extent that any such expense is not paid under clause (i)
or (ii) above;
provided, that this indemnity does not apply to any loss, liability, claim,
damage or expense to the extent arising out of an untrue statement or alleged
untrue statement or omission or alleged omission made in reliance upon and in
conformity with written information furnished to the Company by or on behalf of
such holder expressly for use in the preparation of any registration statement
(or any amendment or supplement thereto), including all documents incorporated
therein by reference, or in any preliminary prospectus or final or summary
prospectus (or any amendment or supplement thereto); and provided, further, that
the Company will not be liable to any holder under the indemnity agreement in
this Section 8.1, with respect to any preliminary prospectus or the final
prospectus or the final prospectus as amended or supplemented, as the case may
be, to the extent that any such loss, liability, claim, damage or expense of
such controlling Person or holder results from the fact that such holder sold
Registrable Securities to a Person to whom there was not sent or given, at or
prior to the written confirmation of such sale, a copy of the final prospectus
or of the final prospectus as then amended or supplemented, whichever is most
recent, if the Company has previously and timely furnished copies thereof to
such holder. Such indemnity shall remain in full force and effect regardless of
any investigation made by or on behalf of such holder, such Controlling Person
or any such director, officer, manager, partner, member, stockholder or other
Controlling Person and shall survive the transfer of such securities by such
seller.
8.2 INDEMNIFICATION BY A SELLING STOCKHOLDER.
In connection with any registration statement in which a
holder of Registrable Securities is participating, each such holder agrees to
indemnify and hold harmless (in the same manner and to the same extent as set
forth in Section 8.1 of this Agreement), to the extent permitted by law, the
Company, each Controlling Person of the Company, and each of their respective
directors, officers, managers, partners, members, stockholders and other
Controlling Persons, with respect to any statement or alleged statement in or
omission or alleged omission from such registration statement, any preliminary,
final or summary prospectus contained therein, or any amendment or supplement
thereto, if such statement or alleged statement or omission or alleged omission
was made in reliance upon and in conformity with written information that
relates only to such holder or the plan of distribution that is expressly
furnished to the Company by or on behalf of such holder for use in the
preparation of such registration statement, preliminary, final or summary
prospectus, amendment or supplement. Such indemnity shall remain in full force
and effect regardless of any investigation made by or on behalf of the Company,
such holder, or any of their respective Controlling Persons, as the case may be,
or any
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of their respective directors, officers, managers, partners, members,
stockholders or other Controlling Persons and shall survive the transfer of such
securities by such holder. With respect to each claim pursuant to this Section
8.2, each holder's maximum liability under this Section shall be limited to an
amount equal to the net proceeds actually received by such holder (after
deducting any underwriting discount and expenses) from the sale of Registrable
Securities being sold pursuant to such registration statement or prospectus by
such holder.
8.3 INDEMNIFICATION PROCEDURE.
Promptly after receipt by an indemnified party hereunder of
written notice of the commencement of any action or proceeding involving a claim
referred to in Section 8.1 or Section 8.2 of this Agreement, such indemnified
party will, if a claim in respect thereof is to be made against an indemnifying
party, give written notice to the latter of the commencement of such action;
provided that the failure of any indemnified party to give notice as provided
herein shall not relieve the indemnifying party of its obligations under Section
8.1 or Section 8.2 of this Agreement except to the extent that the indemnifying
party is actually prejudiced by such failure to give notice. In case any such
action is brought against an indemnified party, the indemnifying party will be
entitled to participate in and to assume the defense thereof, jointly with any
other indemnifying party similarly notified, to the extent that it may wish,
with counsel reasonably satisfactory to such indemnified party, and after notice
from the indemnifying party to such indemnified party of its election so to
assume the defense thereof, the indemnifying party will not be liable to such
indemnified party for any legal fees and expenses subsequently incurred by the
latter in connection with the defense thereof, unless in such indemnified
party's reasonable judgment an actual or potential conflict of interest between
such indemnified and indemnifying parties may exist in respect of such claim, in
which case the indemnifying party shall not be liable for the fees and expenses
of (i) more than one counsel (in addition to any local counsel) for all holders
of Registrable Securities, selected by a majority (by number of shares) of the
holders of Registrable Securities, or (ii) more than one counsel (in addition to
any local counsel) for the Company in connection with any one action or separate
but similar or related actions. An indemnifying party who is not entitled to
(pursuant to an immediately preceding sentence), or elects not to, assume the
defense of a claim will not be obligated to pay the fees and expenses of more
than one counsel (in addition to any local counsel) for all parties indemnified
by such indemnifying party with respect to such claim, unless in the reasonable
judgment of any indemnified party an actual or potential conflict of interest
may exist between such indemnified party and any other of such indemnified
parties with respect to such claim, in which event the indemnifying party shall
be obligated to pay the fees and expenses of such additional counsel or
counsels. The indemnifying party will not, without the prior written consent of
each indemnified party, settle or compromise or consent to the entry of any
judgment in any pending or threatened claim, action, suit or proceeding in
respect of which indemnification may be sought hereunder (whether or not such
indemnified party or any Person who controls such indemnified party is a party
to such claim, action, suit or proceeding), unless such settlement, compromise
or consent includes an unconditional release of such indemnified party from all
liability arising out of such claim, action, suit or proceeding. Notwithstanding
anything to the contrary set forth herein, and
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without limiting any of the rights set forth above, in any event any party will
have the right to retain, at its own expense, counsel with respect to the
defense of a claim.
8.4 UNDERWRITING AGREEMENT.
The Company and each holder of Registrable Securities
requesting registration shall provide for the foregoing indemnity (with
appropriate modifications) in any underwriting agreement with respect to any
required registration or other qualification of securities under any federal or
state law or regulation of any governmental authority.
8.5 CONTRIBUTION.
If the indemnification provided for in Sections 8.1 and 8.2 of
this Agreement is unavailable (for any reason other than a determination of its
inapplicability by a court of competent jurisdiction) to hold harmless an
indemnified party under such Sections, then each indemnifying party shall
contribute to the amount paid or payable by such indemnified party as a result
of the losses, claims, damages or liabilities referred to in Section 8.1 or
Section 8.2 of this Agreement in such proportion as is appropriate to reflect
the relative fault of the indemnifying party on the one hand, and the
indemnified party on the other, in connection with statements or omissions which
resulted in such losses, liabilities, claims, damages or expenses, as well as
any other relevant equitable considerations, including without limitation the
relative benefits received by each party from the offering of the securities
covered by such registration statement, the parties' relative knowledge and
access to information concerning the matter with respect to which the claim was
asserted and the opportunity to correct and prevent any statement or omission.
The relative fault shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by the indemnifying party or the indemnified party and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such untrue statements or omission. The parties hereto agree that it
would not be just and equitable if contributions pursuant to this Section 8.5
were to be determined by pro rata or per capita allocation (even if the
underwriters were treated as one entity for such purpose) or by any other method
of allocation which does not take account of the equitable considerations
referred to in the first and second sentences of this Section 8.5. The amount
paid by an indemnified party as a result of the losses, claims, damages or
liabilities referred to in the first sentence of this Section 8.5 shall be
deemed to include any legal or other expenses reasonably incurred by such
indemnified party in connection with investigating or defending any action or
claim (which shall be limited as provided in Section 8.3 of this Agreement if
the indemnifying party has assumed the defense of any such action in accordance
with the provisions thereof) which is the subject of this Section 8.5. Promptly
after receipt by an indemnified party under this Section 8.5 of notice of the
commencement of any action against such party in respect of which a claim for
contribution may be made against an indemnifying party under this Section 8.5,
such indemnified party shall notify the indemnifying party in writing of the
commencement thereof if the notice specified in Section 8.3 of this Agreement
has not been given with respect to such
21
<PAGE> 24
action; provided that the omission to so notify the indemnifying party shall not
relieve the indemnifying party from any liability which it may otherwise have to
any indemnified party under this Section 8.5, except to the extent that the
indemnifying party is actually prejudiced by such failure to give notice. The
Company and each holder of Registrable Securities agrees with each other and the
underwriters of the Registrable Securities, if requested by such underwriters,
(i) that the underwriters' portion of such contribution shall not exceed the
underwriting discount and (ii) that the amount of such contribution shall not
exceed an amount equal to the net proceeds actually received by such
indemnifying party from the sale of Registrable Securities in the offering to
which the losses, liabilities, claims, damages or expenses of the indemnified
parties relate. No Person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any Person who was not guilty of such fraudulent
misrepresentation.
8.6 PERIODIC PAYMENTS.
The indemnification required by this Article VIII shall be
made by periodic payments of the amount thereof during the course of the
investigation or defense, as and when bills are received or expense, loss,
damage or liability is incurred.
ARTICLE IX
RULE 144
If the Company shall have filed a registration statement
pursuant to the requirements of Section 12 of the Exchange Act or a registration
statement pursuant to the requirements of the Securities Act, the Company
covenants that it will file the reports required to be filed by it under the
Securities Act and the Exchange Act (or, if the Company is not required to file
such reports, it will, upon the request of any holder of Registrable Securities,
make publicly available other information), and it will take such further action
as any holder of Registrable Securities may reasonably request, all to the
extent required from time to time to enable such holder to sell shares of
Registrable Securities without registration under the Securities Act in
compliance with (i) Rule 144 under the Securities Act, as such Rule may be
amended from time to time, or (ii) any similar rule or regulation hereafter
adopted by the Commission. Upon the request of any holder of Registrable
Securities, the Company will deliver to such holder a written statement as to
whether it has complied with such requirements.
ARTICLE X
PARTICIPATION IN UNDERWRITTEN REGISTRATIONS
No Person may participate in any underwritten registration
hereunder unless such Person (i) agrees to sell such Person's securities on the
basis provided in any underwriting arrangements approved by the Person or
Persons entitled hereunder to approve such
22
<PAGE> 25
arrangements and (ii) completes and executes all questionnaires, powers of
attorney, indemnities, underwriting agreements, escrow agreements and other
documents reasonably required under the terms of such underwriting arrangements
and consistent with the provisions of this Agreement.
ARTICLE XI
MISCELLANEOUS
11.1 NO INCONSISTENT AGREEMENTS.
The Company represents and warrants that it does not currently
have, and covenants that it will not hereafter enter into, any agreement which
is inconsistent with, or would otherwise restrict the performance by the Company
of, its obligations hereunder.
11.2 ADJUSTMENTS AFFECTING REGISTRABLE SECURITIES.
The Company will not take any action, or fail to take any
action which it may properly take, with respect to its securities which would
adversely affect the ability of the holders of Registrable Securities to include
Registrable Securities in a registration undertaken pursuant to this Agreement
or which, to the extent within its control, would adversely affect the
marketability of such Registrable Securities in any such registration (including
without limitation effecting a stock split or a combination of shares).
11.3 SPECIFIC PERFORMANCE.
The parties hereto agree that irreparable damage would occur
in the event any provision of this Agreement was not performed in accordance
with the terms hereof and that the parties shall be entitled to specific
performance of the terms hereof, in addition to any other remedy at law or
equity; provided, however, that each of the parties agrees to provide the other
parties with written notice at least two business days prior to filing any
motion or other pleading seeking a temporary restraining order, a temporary or
permanent injunction, specific performance, or any other equitable remedy and to
give such other parties and their counsel a reasonable opportunity to attend and
participate in any judicial or administrative hearing or other proceeding held
to adjudicate or rule upon any such motion or pleading.
11.4 ACTIONS TAKEN; AMENDMENTS AND WAIVERS.
Except as otherwise provided herein, no modification,
amendment or waiver of any provision of this Agreement will be effective against
the Company or any holder of Registrable Securities, unless such modification,
amendment or waiver is approved in writing by a written instrument duly executed
by the Company, the CVC Stockholders and the Sofedit Stockholders; provided that
the Company shall provide twenty (20) days' prior written notice of any such
amendment not governed by the next proviso; and provided further that (a) any
23
<PAGE> 26
amendment, modification, or supplement that adversely and disproportionately
affects, in their capacity as holders of Registrable Securities, the Sofedit
Institutional Stockholders, the Institutional Stockholders, Former Management
Stockholders, Management Stockholders or Additional Stockholders, as the case
may be, shall also require the consent of the Sofedit Institutional
Stockholders, Institutional Stockholders, Former Management Stockholders,
Management Stockholders or Additional Stockholders, respectively, and (b) any
amendment, modification or supplement that adversely and disproportionately
affects less than all of the Sofedit Institutional Stockholders, Institutional
Stockholders, Former Management Stockholders, Management Stockholders or
Additional Stockholders, as the case may be, shall also require consent of the
Sofedit Institutional Stockholders, Institutional Stockholders, Former
Management Stockholders, Management Stockholders or Additional Stockholders so
affected. The failure of any party to enforce any of the provisions of this
Agreement will in no way be construed as a waiver of such provisions and will
not affect the right of such party thereafter to enforce each and every
provision of this Agreement in accordance with its terms.
11.5 SUCCESSORS AND ASSIGNS.
All covenants and agreements in this Agreement by or on behalf
of any of the parties hereto will bind and inure to the benefit of the
respective successors and assigns of the parties hereto whether so expressed or
not; in addition, whether or not any express assignment has been made, the
provisions of this Agreement which are for the benefit of purchasers or holders
of Registrable Securities are also for the benefit of, and enforceable by, any
subsequent holder of Registrable Securities, except to the extent reserved to or
by the transferor in connection with any such transfer; provided, that the
benefits of this Agreement shall inure to and be enforceable by any transferee
of Registrable Securities so long as such transferee shall have acquired such
securities in accordance with the terms of the Stockholders Agreement and shall
have executed a Registration Rights Joinder Agreement. The parties hereto agree
that in connection with the award of the Options to any employee, the Company
may allow such employee to execute a Registration Rights Joinder Agreement, and
thereby enter into and become a party to this Agreement as a Management
Stockholder hereunder.
11.6 NOTICES.
All notices, requests and other communications hereunder shall
be given in the manner set forth in the Stockholders Agreement.
11.7 HEADINGS.
The headings used in this Agreement have been inserted for
convenience of reference only and do not affect the provisions hereof.
24
<PAGE> 27
11.8 GENDER.
Whenever the pronouns "he" or "his" are used herein, they
shall also be deemed to mean "she" or "hers" or "it" or "its" whenever
applicable. Words in the singular shall be read and construed as though in the
plural, and words in the plural shall be construed as though in the singular in
all cases where they would so apply.
11.9 INVALID PROVISIONS.
If any provision of this Agreement is held to be illegal,
invalid or unenforceable under any present or future law, and if the rights or
obligations of any party hereto under this Agreement will not be materially and
adversely affected thereby, (i) such provision will be fully severable, (ii)
this Agreement will be construed and enforced as if such illegal, invalid or
unenforceable provision had never comprised a part hereof, (iii) the remaining
provisions of this Agreement will remain in full force and effect and will not
be affected by the illegal, invalid or unenforceable provision or by its
severance herefrom and (iv) in lieu of such illegal, invalid or unenforceable
provision, there will be added automatically as a part of this Agreement a
legal, valid and enforceable provision as similar in terms to such illegal,
invalid or unenforceable provision as may be possible.
11.10 GOVERNING LAW.
THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE DOMESTIC LAWS OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT
TO ANY CHOICE OR CONFLICT OF LAW PROVISION OR RULE (WHETHER OF THE STATE OF NEW
YORK OR ANY OTHER JURISDICTION) THAT WOULD CAUSE THE APPLICATION OF THE LAWS OF
ANY JURISDICTION OTHER THAN THE STATE OF NEW YORK.
11.11 COUNTERPARTS.
This Agreement may be executed in any number of counterparts,
each of which will be deemed an original, but all of which together will
constitute one and the same instrument.
11.12 CONSENT TO JURISDICTION AND SERVICE OF PROCESS.
EACH PARTY OTHER THAN THE STATE OF MICHIGAN, CONSENTS TO THE
JURISDICTION OF ANY STATE OR FEDERAL COURT LOCATED WITHIN THE COUNTY OF NEW
YORK, STATE OF NEW YORK AND IRREVOCABLY AGREES THAT ALL ACTIONS OR PROCEEDINGS
RELATING TO THIS AGREEMENT MAY BE LITIGATED IN SUCH COURTS. EACH SUCH PARTY
ACCEPTS FOR ITSELF AND IN CONNECTION WITH ITS PROPERTIES, GENERALLY AND
UNCONDITIONALLY, THE NONEXCLUSIVE JURISDICTION OF THE AFORESAID COURTS AND
WAIVES ANY DEFENSE OF FORUM NON CONVENIENS, AND IRREVOCABLY AGREES TO BE BOUND
BY ANY JUDGMENT RENDERED THEREBY IN CONNECTION WITH THIS
25
<PAGE> 28
AGREEMENT. EACH SUCH PARTY FURTHER IRREVOCABLY CONSENTS TO THE SERVICE OF
PROCESS OUT OF ANY OF THE AFOREMENTIONED COURTS IN ANY SUCH ACTION OR PROCEEDING
BY THE MAILING OF COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE
PREPAID, TO THE PARTY AT THE ADDRESS SPECIFIED IN THIS AGREEMENT, SUCH SERVICE
TO BECOME EFFECTIVE FIFTEEN (15) DAYS AFTER SUCH MAILING. NOTHING HEREIN SHALL
IN ANY WAY BE DEEMED TO LIMIT THE ABILITY OF ANY PARTY HERETO TO SERVE ANY SUCH
LEGAL PROCESS, SUMMONS, NOTICES AND DOCUMENTS IN ANY OTHER MANNER PERMITTED BY
APPLICABLE LAW OR TO OBTAIN JURISDICTION OVER OR TO BRING ACTIONS, SUITS OR
PROCEEDINGS AGAINST ANY OF THE OTHER PARTIES HERETO IN SUCH OTHER JURISDICTIONS,
AND IN SUCH MANNER, AS MAY BE PERMITTED BY ANY APPLICABLE LAW.
11.13 WAIVER OF JURY TRIAL.
EACH PARTY, OTHER THAN THE STATE OF MICHIGAN, HEREBY WAIVES
ITS RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON
OR ARISING OUT OF THIS AGREEMENT. EACH SUCH PARTY ALSO WAIVES ANY BOND OR SURETY
OR SECURITY UPON SUCH BOND WHICH MIGHT, BUT FOR THIS WAIVER, BE REQUIRED OF SUCH
PARTY. THE SCOPE OF THIS WAIVER IS INTENDED TO BE ALL-ENCOMPASSING OF ANY AND
ALL DISPUTES THAT MAY BE FILED IN ANY COURT AND THAT RELATE TO THE SUBJECT
MATTER OF THIS AGREEMENT, INCLUDING WITHOUT LIMITATION CONTRACT CLAIMS, TORT
CLAIMS, BREACH OF DUTY CLAIMS AND ALL OTHER COMMON LAW AND STATUTORY CLAIMS.
EACH SUCH PARTY FURTHER WARRANTS AND REPRESENTS THAT IT HAS REVIEWED THIS WAIVER
WITH ITS LEGAL COUNSEL AND THAT IT KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY
TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL. THIS WAIVER IS
IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING,
AND THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS
OR MODIFICATIONS TO THIS AGREEMENT. IN THE EVENT OF LITIGATION, THIS AGREEMENT
MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
26
<PAGE> 29
IN WITNESS WHEREOF, the parties have executed this Registration Rights
Agreement as of the date first written above.
MS ACQUISITION CORP.
By: /s/ Ueli Spring
-----------------------------------------
Name:
Title:
FORMER SOFEDIT INVESTORS
CEFI
By: /s/ Francis Barge
-----------------------------------------
Name: Francis Barge
Title: President
YACESE S.A.
By: /s/ Felix Domenech
-----------------------------------------
Name: F. Domenech
Title: President
H.H.A. WAY
By: /s/ Hergoualc'h
-----------------------------------------
Name: Hergoualc'h
Title: President
[Signature page to Registration Rights Agreement]
<PAGE> 30
SOFEDIT INSTITUTIONAL
INVESTORS
COMPAGNIE DE FINANCEMENT
INDUSTRIEL S.A.
By: /s/ Patrick Lente
-----------------------------------------
Name: Patrick Lente
Title: Membre du Directoire
JAFCO I SAINT HONORE S.A.
By: /s/ P.M. Passy
-----------------------------------------
Name: Passy
Title: Mandataire
JAFCO II SAINT HONORE S.A.
By: /s/ P.M. Passy
-----------------------------------------
Name: Passy
Title: Mandataire
TOCQUEVILLE EUROPE L.P.
By: /s/ Jean-Philippe Larramendy
-----------------------------------------
Name: Jean-Philippe Larramendy
Title: General Partner, Tocqueville Group
lui-meme General Partner,
Tocqueville Europe
BIDASSOA INVESTISSEMENTS S.A.
By: /s/ Jean-Philippe Larramendy
-----------------------------------------
Name: Jean-Philippe Larramendy
Title: Gerant de
Bidassoa Investissements S.A.
[Signature page to Registration Rights Agreement]
<PAGE> 31
CININDEV
By: /s/ Blain Xavier
-----------------------------------------
Name: Blain Xavier
Title: Dir. Gen.
CFJPE S.A.
By: /s/ Delvaux
-----------------------------------------
Name: Delvaux
Title: General Manager
OBERON S.A.
By: /s/ F. Domenech
-----------------------------------------
Name: F. Domenech
Title:
EURO SYNERGIES S.A.
By: /s/ Jean de Severac
-----------------------------------------
Name: Jean de Severac
Title: Dr. Gen. Euro Synergies Management
VENTADOUR INVESTISSEMENTS S.A.
By: /s/ F. Deulve
-----------------------------------------
Name: F. Deulve
Title: Director
COGEPA S.A.
By: /s/ G. Lanthier
-----------------------------------------
Name: G. Lanthier
Title: Director General
[Signature page to Registration Rights Agreement]
<PAGE> 32
SOFEDICI S.C.
By: /s/ F. Domenech
-----------------------------------------
Name: F. Domenech
Title:
APAX PARTNER CLUB
By: /s/ Rudolphe Lambert
-----------------------------------------
Name: Rudolphe Lambert
Title: Directeur associe
ALTAMIR S.A.
By: /s/ Rudolphe Lambert
-----------------------------------------
Name: Rudolphe Lambert
Title: Directeur associe
APAX FRANCE IV
By: /s/ Rudolphe Lambert
-----------------------------------------
Name: Rudolphe Lambert
Title: Directeur associe
CVC
CITICORP VENTURE CAPITAL, LTD.
By: /s/ D. Howe
-----------------------------------------
Name: D. Howe
Title:
[Signature page to Registration Rights Agreement]
<PAGE> 33
CVC CO-INVESTORS
/s/ William T. Comfort
-----------------------------------
WILLIAM T. COMFORT
/s/ Richard M. Cashin
-----------------------------------
RICHARD M. CASHIN
/s/ David F. Thomas
-----------------------------------
DAVID F. THOMAS
/s/ Thomas F. McWilliams
-----------------------------------
THOMAS F. McWILLIAMS
/s/ David Y. Howe
-----------------------------------
DAVID Y. HOWE
/s/ Michael A. Delaney
-----------------------------------
MICHAEL A. DELANEY
/s/ John Weber
-----------------------------------
JOHN WEBER
/s/ James Urry
-----------------------------------
JAMES URRY
/s/ Joseph Silvestri
-----------------------------------
JOSEPH SILVESTRI
/s/ Charles Corpening
-----------------------------------
CHARLES CORPENING
[Signature page to Registration Rights Agreement]
<PAGE> 34
BERKSHIRE FUND
THE BERKSHIRE FUND,
A LIMITED PARTNERSHIP
By: BERKSHIRE CAPITAL ASSOCIATES,
LIMITED PARTNERSHIP
Its General Partner
By:
-----------------------------------
A General Partner
BERKSHIRE GROUP
/s/ Bradley M. Bloom
-----------------------------------
BRADLEY M. BLOOM
/s/ J. Christopher Clifford
-----------------------------------
J. CHRISTOPHER CLIFFORD
/s/ Russell L. Epker
-----------------------------------
RUSSELL L. EPKER
/s/ Carl Ferenbach
-----------------------------------
CARL FERENBACH
/s/ Richard K. Lubin
-----------------------------------
RICHARD K. LUBIN
/s/ Lea Anne S. Ottinger
-----------------------------------
LEA ANNE S. OTTINGER
/s/ Kevin T. Callaghan
-----------------------------------
KEVIN T. CALLAGHAN
[Signature page to Registration Rights Agreement]
<PAGE> 35
PRUDENTIAL
THE PRUDENTIAL INSURANCE
COMPANY OF AMERICA
By: /s/ Paul L. Metring
--------------------------------
Name: Paul L. Metring
Title: Vice President
PRUCO
PRUCO LIFE INSURANCE COMPANY
By: /s/ Paul L. Metring
--------------------------------
Name: Paul L. Metring
Title: Vice President
STATE OF MICHIGAN
STATE TREASURER OF THE STATE OF MICHIGAN,
CUSTODIAN OF THE PUBLIC SCHOOL EMPLOYEES'
RETIREMENT SYSTEM; STATE EMPLOYEES'
RETIREMENT SYSTEM; MICHIGAN STATE POLICE
RETIREMENT SYSTEM; JUDGES' RETIREMENT
SYSTEM; AND PROBATE JUDGES' RETIREMENT
SYSTEM
By: /s/ Linda Rose
--------------------------------
Name: Linda Rose
Title: Acting Administrator
[Signature page to Registration Rights Agreement]
<PAGE> 36
FORMER MANAGEMENT GROUP
/s/ Jerome Singer
----------------------------------
JEROME SINGER
/s/ Douglas A. Thal
----------------------------------
DOUGLAS A. THAL
/s/ Robert J. Klein
--------------------------------
ROBERT J. KLEIN
/s/ Steven Singer
--------------------------------
STEVEN SINGER
MANAGEMENT GROUP
/s/ Ueli Spring
--------------------------------
UELI SPRING
/s/ Harold Brown
--------------------------------
HAROLD BROWN
/s/ Gary Easterly
-------------------------------
GARY EASTERLY
/s/ Edward Lawson
--------------------------------
EDWARD LAWSON
/s/ Daniel Pierce
--------------------------------
DANIEL PIERCE
[Signature page to Registration Rights Agreement]
<PAGE> 37
/s/ David Thal
--------------------------------
DAVID THAL
/s/ Ralph Bredenbeck
--------------------------------
RALPH BREDENBECK
[Signature page to Registration Rights Agreement]
<PAGE> 38
CVC CO-INVESTORS, CONTINUED
CCT PARTNERS III, L.P.,
by its General Partner
By: /s/ Thomas Sanders
-------------------------------
Name: Thomas Sanders
Title: GP of CCT Partners III, LP
[Signature page to Registration Rights Agreement]
<PAGE> 1
EXHIBIT 10.1
======================================================================
INDENTURE
Dated as of August 1, 1996
among
AETNA INDUSTRIES, INC.,
as Issuer,
MS ACQUISITION CORP.,
AETNA HOLDINGS, INC.,
as Guarantors,
AETNA EXPORT SALES CORP.,
as Subsidiary Guarantor,
and
NORWEST BANK MINNESOTA NATIONAL ASSOCIATION,
as Trustee
________________
$85,000,000
11 7/8% Senior Notes due 2006, Series A
11 7/8% Senior Notes due 2006, Series B
======================================================================
<PAGE> 2
CROSS-REFERENCE TABLE
TIA Indenture
Section Section
- ------- ---------
310 (a)(1) ...................................................... 7.10
(a)(2) ...................................................... 7.10
(a)(3) ...................................................... N.A.
(a)(4) ...................................................... N.A.
(a)(5) ...................................................... 7.10
(b) ......................................................... 7.08; 7.10
(c) ......................................................... N.A.
311 (a) ......................................................... 7.11
(b) ......................................................... 7.11
(c) ......................................................... N.A.
312 (a) ......................................................... 2.05
(b) ......................................................... 11.03
(c) ......................................................... 11.03
313 (a) ......................................................... 7.06
(b)(1) ...................................................... 7.06
(b)(2) ...................................................... 7.06; 7.07
(c) ......................................................... 7.05; 7.06;
11.02
(d) ......................................................... 7.06
314 (a) ......................................................... 4.08; 4.10;
11.02
(b) ......................................................... N.A.
(c)(1) ...................................................... 4.08; 11.04
(c)(2) ...................................................... 11.04
(c)(3) ...................................................... 4.08; 11.04
(d) ......................................................... N.A.
(e) ......................................................... 11.05
(f) ......................................................... N.A.
315 (a) ......................................................... 7.01(b)
(b) ......................................................... 7.05; 11.02
(c) ......................................................... 7.01(a)
(d) ......................................................... 7.01(c)
(e) ......................................................... 6.11
316 (a)(last sentence) .......................................... 2.09
(a)(1)(A) ................................................... 6.05
(a)(1)(B) ................................................... 6.04
(a)(2) ...................................................... N.A.
(b) ......................................................... 6.07; 9.04
(c) ......................................................... 9.04
317 (a)(1) ...................................................... 6.08
<PAGE> 3
(a)(2) ........................................................ 6.09
(b) ........................................................... 2.04
318(a) ........................................................ 11.01
(c) ........................................................... 11.01
______________________
"N.A." means Not Applicable.
NOTE: This Cross-Reference Table shall not, for any purpose, be deemed to be a
part of the Indenture.
<PAGE> 4
TABLE OF CONTENTS
Page
----
ARTICLE ONE
DEFINITIONS AND INCORPORATION
BY REFERENCE
Section 1.01 Definitions ................................................ 1
Section 1.02 Incorporation by Reference of TIA .......................... 25
Section 1.03 Rules of Construction ...................................... 26
ARTICLE TWO
THE SECURITIES
Section 2.01 Form and Dating ............................................ 26
Section 2.02 Execution and Authentication ............................... 27
Section 2.03 Registrar and Paying Agent ................................. 28
Section 2.04 Paying Agent To Hold Assets in Trust ....................... 29
Section 2.05 Securityholder Lists ....................................... 29
Section 2.06 Transfer and Exchange ...................................... 29
Section 2.07 Replacement Securities ..................................... 30
Section 2.08 Outstanding Securities ..................................... 30
Section 2.09 Treasury Securities ........................................ 31
Section 2.10 Temporary Securities ....................................... 31
Section 2.11 Cancellation ............................................... 31
Section 2.12 Defaulted Interest ......................................... 32
Section 2.13 CUSIP Number ............................................... 32
Section 2.14 Deposit of Moneys .......................................... 32
Section 2.15 Book-Entry Provisions for Global Securities ................ 32
Section 2.16 Registration of Transfers and Exchanges .................... 34
Section 2.17 Designation ................................................ 39
ARTICLE THREE
REDEMPTION
Section 3.01 Notices to Trustee ......................................... 39
Section 3.02 Selection of Securities To Be Redeemed ..................... 39
-i-
<PAGE> 5
Page
----
Section 3.03 Notice of Redemption ....................................... 40
Section 3.04 Effect of Notice of Redemption ............................. 41
Section 3.05 Deposit of Redemption Price ................................ 41
Section 3.06 Securities Redeemed in Part ................................ 41
ARTICLE FOUR
COVENANTS
Section 4.01 Payment of Securities ...................................... 42
Section 4.02 Maintenance of Office or Agency ............................ 42
Section 4.03 Limitation on Incurrence of Additional
Indebtedness .............................................. 42
Section 4.04 Limitation on Restricted Payments .......................... 43
Section 4.05 Corporate Existence ........................................ 45
Section 4.06 Payment of Taxes and Other Claims .......................... 46
Section 4.07 Maintenance of Properties and Insurance .................... 46
Section 4.08 Compliance Certificate; Notice of Default .................. 47
Section 4.09 Compliance with Laws ....................................... 48
Section 4.10 SEC Reports ................................................ 48
Section 4.11 Waiver of Stay, Extension or Usury Laws .................... 49
Section 4.12 Limitation on Asset Sales .................................. 49
Section 4.13 Limitation on Dividend and Other Payment
Restrictions Affecting Restricted
Subsidiaries .............................................. 52
Section 4.14 Limitation on Preferred Stock of
Restricted Subsidiaries ................................... 53
Section 4.15 Limitation on Liens ........................................ 53
Section 4.16 Limitation on Sale and Leaseback
Transactions .............................................. 54
Section 4.17 Intentionally Omitted ...................................... 54
Section 4.18 Limitations on Transactions with
Affiliates ................................................ 54
Section 4.19 Additional Subsidiary Guarantees ........................... 55
Section 4.20 Intentionally Omitted ...................................... 56
Section 4.21 Lines of Business .......................................... 56
Section 4.22 Payments for Consent ....................................... 56
Section 4.23 Limitation on Designations of
Unrestricted Subsidiaries ................................. 57
Section 4.24 Change of Control .......................................... 57
-ii-
<PAGE> 6
Page
----
ARTICLE FIVE
SUCCESSOR CORPORATION
Section 5.01 Mergers, Consolidations and Sales of
Assets ...................................................... 60
Section 5.02 Successor Corporation Substituted ............................ 62
ARTICLE SIX
DEFAULT AND REMEDIES
Section 6.01 Events of Default ........................................... 63
Section 6.02 Acceleration ................................................ 65
Section 6.03 Other Remedies .............................................. 66
Section 6.04 Waiver of Past Defaults ..................................... 66
Section 6.05 Control by Majority ......................................... 67
Section 6.06 Limitation on Suits ......................................... 67
Section 6.07 Rights of Holders To Receive Payment ........................ 68
Section 6.08 Collection Suit by Trustee .................................. 68
Section 6.09 Trustee May File Proofs of Claim ............................ 68
Section 6.10 Priorities .................................................. 69
Section 6.11 Undertaking for Costs ....................................... 69
ARTICLE SEVEN
TRUSTEE
Section 7.01 Duties of Trustee ........................................... 70
Section 7.02 Rights of Trustee ........................................... 71
Section 7.03 Individual Rights of Trustee ................................ 72
Section 7.04 Trustee's Disclaimer ........................................ 72
Section 7.05 Notice of Default ........................................... 73
Section 7.06 Reports by Trustee to Holders ............................... 73
Section 7.07 Compensation and Indemnity .................................. 74
Section 7.08 Replacement of Trustee ...................................... 75
Section 7.09 Successor Trustee by Merger, Etc. ........................... 76
-iii-
<PAGE> 7
Page
----
Section 7.10 Eligibility; Disqualification ............................... 76
Section 7.11 Preferential Collection of Claims Against
Company .................................................... 76
ARTICLE EIGHT
SATISFACTION AND DISCHARGE OF INDENTURE
Section 8.01 Legal Defeasance and Covenant Defeasance .................... 77
Section 8.02 Satisfaction and Discharge .................................. 80
Section 8.03 Survival of Certain Obligations ............................. 81
Section 8.04 Acknowledgment of Discharge by Trustee ...................... 81
Section 8.05 Application of Trust Assets ................................. 82
Section 8.06 Repayment to the Company, Guarantors or
Subsidiary Guarantors; Unclaimed Money ..................... 82
Section 8.07 Reinstatement ............................................... 83
ARTICLE NINE
AMENDMENTS, SUPPLEMENTS AND WAIVERS
Section 9.01 Without Consent of Holders .................................. 83
Section 9.02 With Consent of Holders ..................................... 84
Section 9.03 Compliance with TIA ......................................... 86
Section 9.04 Revocation and Effect of Consents ........................... 86
Section 9.05 Notation on or Exchange of Securities ....................... 87
Section 9.06 Trustee To Sign Amendments, Etc. ............................ 87
ARTICLE TEN
GUARANTEES
Section 10.01 Unconditional Guarantee .................................... 87
Section 10.02 Severability ............................................... 88
Section 10.03 Release of a Subsidiary Guarantor .......................... 89
Section 10.04 Limitation of a Guarantor's or
Subsidiary Guarantor's Liability .......................... 89
-iv-
<PAGE> 8
Page
----
Section 10.05 Contribution ............................................... 90
Section 10.06 Waiver of Subrogation ...................................... 90
Section 10.07 Execution of Guarantees and Subsidiary
Guarantees ................................................ 91
Section 10.08 Waiver of Stay, Extension or Usury Laws .................... 92
ARTICLE ELEVEN
MISCELLANEOUS
Section 11.01 TIA Controls ............................................... 92
Section 11.02 Notices .................................................... 92
Section 11.03 Communications by Holders with Other
Holders .................................................. 94
Section 11.04 Certificate and Opinion as to Conditions
Precedent ................................................ 94
Section 11.05 Statements Required in Certificate or
Opinion .................................................. 94
Section 11.06 Rules by Trustee, Paying Agent, Registrar .................. 95
Section 11.07 Legal Holidays ............................................. 95
Section 11.08 Governing Law .............................................. 95
Section 11.09 No Adverse Interpretation of Other
Agreements ............................................... 95
Section 11.10 No Recourse Against Others ................................. 95
Section 11.11 Successors ................................................. 96
Section 11.12 Duplicate Originals ........................................ 96
Section 11.13 Severability ............................................... 96
Signatures ................................................................ 97
Exhibit A - Form of Series A Security
Exhibit B - Form of Series B Security
Exhibit C - Form of Legend for Global Securities
Exhibit D - Transfer Certificate
Exhibit E - Transferee Certificate for Institutional
Accredited Investors
Exhibit F - Transferee Certificate for Regulation S Transfers
Note: This Table of Contents shall not, for any purpose, be deemed to be a
part of the Indenture.
-v-
<PAGE> 9
INDENTURE dated as of August 1, 1996, among AETNA INDUSTRIES, INC., a
Delaware corporation (the "Company"), as Issuer, MS ACQUISITION CORP., a
Delaware corporation, and AETNA HOLDINGS, INC., a Delaware corporation, as
Guarantors (each a "Guarantor" and, collectively, the "Guarantors"), AETNA
EXPORT SALES CORP., a U.S. Virgin Islands corporation, as Subsidiary Guarantor,
and NORWEST BANK MINNESOTA NATIONAL ASSOCIATION, a national banking association
organized under the laws of the United States, as Trustee (the "Trustee").
The Company has duly authorized the creation of an issue of 11 7/8% Senior
Notes due 2006, Series A, and 11 7/8% Senior Notes due 2006, Series B, to be
issued in exchange for the 11 7/8% Senior Notes due 2006, Series A, pursuant to
the Registration Rights Agreement and, to provide therefor, the Company, the
Guarantors, and the Subsidiary Guarantor have duly authorized the execution and
delivery of this Indenture. All things necessary to make the Securities, when
duly issued and executed by the Company and authenticated and delivered
hereunder, the Guarantees and the Subsidiary Guarantees the valid and binding
obligations of the Company, the Guarantors, and the Subsidiary Guarantor,
respectively, and to make this Indenture a valid and binding agreement of the
Company, each of the Guarantors and the Subsidiary Guarantor, have been done.
Each party hereto agrees as follows for the benefit of each other party
and for the equal and ratable benefit of the Holders of the Securities:
ARTICLE ONE
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.01. Definitions.
"Acquired Indebtedness" means Indebtedness of a Person or any of its
Subsidiaries existing at the time such Person becomes a Restricted Subsidiary
or at the time it merges or consolidates with the Company or any of the
Restricted Subsidiaries or assumed by the Company or a Restricted Subsidiary in
connection with the acquisition of assets by such Person and in each case not
incurred in connection with, or in anticipation or contemplation of, such
Person becoming a Restricted Subsidiary or such acquisition, merger or
consolidation.
"Affiliate" means, with respect to any specified Person, any other Person
who directly or indirectly through one or more intermediaries controls, or is
controlled by, or is under common control with, such specified Person. The
term "control" means the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of a Person,
whether
<PAGE> 10
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through the ownership of voting securities, by contract or otherwise; and the
terms "controlling" and "controlled" have meanings correlative of the
foregoing.
"Affiliate Transaction" has the meaning provided in Section 4.18.
"Agent" means any Registrar, Paying Agent or co-Registrar.
"Asset Acquisition" means (a) an Investment by the Company or any
Restricted Subsidiary in any other Person pursuant to which such Person shall
become a Restricted Subsidiary, or shall be merged with or into the Company or
any Restricted Subsidiary, or (b) the acquisition by the Company or any
Restricted Subsidiary of the assets of any Person (other than a Restricted
Subsidiary) which constitute all or substantially all of the assets of such
Person or comprises any division or line of business of such Person or any
other properties or assets of such Person other than in the ordinary course of
business.
"Asset Sale" means any direct or indirect sale, issuance, conveyance,
transfer, lease (other than operating leases entered into in the ordinary
course of business), assignment or other transfer for value by the Company or
any of the Restricted Subsidiaries (including any Sale and Leaseback
Transaction) to any Person other than the Company or a Restricted Subsidiary of
(a) any Capital Stock of any Restricted Subsidiary; or (b) any other property
or assets of the Company or any Restricted Subsidiary other than in the
ordinary course of business; provided, however, that Asset Sales shall not
include (i) a transaction or series of related transactions for which the
Company or the Restricted Subsidiaries receive aggregate consideration of less
than $250,000, (ii) the sale, lease, conveyance, disposition or other transfer
of all or substantially all of the assets of the Company as permitted under
Section 5.01, (iii) Investments made in compliance with Section 4.04 and (iv)
the sale, disposition or other transfer of obsolete, damaged, materially worn
or unusable equipment in the ordinary course of business.
"Attributable Value" means, as to any particular lease under which any
Person is at the time liable other than a Capitalized Lease Obligation, and at
any date as of which the amount thereof is to be determined, the total net
amount of rent required to be paid by such Person under such lease during the
remaining term thereof (whether or not such lease is terminable at the option
of the lessee prior to the end of such term), including any period for which
such lease has been, or may, at the option of the lessor, be extended,
discounted from the last date of such term to the date of determination at a
rate per annum equal to the discount rate which would be applicable to a
Capitalized Lease Obligation with a like term in accordance with GAAP. The net
amount of rent required to be paid under any lease for any such period shall be
the aggregate amount of rent payable by the lessee with respect to such period
after excluding amounts required to be paid on account of insurance, taxes,
assessments, utility, operating and labor costs and similar charges.
"Attributable
<PAGE> 11
-3-
Value" means, as to a Capitalized Lease Obligation under which any Person is at
the time liable and at any date as of which the amount thereof is to be
determined, the capitalized amount thereof that would appear on the face of a
balance sheet of such Person in accordance with GAAP.
"Bankruptcy Law" means Title 11, U.S. Code or any similar Federal, state
or foreign law for the relief of debtors.
"Berkshire" means, individually and collectively, The Berkshire Fund,
Berkshire Partners and each of their respective Permitted Transferees.
"Board of Directors" means, as to any Person, the board of directors of
such Person or any duly authorized committee thereof.
"Board Resolution" means, with respect to any Person, a copy of a
resolution certified by the Secretary or an Assistant Secretary of such Person
to have been duly adopted by the Board of Directors of such Person and to be in
full force and effect on the date of such certification, and delivered to the
Trustee.
"Business Day" means any day other than a Saturday, Sunday or any other
day on which banking institutions in the City of New York are required or
authorized by law or other governmental action to be closed.
"Capital Stock" means (a) with respect to any Person that is a
corporation, any and all shares, interests, participations or other equivalents
(however designated and whether or not voting) of corporate stock, including
each class of Common Stock and Preferred Stock of such Person and (b) with
respect to any Person that is not a corporation, any and all partnership or
other equity interests of such Person.
"Capitalized Lease Obligation" means, as to any Person, the obligations of
such Person under a lease that are required to be classified and accounted for
as capital lease obligations under GAAP, and the amount of such obligations at
any date shall be the capitalized amount of such obligations at such date,
determined in accordance with GAAP.
"Cash Equivalents" means (a) marketable direct obligations issued by, or
unconditionally guaranteed by, the United States Government or issued by any
agency thereof and backed by the full faith and credit of the United States, in
each case maturing within one year from the date of acquisition thereof; (b)
marketable direct obligations issued by any state of the United States of
America or any political subdivision of any such state or any public
instrumentality thereof maturing within one year from the date of acquisition
thereof and, at the time of acquisition, having
<PAGE> 12
-4-
one of the two highest ratings obtainable from either Standard & Poor's
Corporation ("S&P") or Moody's Investors Service, Inc. ("Moody's"); (c)
commercial paper maturing no more than one year from the date of creation
thereof and, at the time of acquisition, having a rating of at least A-1 from
S&P or at least P-1 from Moody's; (d) certificates of deposit or bankers'
acceptances maturing within one year from the date of acquisition thereof
issued by any bank organized under the laws of the United States of America or
any state thereof or the District of Columbia or any United States branch of a
foreign bank having at the date of acquisition thereof combined capital and
surplus of not less than $250,000,000; (e) repurchase obligations with a term
of not more than seven days for underlying securities of the types described in
clause (a) above entered into with any bank meeting the qualifications
specified in clause (d) above; and (f) investments in money market funds which
invest substantially all their assets in securities of the types described in
clauses (a) through (e) of this definition.
"Change of Control" means the occurrence of any of the following
events:
(a) prior to the first public offering of Voting Stock of either of
the Guarantors or the Company, any person or group, as such terms are
used in Sections 13(d) and 14(d) of the Exchange Act, other than one or
more of the Permitted Holders, shall be entitled (by "beneficial
ownership" (as defined in rules 13d-3 and 13d-5 under the Exchange Act)
of Voting Stock, by contract or otherwise) to designate for election
directors of either of the Guarantors or the Company having a majority of
the total voting power of the Board of Directors of either of the
Guarantors or the Company, as the case may be;
(b) prior to the first public offering of Voting Stock of the
Company, MS Acquisition Corp. shall cease to own 100% of the issued and
outstanding Voting Stock of Aetna Holdings, Inc. or Aetna Holdings, Inc.
shall cease to own 100% of the Voting Stock of the Company, whether as a
result of the issuance of securities of Aetna Holdings, Inc. or the
Company, any merger, consolidation, liquidation or dissolution of Aetna
Holdings, Inc. or the Company, or any direct or indirect transfer of
securities by either of the Guarantors or otherwise; provided that
notwithstanding any other provision of this Indenture, including this
clause (b), to the contrary, Aetna Holdings, Inc. may cease to exist,
whether as a result of merger, consolidation, liquidation, dissolution or
by any other means, so long as thereafter (but prior to the first public
offering of Voting Stock of the Company), MS Acquisition Corp. owns 100%
of the issued and outstanding Voting Stock of the Company;
(c) after the first public offering of Voting Stock of either of the
Guarantors or the Company, any person or group (as such terms are used in
Sections 13(d) and 14(d) of the Exchange Act), other than one or more of
the Permitted Holders, is or becomes the beneficial owner (as defined in
clause (a) above), directly or indirectly, of Voting Stock that
represents
<PAGE> 13
-5-
more than a majority of the aggregate ordinary voting power of all
classes of the Voting Stock of the Company or either of the Guarantors,
voting together as a single class;
(d) after the first public offering of Voting Stock of either of the
Guarantors or the Company, during any period of not greater than two
consecutive years beginning after the Issue Date, individuals who at the
beginning of such period constituted the Board of Directors of the
Company or either of the Guarantors, as the case may be (together with
any new directors whose election by such Board of Directors or whose
nomination for election by the shareholders of the Company or either of
the Guarantors, as the case may be, was approved by a vote of a majority
of the directors of the Company or either of the Guarantors, as the case
may be, then still in office who were either directors at the beginning
of such period or whose election or nomination for election was
previously so approved), cease for any reason to have a majority of the
total voting power of the Board of Directors of the Company or either of
the Guarantors, as the case may be; or
(e) any sale, lease, exchange or other transfer (in one transaction
or a series of related transactions) of all or substantially all of the
assets of the Company to any person or group (as such terms are used in
Sections 13(d) and 14(d) of the Exchange Act).
"Change of Control Offer" has the meaning provided in Section 4.24.
"Change of Control Payment Date" has the meaning provided in Section 4.24.
"Commission" means the Securities and Exchange Commission.
"Common Stock" of any Person means any and all shares, interests or other
participations in, and other equivalents (however designated and whether voting
or non-voting) of such Person's common stock, whether outstanding on the Issue
Date or issued after the Issue Date, and includes, without limitation, all
series and classes of such common stock.
"Company" means the party named as such in this Indenture until a
successor replaces it pursuant to this Indenture and thereafter means such
successor.
"Consolidated EBITDA" means, for any period, the sum (without duplication)
of (a) Consolidated Net Income and (b) to the extent Consolidated Net Income
has been reduced thereby, (i) all income taxes of the Company and the
Restricted Subsidiaries paid or accrued in accordance with GAAP for such period
(other than income taxes attributable to extraordinary, unusual or nonrecurring
gains or losses or taxes attributable to sales or dispositions outside the
ordinary course of business), (ii) Consolidated Interest Expense, (iii)
Consolidated Non-cash Charges, less any
<PAGE> 14
-6-
non-cash items increasing Consolidated Net Income for such period, all as
determined on a consolidated basis for the Company and the Restricted
Subsidiaries in accordance with GAAP; (iv) bonuses paid on the Issue Date to
officers and directors of the Guarantors and the Company not to exceed $350,000
in the aggregate and (v) any prepayment penalty on Indebtedness of the Company
retired on the Issue Date.
"Consolidated Fixed Charge Coverage Ratio" means, with respect to the
Company, the ratio of Consolidated EBITDA of the Company during the four full
fiscal quarters (the "Four Quarter Period") ending on or prior to the date of
the transaction giving rise to the need to calculate the Consolidated Fixed
Charge Coverage Ratio (the "Transaction Date") to Consolidated Fixed Charges of
the Company for the Four Quarter Period. In addition to and without limitation
of the foregoing, for purposes of this definition, "Consolidated EBITDA" and
"Consolidated Fixed Charges" shall be calculated after giving effect on a pro
forma basis for the period of such calculation to (a) the incurrence or
repayment of any Indebtedness of the Company or any of the Restricted
Subsidiaries (and the application of the proceeds thereof) giving rise to the
need to make such calculation and any incurrence or repayment of other
Indebtedness (and the application of the proceeds thereof), other than the
incurrence or repayment of Indebtedness in the ordinary course of business for
working capital purposes pursuant to working capital facilities, occurring
during the Four Quarter Period or at any time subsequent to the last day of the
Four Quarter Period and on or prior to the Transaction Date, as if such
incurrence or repayment, as the case may be (and the application of the
proceeds thereof), occurred on the first day of the Four Quarter Period and (b)
any Asset Sales or Asset Acquisitions (including, without limitation, any Asset
Acquisition giving rise to the need to make such calculation as a result of the
Company or one of the Restricted Subsidiaries (including any Person who becomes
a Restricted Subsidiary as a result of the Asset Acquisition) incurring,
assuming or otherwise being liable for Acquired Indebtedness and also including
any Consolidated EBITDA attributable to the assets which are the subject of the
Asset Acquisition or Asset Sale during the Four Quarter Period) occurring
during the Four Quarter Period or at any time subsequent to the last day of the
Four Quarter Period and on or prior to the Transaction Date, as if such Asset
Sale or Asset Acquisition (including the incurrence, assumption or liability
for any such Acquired Indebtedness) occurred on the first day of the Four
Quarter Period. If the Company or any of the Restricted Subsidiaries directly
or indirectly guarantees Indebtedness of a third Person, the preceding sentence
shall give effect to the incurrence of such guaranteed Indebtedness as if the
Company or the Restricted Subsidiary, as the case may be, had directly incurred
or otherwise assumed such guaranteed Indebtedness. Furthermore, in calculating
"Consolidated Fixed Charges" for purposes of determining the denominator (but
not the numerator) of this "Consolidated Fixed Charge Coverage Ratio," (i)
interest on outstanding Indebtedness determined on a fluctuating basis as of
the Transaction Date and which will continue to be so determined thereafter
shall be deemed to have accrued at a fixed rate per annum equal to the rate of
interest on such Indebtedness in effect on the Transaction Date; (ii) if
interest on any Indebtedness actually incurred on the Transaction
<PAGE> 15
-7-
Date may optionally be determined at an interest rate based upon a factor of a
prime or similar rate, a eurocurrency interbank offered rate, or other rates,
then the interest rate in effect on the Transaction Date will be deemed to have
been in effect during the Four Quarter Period; and (iii) notwithstanding clause
(i) above, interest on Indebtedness determined on a fluctuating basis, to the
extent such interest is covered by agreements relating to Obligations under
Interest Rate Agreements, shall be deemed to accrue at the rate per annum
resulting after giving effect to the operation of such agreements.
"Consolidated Fixed Charges" means, with respect to the Company for any
period, the sum, without duplication, of (a) Consolidated Interest Expense
(including any premium or penalty paid in connection with redeeming or retiring
Indebtedness of the Company and the Restricted Subsidiaries prior to the stated
maturity thereof pursuant to the agreements governing such Indebtedness), plus
(b) the product of (i) the amount of all dividend payments on any series of
Preferred Stock of the Company (other than dividends paid in Qualified Capital
Stock) paid, accrued or scheduled to be paid or accrued during such period
times (ii) a fraction, the numerator of which is one and the denominator of
which is one minus the then current effective consolidated Federal, state and
local income tax rate of such Person, expressed as a decimal.
"Consolidated Interest Expense" means, with respect to the Company for any
period, the sum of, without duplication: (a) the aggregate of the interest
expense of the Company and the Restricted Subsidiaries for such period
determined on a consolidated basis in accordance with GAAP, including without
limitation, (i) any amortization of original issue discount, (ii) Obligations
under Interest Rate Agreements, (iii) all capitalized interest and (iv) the
interest portion of any deferred payment obligation; and (b) the interest
component of Capitalized Lease Obligations paid, accrued and/or scheduled to be
paid or accrued by the Company and the Restricted Subsidiaries during such
period as determined on a consolidated basis in accordance with GAAP.
"Consolidated Net Income" means, with respect to the Company for any
period, the aggregate net income (or loss) of the Company and the Restricted
Subsidiaries for such period on a consolidated basis, determined in accordance
with GAAP; provided that there shall be excluded therefrom (a) after-tax gains
from Asset Sales or abandonments or reserves relating thereto, (b) after-tax
items classified as extraordinary or nonrecurring gains, (c) the net income of
any Person acquired in a "pooling of interests" transaction accrued prior to
the date it becomes a Restricted Subsidiary or is merged or consolidated with
the Company or any Restricted Subsidiary, (d) the net income (but not loss) of
any Restricted Subsidiary to the extent that the declaration of dividends or
similar distributions by that Restricted Subsidiary of that income is
restricted by a contract, operation of law or otherwise, (e) the net income of
any Person, other than a Restricted Subsidiary, except to the extent of cash
dividends or distributions paid to the Company or to a Restricted Subsidiary by
such Person, (f) income or loss attributable to discontinued operations
(including, without limitation,
<PAGE> 16
-8-
operations disposed of during such period whether or not such operations were
classified as discontinued) and (g) in the case of a successor to the Company
by consolidation or merger or as a transferee of the Company's assets, any net
income (or loss) of the successor corporation prior to such consolidation,
merger or transfer of assets.
"Consolidated Net Worth" of any Person means the consolidated
stockholders' equity of such Person, determined on a consolidated basis in
accordance with GAAP, less (without duplication) amounts attributable to
Disqualified Capital Stock of such Person.
"Consolidated Non-cash Charges" means, with respect to the Company, for
any period, the aggregate depreciation, amortization and other non-cash
expenses of the Company and the Restricted Subsidiaries reducing Consolidated
Net Income of the Company for such period, determined on a consolidated basis
in accordance with GAAP (excluding any such charges constituting an
extraordinary item or loss or any such charge which requires an accrual of or a
reserve for cash charges for any future period).
"Covenant Defeasance" has the meaning provided in Section 8.01.
"Custodian" means any receiver, trustee, assignee, liquidator,
sequestrator or similar official under any Bankruptcy Law.
"CVC" means Citicorp Venture Capital, Ltd., a New York corporation.
"CVC Group" means CVC and its Permitted Transferees.
"Default" means an event or condition the occurrence of which is, or with
the lapse of time or the giving of notice or both would be, an Event of
Default.
"Depository" means, with respect to the Securities issued in the form of
one or more Global Securities, The Depository Trust Company or another Person
designated as Depository by the Company, which must be a clearing agency
registered under the Exchange Act.
"Designation" has the meaning provided in Section 4.23.
"Designation Amount" has the meaning provided in Section 4.23.
"Disqualified Capital Stock" means that portion of any Capital Stock
which, by its terms (or by the terms of any security into which it is
convertible or for which it is exchangeable), or upon the happening of any
event, matures or is mandatorily redeemable, pursuant to a sinking
<PAGE> 17
-9-
fund obligation or otherwise, or is redeemable at the sole option of the
holder thereof on or prior to the final maturity date of the Securities.
"Event of Default" has the meaning provided in Section 6.01.
"Exchange Act" means the Securities Exchange Act of 1934, as amended, or
any successor statute or statutes thereto.
"fair market value" means, with respect to any asset or property, the
price which could be negotiated in an arm's-length, free market transaction,
for cash, between a willing seller and a willing buyer, neither of whom is
under undue pressure or compulsion to complete the transaction. Fair market
value shall be determined by the Board of Directors of the Company acting
reasonably and in good faith and shall be evidenced by a Board Resolution of
the Company delivered to the Trustee.
"Final Maturity Date" means October 1, 2006.
"Four Quarter Period" has the meaning provided in the definition of
"Consolidated Fixed Charge Coverage Ratio" above.
"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 may be approved by a significant segment of the accounting
profession of the United States, which are in effect as of the Issue Date.
"Global Security" means a security evidencing all or a part of the
Securities issued to the Depository in accordance with Section 2.01 and bearing
the legend prescribed in Exhibit C.
"Guarantees" means the unconditional guarantees pursuant to Article Ten by
the Guarantors, on a senior basis, to each Holder and the Trustee of the full
and prompt performance of the Company's obligations under this Indenture and
the Securities, including the payment of principal of and interest on the
Securities.
"Guarantors" means the parties named as such in this Indenture until a
successor replaces either of them pursuant to this Indenture and thereafter
means such successor as one of the parties.
<PAGE> 18
-10-
"Holder" or "Securityholder" means a Person in whose name a Security is
registered on the Registrar's books.
"incur" has the meaning provided in Section 4.03.
"Indebtedness" means with respect to any Person, without duplication, (a)
all Obligations of such Person for borrowed money, (b) all Obligations of such
Person evidenced by bonds, debentures, notes or other similar instruments, (c)
all Capitalized Lease Obligations of such Person, (d) all Obligations of such
Person issued or assumed as the deferred purchase price of property, all
conditional sale obligations and all Obligations under any title retention
agreement (but excluding trade accounts payable and other accrued liabilities
arising in the ordinary course of business that are not overdue by 90 days or
more or are being contested in good faith by appropriate proceedings promptly
instituted and diligently conducted), (e) all Obligations for the reimbursement
of any obligor on any letter of credit, banker's acceptance or similar credit
transaction, (f) guarantees and other contingent obligations in respect of
Indebtedness referred to in clauses (a) through (e) above and clause (h) below,
(g) all Obligations of any other Person of the type referred to in clauses (a)
through (f) above which are secured by any Lien on any property or asset of
such Person, the amount of such Obligation being deemed to be the lesser of the
fair market value of such property or asset or the amount of the Obligation so
secured, (h) all Obligations under currency exchange agreements and Interest
Rate Agreements of such Person and (i) all Disqualified Capital Stock issued by
such Person with the amount of Indebtedness represented by such Disqualified
Capital Stock being equal to the greater of its voluntary or involuntary
liquidation preference and its maximum fixed repurchase price. For purposes
hereof, the "maximum fixed repurchase price" of any Disqualified Capital Stock
which does not have a fixed repurchase price shall be calculated in accordance
with the terms of such Disqualified Capital Stock as if such Disqualified
Capital Stock were purchased on any date on which Indebtedness shall be
required to be determined pursuant to this Indenture, and if such price is
based upon, or measured by, the fair market value of such Disqualified Capital
Stock, such fair market value shall be determined reasonably and in good faith
by the Board of Directors of the Company.
"Indenture" means this Indenture, as amended or supplemented from time to
time in accordance with the terms hereof.
"Independent" when used with respect to any specified Person means such a
Person who (a) is in fact independent; (b) does not have any direct financial
interest or any material indirect financial interest in the Company or any of
its Subsidiaries, or in any Affiliate of the Company or any of its
Subsidiaries; and (c) is not an officer, employee, promoter, underwriter,
trustee, partner, director or Person performing similar functions for the
Company or any of its Subsidiaries. Whenever it is provided in this Indenture
that any Independent Person's opinion or certificate shall
<PAGE> 19
-11-
be furnished to the Trustee, such Person shall be appointed by the Company, and
such opinion or certificate shall state that the signer has read this
definition and that the signer is Independent within the meaning hereof.
"Independent Financial Advisor" means a firm (a) which does not, and whose
directors, officers and employees or Affiliates do not, have a direct or
indirect material financial interest in the Company and (b) which, in the
judgment of the Board of Directors of the Company, is otherwise independent and
qualified to perform the task for which it is to be engaged.
"Initial Purchasers" means Smith Barney Inc., Schroder Wertheim & Co.
Incorporated and First Chicago Capital Markets, Inc.
"Institutional Accredited Investor" means an institution that is an
"accredited investor" as that term is defined in Rule 501(a)(1), (2), (3) or
(7) under the Securities Act.
"Interest Payment Date" means the stated maturity of an installment of
interest on the Securities.
"Interest Rate Agreement" means an agreement governing any interest rate
swap transaction, interest rate cap, collar or floor transaction, interest rate
future, any option on any of the above or any similar transaction.
"Investment" means, with respect to any Person, any direct or indirect
loan or other extension of credit (including, without limitation, a guarantee)
or capital contribution to (by means of any transfer of cash or other property
to others or any payment for property or services for the account or use of
others), or any purchase or acquisition by such Person of any Capital Stock,
bonds, notes, debentures or other securities or evidences of Indebtedness
issued by, any Person. "Investment" shall exclude extensions of trade credit
by the Company and the Restricted Subsidiaries on commercially reasonable terms
in accordance with normal trade practices of the Company or such Restricted
Subsidiary, as the case may be. If the Company or any Restricted Subsidiary
sells or otherwise disposes of any Capital Stock of any Restricted Subsidiary
such that, after giving effect to any such sale or disposition, it ceases to be
a Subsidiary of the Company, the Company shall be deemed to have made an
Investment on the date of any such sale or disposition equal to the fair market
value of the Capital Stock of such Restricted Subsidiary not sold or disposed
of. The amount of any Investment shall not be adjusted for increases or
decreases in value of write-ups or write-downs with respect to such Investment.
"Issue Date" means the date of original issuance of the Securities.
<PAGE> 20
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"Legal Defeasance" has the meaning provided in Section 8.01.
"Lien" means any lien, mortgage, deed of trust, pledge, security interest,
charge or encumbrance of any kind (including any conditional sale or other
title retention agreement, any lease in the nature thereof and any agreement to
give any security interest).
"Management" means, individually and collectively, any officer, director
or employee of the Company, either of the Guarantors or a Subsidiary of the
Company who acquires Voting Stock of the Company or either of the Guarantors on
or after the Issue Date and each of their respective Permitted Transferees.
"Michigan" means, individually and collectively, the State of Michigan,
any political subdivision thereof and any pension fund for employees of the
State of Michigan or any political subdivision thereof.
"Net Cash Proceeds" means, with respect to any Asset Sale, the proceeds in
the form of cash or Cash Equivalents including payments in respect of deferred
payment obligations when received in the form of cash or Cash Equivalents
(other than the portion of any such deferred payment constituting interest)
received by the Company or any of the Restricted Subsidiaries from such Asset
Sale net of (a) reasonable out-of-pocket expenses and fees relating to such
Asset Sale (including, without limitation, legal, accounting and investment
banking fees, underwriter or placement agent fees and commissions, brokerage,
filing and registration fees and trustee fees), (b) taxes paid or payable after
taking into account any reduction in consolidated tax liability due to
available tax credits or deductions and any tax sharing arrangements, (c)
repayment of Indebtedness that is required to be repaid in connection with such
Asset Sale and (d) appropriate amounts to be provided by the Company or any
Restricted Subsidiary, as the case may be, as a reserve, in accordance with
GAAP, against any liabilities associated with such Asset Sale and retained by
the Company or any Restricted Subsidiary, as the case may be, after such Asset
Sale, including, without limitation, pension and other post-employment benefit
liabilities, liabilities related to environmental matters and liabilities under
any indemnification obligations associated with such Asset Sale.
"Net Proceeds Offer" has the meaning provided in Section 4.12.
"Net Proceeds Offer Amount" has the meaning provided in Section 4.12.
"Net Proceeds Offer Payment Date" has the meaning provided in Section
4.12.
"Net Proceeds Offer Trigger Date" has the meaning provided in Section
4.12.
<PAGE> 21
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"Obligations" means all obligations for principal, premium, interest,
penalties, fees, indemnifications, reimbursements, damages and other
liabilities payable under the documentation governing any Indebtedness.
"Officer" means, with respect to any Person, the Chairman of the Board,
the Chief Executive Officer, the President, any Vice President, the Chief
Financial Officer, the Controller, or the Secretary of such Person.
"Officers' Certificate" means a certificate signed by two Officers of the
Company.
"Opinion of Counsel" means a written opinion from legal counsel which and
who are acceptable to the Trustee.
"Participants" has the meaning provided in Section 2.15.
"Paying Agent" has the meaning provided in Section 2.03.
"Permitted Holders" means Michigan, Berkshire, Prudential, Management and
the CVC Group; provided that Michigan, Berkshire, Prudential, Management and
the CVC Group (other than CVC, Citicorp N.A. or any direct or indirect Wholly
Owned Subsidiary of Citicorp N.A., in each case, individually or on behalf of
the CVC Group, each of which may be a Permitted Holder irrespective of any such
entitlement) shall not be a Permitted Holder if it is entitled by "beneficial
ownership" (as defined in Rule 13d-3 and 13d-5 under the Exchange Act), by
contract or otherwise, to designate for election directors of either of the
Guarantors or the Company having a majority of the total voting power of the
Board of Directors of either of the Guarantors or the Company, as the case may
be.
"Permitted Indebtedness" means, without duplication, each of the
following:
(a) Indebtedness under the Securities, this Indenture, the
Guarantees and any Subsidiary Guarantee;
(b) Indebtedness incurred pursuant to the Revolving Credit Facility
in an aggregate principal amount at any time outstanding not to exceed
the greater of (a) the sum of (i) 85% of the net book value of accounts
receivable of the Company and the Restricted Subsidiaries and (ii) 60% of
the net book value of inventory of the Company and the Restricted
Subsidiaries and (b) $35,000,000, in each case reduced by any required
permanent repayments (which are accompanied by a corresponding permanent
commitment reduction) thereunder;
<PAGE> 22
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(c) Obligations under Interest Rate Agreements of the Company or a
Subsidiary Guarantor covering Indebtedness of the Company or any of the
Restricted Subsidiaries and Obligations under Interest Rate Agreements
of any Restricted Subsidiary (other than a Subsidiary Guarantor) covering
Indebtedness of such Restricted Subsidiary; provided, however, that such
Interest Rate Agreements are entered into to protect the Company and the
Restricted Subsidiaries from fluctuations in interest rates on
Indebtedness incurred in accordance with this Indenture to the extent the
notional amount (or, if acceptable, contract amount) of such Obligation
does not exceed the principal amount of the Indebtedness to which such
Obligation relates;
(d) Indebtedness of a Restricted Subsidiary to the Company or to
another Restricted Subsidiary for so long as such Indebtedness is held by
the Company or a Restricted Subsidiary, in each case subject to no Lien
held by a Person other than the Company or a Restricted Subsidiary;
provided that if as of any date any Person other than the Company or a
Restricted Subsidiary owns or holds any such Indebtedness or holds a Lien
in respect of such Indebtedness, such date shall be deemed the incurrence
of Indebtedness not constituting Permitted Indebtedness by the issuer of
such Indebtedness;
(e) Indebtedness of the Company to a Restricted Subsidiary for so
long as such Indebtedness is held by a Restricted Subsidiary, in each
case subject to no Lien; provided that (i) any Indebtedness of the
Company to any Restricted Subsidiary that is not a Subsidiary Guarantor
is unsecured and subordinated, pursuant to a written agreement, to the
Company's obligations under this Indenture and the Securities and (ii) if
as of any date any Person other than a Restricted Subsidiary owns or
holds any such Indebtedness or holds a Lien in respect of such
Indebtedness, such date shall be deemed the date of an incurrence of
Indebtedness not constituting Permitted Indebtedness by the Company;
(f) Indebtedness 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) drawn against
insufficient funds in the ordinary course of business; provided, however,
that such Indebtedness is extinguished within five Business Days of
incurrence;
(g) Indebtedness of the Company or any of the Restricted
Subsidiaries represented by letters of credit for the account of the
Company or such Restricted Subsidiary, as the case may be, in order to
provide security for workers' compensation claims, payment obligations in
connection with self-insurance or similar requirements in the ordinary
course of business;
(h) Refinancing Indebtedness; and
<PAGE> 23
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(i) additional Indebtedness of the Company or any Subsidiary
Guarantor in an aggregate principal amount not to exceed $5,000,000 at
any one time outstanding.
"Permitted Investments" means (a) Investments by the Company or any
Restricted Subsidiary in any Person that is or will become immediately after
such Investment a Restricted Subsidiary or that will merge or consolidate into
the Company or a Restricted Subsidiary; (b) Investments in the Company by any
Restricted Subsidiary; provided that any Indebtedness evidencing any such
Investment held by a Restricted Subsidiary that is not a Subsidiary Guarantor
is unsecured and subordinated, pursuant to a written agreement, to the
Company's obligations under the Securities and this Indenture; (c) investments
in cash and Cash Equivalents; (d) loans and advances to employees and officers
of the Company or any of the Restricted Subsidiaries in the ordinary course of
business for bona fide business purposes not in excess of $1,000,000 at any one
time outstanding; (e) Obligations under Interest Rate Agreements; provided,
however, that such Interest Rate Agreements are entered into to protect the
Company, or, if applicable, Restricted Subsidiaries from fluctuations in
interest rates on Indebtedness incurred in accordance with this Indenture; (f)
Investments in Unrestricted Subsidiaries not to exceed $1,000,000 at any one
time outstanding; (g) Investments in securities of trade creditors or customers
received pursuant to any plan of reorganization or similar arrangement upon the
bankruptcy or insolvency of such trade creditors or customers; (h) Investments
made by the Company or the Restricted Subsidiaries as a result of consideration
received in connection with an Asset Sale made in compliance with Section 4.12;
(i) Investments in the Securities; and (j) Investments not to exceed $1,000,000
at any one time outstanding in Persons a majority of whose revenues are derived
from business which, in the reasonable good faith judgment of the Board of
Directors of the Company, is related to the automotive industry.
"Permitted Liens" means the following types of Liens:
(a) Liens for taxes, assessments or governmental charges or claims
either (i) not delinquent or (ii) contested in good faith by appropriate
proceedings and as to which the Company or a Restricted Subsidiary, as
the case may be, shall have set aside on its books such reserves as may
be required pursuant to GAAP;
(b) statutory Liens of landlords and Liens of carriers,
warehousemen, mechanics, suppliers, materialmen, repairmen and other
Liens imposed by law incurred in the ordinary course of business for sums
not yet delinquent or being contested in good faith, if such reserve or
other appropriate provision, if any, as shall be required by GAAP shall
have been made in respect thereof;
<PAGE> 24
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(c) Liens incurred or deposits made in the ordinary course of
business in connection with workers' compensation, unemployment insurance
and other types of social security, 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);
(d) judgment Liens not giving rise to an Event of Default so long as
such Lien is adequately bonded and any appropriate legal proceedings
which may have been duly initiated for the review of such judgment shall
not have been finally terminated or the period within which such
proceedings may be initiated shall not have expired;
(e) easements, rights-of-way, zoning restrictions and other similar
charges or encumbrances in respect of real property not interfering in
any material respect with the ordinary conduct of the business of the
Company or any of the Restricted Subsidiaries;
(f) any interest or title of a lessor under any Capitalized Lease
Obligation; provided that such Liens do not extend to any property or
assets which is not leased property subject to such Capitalized Lease
Obligation;
(g) Liens securing Purchase Money Indebtedness of the Company or any
Restricted Subsidiary; provided, however, that (i) the Purchase Money
Indebtedness shall not be secured by any property or assets of the
Company or any Restricted Subsidiary other than the property and assets
so acquired and (ii) the Lien securing such Indebtedness shall be created
within 180 days of such acquisition;
(h) Liens securing reimbursement obligations with respect to
commercial letters of credit which encumber documents and other property
relating to such letters of credit and products and proceeds thereof;
(i) Liens encumbering deposits made to secure obligations arising
from statutory, regulatory, contractual, or warranty requirements of the
Company or any of the Restricted Subsidiaries, including rights of offset
and set-off;
(j) Liens securing Obligations under Interest Rate Agreements which
Obligations relate to Indebtedness that is otherwise permitted under this
Indenture; and
<PAGE> 25
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(k) Liens securing Acquired Indebtedness incurred in accordance with
Section 4.03; provided that (i) such Liens secured such Acquired
Indebtedness at the time of and prior to the incurrence of such Acquired
Indebtedness by the Company or a Restricted Subsidiary and were not
granted in connection with, or in anticipation of, the incurrence of such
Acquired Indebtedness by the Company or a Restricted Subsidiary and (ii)
such Liens do not extend to or cover any property or assets of the
Company or of any of the Restricted Subsidiaries other than the property
or assets that secured the Acquired Indebtedness prior to the time such
Indebtedness became Acquired Indebtedness of the Company or a Restricted
Subsidiary.
"Permitted Transferee" means (a) with respect to CVC, (i) Citicorp,
any direct or indirect Wholly Owned Subsidiary of Citicorp and any
officer, director or employee of CVC, Citicorp or any Wholly Owned Subsidiary
of Citicorp, (ii) any spouse or lineal descendent (including by adoption and
stepchildren) of the officers, directors and employees referred to in clause
(a)(i) above, (iii) any trust, corporation or partnership 100% in interest of
the beneficiaries, stockholders or partners of which consists of one or more of
the Persons described in clause (a)(i) or (ii) above; (b) with respect to the
Berkshire Fund, Berkshire Partners, Prudential Insurance Co. and Pruco Life
Insurance Co., each of their respective direct or indirect Wholly Owned
Subsidiaries; and (c) with respect to each officer, director and employee of
the Company, either of the Guarantors or a Subsidiary of the Company, (i) any
spouse or lineal descendent (including by adoption and stepchildren) of such
officer, director or employee and (ii) any trust, corporation or partnership
100% in interest of the beneficiaries, stockholders or partners of which
consists of one or more of any such officer, director or employee or any of the
Persons described in clause (c)(i) above.
"Person" means an individual, partnership, corporation,
unincorporated organization, trust or joint venture, or a governmental
agency or political subdivision thereof.
"Physical Securities" has the meaning provided in Section 2.01.
"Preferred Stock" of any Person means any Capital Stock of such
Person that has preferential rights to any other Capital Stock of such
Person with respect to dividends or redemptions or upon liquidation.
"Private Placement Legend" means the legend initially set forth on
the Securities in the form set forth on Exhibit A.
"pro forma" means, with respect to any calculation made or required
to be made pursuant to the terms of this Indenture, a calculation in
accordance with Article 11 of Regulation S-X
<PAGE> 26
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under the Securities Act as interpreted by the Company's Board of Directors in
consultation with its independent certified public accountants.
"Prudential" means, individually and collectively, Prudential Insurance
Co., Pruco Life Insurance Co. and each of their respective Permitted
Transferees.
"Public Equity Offering" has the meaning provided in Paragraph 6 of the
Securities.
"Purchase Agreement" means the purchase agreement dated as of August 8,
1996 by and among the Company, the Guarantors, the Subsidiary Guarantor and the
Initial Purchasers.
"Purchase Money Indebtedness" means Indebtedness the net proceeds of which
are used for the purchase of property or assets acquired in the normal course
of business by the Person incurring such Indebtedness.
"Qualified Capital Stock" means any Capital Stock that is not Disqualified
Capital Stock.
"Qualified Institutional Buyer" or "QIB" shall have the meaning specified
in Rule 144A under the Securities Act.
"Record Date" means the Record Dates specified in the Securities; provided
that if any such date is not a Business Day, the Record Date shall be the first
day immediately preceding such specified day that is a Business Day.
"Redemption Date," when used with respect to any Security to be redeemed,
means the date fixed for such redemption pursuant to this Indenture and the
Securities.
"Redemption Price," when used with respect to any Security to be redeemed,
means the price fixed for such redemption, payable in immediately available
funds, pursuant to this Indenture and the Securities.
"Reference Date" has the meaning provided in Section 4.04.
"Refinance" means, in respect of any security or Indebtedness, to
refinance, extend, renew, refund, repay, prepay, redeem, defease or retire, or
to issue a security or Indebtedness in exchange or replacement for, such
security or Indebtedness in whole or in part. "Refinanced" and "Refinancing"
shall have correlative meanings.
<PAGE> 27
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"Refinancing Indebtedness" means any Refinancing by the Company or any
Restricted Subsidiary of the Company of Indebtedness incurred in accordance
with Section 4.03 (other than pursuant to clause (b), (c), (d), (e), (f), (g)
or (i) of the definition of Permitted Indebtedness), in each case that does not
(i) result in an increase in the aggregate principal amount of Indebtedness of
such Person as of the date of such proposed Refinancing (plus the amount of any
premium required to be paid under the terms of the instrument governing such
Indebtedness and plus the amount of reasonable expenses incurred by the Company
and the Restricted Subsidiaries in connection with such Refinancing) or (ii)
create Indebtedness with (x) a Weighted Average Life to Maturity that is less
than the Weighted Average Life to Maturity of the Indebtedness being Refinanced
or (y) a final maturity earlier than the final maturity of the Indebtedness
being Refinanced; provided that (1) if such Indebtedness being Refinanced is
Indebtedness of the Company or a Subsidiary Guarantor, then such Refinancing
Indebtedness shall be Indebtedness solely of the Company and/or such Subsidiary
Guarantor and (2) if such Indebtedness being Refinanced is subordinate or
junior to the Securities or a Subsidiary Guarantee, then such Refinancing
Indebtedness shall be subordinate to the Securities or such Subsidiary
Guarantee, as the case may be, at least to the same extent and in the same
manner as the Indebtedness being Refinanced.
"Registered Exchange Offer" means the offer to exchange the Series B
Securities for all of the outstanding Series A Securities in accordance with
the Registration Rights Agreement.
"Registrar" has the meaning provided in Section 2.03.
"Registration Rights Agreement" means the Registration Rights Agreement
dated as of the Issue Date among the Company, the Guarantors, the Subsidiary
Guarantor and the Initial Purchasers.
"Regulation S" means Regulation S under the Securities Act.
"Replacement Assets" has the meaning provided in Section 4.12.
"Responsible Officer" shall mean, when used with respect to the Trustee,
any officer in the Corporate Trust Services of the Trustee including any vice
president, assistant vice president, assistant secretary, treasurer, assistant
treasurer, or any other officer of the Trustee who customarily performs
functions similar to those performed by the Persons who at the time shall be
such officers, respectively, or to whom any corporate trust matter is referred
because of such officer's knowledge of and familiarity with the particular
subject.
"Restricted Payment" has the meaning provided in Section 4.04.
<PAGE> 28
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"Restricted Security" has the meaning set forth in Rule 144(a)(3) under
the Securities Act; provided that the Trustee shall be entitled to request and
conclusively rely upon an Opinion of Counsel with respect to whether any
Security is a Restricted Security.
"Restricted Subsidiary" means any Subsidiary of the Company that has not
been designated by the Board of Directors of the Company, by a Board Resolution
delivered to the Trustee, as an Unrestricted Subsidiary pursuant to and in
compliance with Section 4.23. Any such Designation may be revoked by a Board
Resolution of the Company delivered to the Trustee, subject to the provisions
of such covenant.
"Revocation" has the meaning provided in Section 4.23.
"Revolving Credit Facility" means the Amended and Restated Credit
Agreement dated as of May 6, 1996, as amended by Amendment No. 1 thereto, among
the Company, the Guarantors, the Subsidiary Guarantor and NBD Bank, N.A., a
Michigan banking corporation, together with the related documents thereto
(including, without limitation, any guarantee agreements and security
documents), in each case as such agreements may be amended (including any
amendment and restatement thereof), supplemented or otherwise modified from
time to time, including any agreement extending the maturity of, refinancing,
replacing or otherwise restructuring (including increasing the amount of
available borrowings thereunder (provided that such increase in borrowings is
permitted under Section 4.03) or adding Subsidiaries of the Company as
additional borrowers or guarantors thereunder) all or any portion of the
Indebtedness under such agreement or any successor or replacement agreement and
whether by the same or any other agent, lender or group of lenders.
"Rule 144A" means Rule 144A under the Securities Act.
"Sale and Leaseback Transaction" means any direct or indirect arrangement
with any Person or to which any such Person is a party, providing for the
leasing to the Company or a Restricted Subsidiary of any property, whether
owned by the Company or any Restricted Subsidiary at the Issue Date or later
acquired, which has been or is to be sold or transferred by the Company or such
Restricted Subsidiary to such Person or to any other Person from whom funds
have been or are to be advanced by such Person on the security of such
property.
"SEC" means the Securities and Exchange Commission.
"Securities" means the Series A Securities and the Series B Securities
treated as a single class of securities, as amended or supplemented from time
to time in accordance with the terms hereof, that are issued pursuant to this
Indenture.
<PAGE> 29
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"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations of the SEC promulgated thereunder.
"Series A Securities" means the 11 7/8% Senior Notes due 2006, Series A,
of the Company issued pursuant to this Indenture and sold pursuant to the
Purchase Agreement.
"Series B Securities" means the 11 7/8% Senior Notes due 2006, Series B,
of the Company to be issued in exchange for the Series A Securities pursuant to
the Registered Exchange Offer and the Registration Rights Agreement.
"Significant Subsidiary" shall have the meaning set forth in Rule 1.02(v)
of Regulation S-X under the Securities Act.
"Subsidiary", with respect to any Person, means (a) any corporation of
which the outstanding Capital Stock having at least a majority of the votes
entitled to be cast in the election of directors under ordinary circumstances
shall at the time be owned, directly or indirectly, by such Person or (b) any
other Person of which at least a majority of the voting interest under ordinary
circumstances is at the time, directly or indirectly, owned by such Person.
"Subsidiary Guarantee" means the unconditional guarantee pursuant to
Article Ten by a Subsidiary Guarantor, on a senior basis, to each Holder and
the Trustee of the full and prompt performance of the Company's obligations
under this Indenture and the Securities, including the payment of principal of
and interest on the Securities.
"Subsidiary Guarantor" means (a) the Company's Subsidiary as of the Issue
Date and (b) each of the Company's Subsidiaries that in the future executes a
supplemental indenture in which such Subsidiary agrees to be bound by the terms
of this Indenture as a Subsidiary Guarantor; provided that any Person
constituting a Subsidiary Guarantor as described above shall cease to
constitute a Subsidiary Guarantor when its Subsidiary Guarantee is released in
accordance with the terms of this Indenture.
"Surviving Entity" has the meaning provided in Section 5.01.
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C. Section Section
77aaa-77bbbb), as amended, as in effect on the date of the execution of this
Indenture until such time as this Indenture is qualified under the TIA, and
thereafter as in effect on the date on which this Indenture is qualified under
the TIA, except as otherwise provided in Section 9.03.
<PAGE> 30
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"Trustee" means the party named as such in this Indenture until a
successor replaces it in accordance with the provisions of this Indenture and
thereafter means such successor.
"Unrestricted Subsidiary" means any Subsidiary of the Company designated
as such pursuant to and in compliance with Section 4.23. Any such designation
may be revoked by a Board Resolution of the Company delivered to the Trustee,
subject to the provisions of such covenant.
"U.S. Government Obligations" shall have the meaning provided in Section
8.01.
"U.S. Legal Tender" means such coin or currency of the United States of
America as at the time of payment shall be legal tender for the payment of
public and private debts.
"U.S. Physical Securities" shall have the meaning set forth in Section
2.01.
"Voting Stock" of a corporation means all classes of Capital Stock of such
corporation then outstanding and normally entitled to vote in the election of
the directors of such corporation.
"Weighted Average Life to Maturity" means, when applied to any
Indebtedness at any date, the number of years obtained by dividing (a) the then
outstanding aggregate principal amount of such Indebtedness into (b) the sum of
the total of the products obtained by multiplying (i) the amount of each then
remaining installment, sinking fund, serial maturity or other required payment
of principal, including payment at final maturity, in respect thereof, by (ii)
the number of years (calculated to the nearest one-twelfth) which will elapse
between such date and the making of such payment.
"Wholly Owned Restricted Subsidiary" means any Restricted Subsidiary of
which all the outstanding voting securities (other than in the case of a
foreign Restricted Subsidiary, directors' qualifying shares or an immaterial
amount of shares required to be owned by other Persons pursuant to applicable
law) are owned by the Company or another Wholly Owned Restricted Subsidiary.
"Wholly Owned Subsidiary" of any Person means a corporation of which all
the outstanding voting securities (other than in the case of a foreign
corporation, director's qualifying shares or an immaterial amount of shares
required to be owned by other Persons pursuant to applicable laws) are owned by
such Person or a Wholly Owned Subsidiary of such Person.
SECTION 1.02. Incorporation by Reference of TIA.
<PAGE> 31
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Whenever this Indenture refers to a provision of the TIA, such provision
is incorporated by reference in, and made a part of, this Indenture. The
following TIA terms used in this Indenture have the following meanings:
"Commission" means the SEC.
"indenture securities" means the Securities.
"indenture security holder" means a Holder or a Securityholder.
"indenture to be qualified" means this Indenture.
"indenture trustee" or "institutional trustee" means the Trustee.
"obligor" on the indenture securities means the Company, the Guarantors,
each Subsidiary Guarantor and any other obligor on the Securities.
All other TIA terms used in this Indenture that are defined by the TIA,
defined by TIA reference to another statute or defined by SEC rule and not
otherwise defined herein have the meanings assigned to them therein.
SECTION 1.013. Rules of Construction.
Unless the context otherwise requires:
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the meaning
assigned to it in accordance with GAAP;
(3) "or" is not exclusive;
(4) words in the singular include the plural, and words in the
plural include the singular;
(5) provisions apply to successive events and transactions; and
(6) "herein," "hereof" and other words of similar import refer to
this Indenture as a whole and not to any particular Article, Section or
other subdivision.
<PAGE> 32
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ARTICLE TWO
THE SECURITIES
SECTION 2.01. Form and Dating.
The Series A Securities and the Trustee's certificate of authentication
thereof shall be substantially in the form of Exhibit A annexed hereto, which
is hereby incorporated in and expressly made a part of this Indenture. The
Series B Securities and the Trustee's certificate of authentication thereof
shall be substantially in the form of Exhibit B annexed hereto, which is hereby
incorporated in and expressly made a part of this Indenture. The Securities
may have notations, legends or endorsements (including notations relating to
the Guarantees and Subsidiary Guarantees, stock exchange rule or usage). The
Company and the Trustee shall approve the form of the Securities and any
notation, legend or endorsement (including notations relating to the Guarantees
and Subsidiary Guarantees) on them. Each Security shall be dated the date of
its issuance and shall show the date of its authentication.
Securities offered and sold in reliance on Rule 144A shall be issued
initially in the form of one or more permanent Global Securities in registered
form, substantially in the form set forth in Exhibit A, deposited with the
Trustee, as custodian for the Depository, and shall bear the legend set forth
on Exhibit C. The aggregate principal amount of any Global Security may from
time to time be increased or decreased by adjustments made on the records of
the Trustee, as custodian for the Depository, as hereinafter provided.
Securities offered and sold in offshore transactions in reliance on
Regulation S shall be issued in the form of certificated Securities in
registered form in substantially the form set forth in Exhibit A (the "Offshore
Physical Securities"). Securities offered and sold in reliance on any other
exemption from registration under the Securities Act other than as described in
the preceding paragraph shall be issued, and Securities offered and sold in
reliance on Rule 144A may be issued, in the form of certificated Securities in
registered form in substantially the form set forth in Exhibit A (the "U.S.
Physical Securities"). The Offshore Physical Securities and the U.S. Physical
Securities are sometimes collectively herein referred to as the "Physical
Securities."
<PAGE> 33
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SECTION 2.02. Execution and Authentication.
Two Officers, or an Officer and an Assistant Secretary, shall sign, or one
Officer shall sign and one Officer or an Assistant Secretary (each of whom
shall, in each case, have been duly authorized by all requisite corporate
actions) shall attest to, the Securities for the Company by manual or facsimile
signature. The Company's seal shall also be reproduced on the Securities.
If an Officer or Assistant Secretary whose signature is on a Security was
an Officer or Assistant Secretary at the time of such execution but no longer
holds that office at the time the Trustee authenticates the Security, the
Security shall be valid nevertheless. Each Guarantor and each Subsidiary
Guarantor shall execute its Guarantee or Subsidiary Guarantee, as the case may
be, in the manner set forth in Section 10.07.
A Security shall not be valid until an authorized signatory of the Trustee
manually signs the certificate of authentication on the Security. The
signature shall be conclusive evidence that the Security has been authenticated
under this Indenture.
The Trustee shall authenticate (i) Series A Securities for original issue
in the aggregate principal amount not to exceed $85,000,000 and (ii) Series B
Securities from time to time for issue only in exchange for a like principal
amount of Series A Securities, in each case upon a written order of the Company
in the form of an Officers' Certificate. The Officers' Certificate shall
specify the amount of Securities to be authenticated, the series of Securities
and the date on which the Securities are to be authenticated. The aggregate
principal amount of Securities outstanding at any time may not exceed
$85,000,000, except as provided in Section 2.07. Upon receipt of a written
order of the Company in the form of an Officers' Certificate, the Trustee shall
authenticate Securities in substitution for Securities originally issued to
reflect any name change of the Company.
The Trustee may appoint an authenticating agent reasonably acceptable to
the Company to authenticate Securities. Unless otherwise provided in the
appointment, an authenticating agent may authenticate Securities whenever the
Trustee may do so. Each reference in this Indenture to authentication by the
Trustee includes authentication by such agent. An authenticating agent has the
same rights as an Agent to deal with the Company and Affiliates of the Company.
The Securities shall be issuable only in registered form without coupons
in denominations of $1,000 and any integral multiple thereof.
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SECTION 2.03. Registrar and Paying Agent.
The Company shall maintain an office or agency in the Borough of
Manhattan, The City of New York, where (a) Securities may be presented or
surrendered for registration of transfer or for exchange ("Registrar"), (b)
Securities may be presented or surrendered for payment ("Paying Agent") and (c)
notices and demands in respect of the Securities and this Indenture may be
served. The Registrar shall keep a register of the Securities and of their
transfer and exchange. The Company, upon written notice to the Trustee, may
have one or more co-Registrars and one or more additional Paying Agents
reasonably acceptable to the Trustee. The term "Paying Agent" includes any
additional Paying Agent. The Company initially appoints the Trustee as
Registrar and Paying Agent until such time as the Trustee has resigned or a
successor has been appointed. Neither the Company nor any Affiliate of the
Company may act as Paying Agent except as otherwise expressly provided in the
form of the Security.
To the extent the Company makes such payments directly to the Holders, the
Company shall simultaneously notify the Trustee thereof in writing.
SECTION 2.04. Paying Agent To Hold Assets in Trust.
The Company shall require each Paying Agent other than the Trustee to
agree in writing that each Paying Agent shall hold in trust for the benefit of
Holders or the Trustee all assets held by the Paying Agent for the payment of
principal of, or interest on, the Securities, and shall notify the Trustee in
writing of any Default by the Company in making any such payment. The Company
at any time may require a Paying Agent to distribute all assets held by it to
the Trustee and account for any assets disbursed and the Trustee may at any
time, but shall be under no obligation to, during the continuance of any
payment Default, upon written request to a Paying Agent, require such Paying
Agent to distribute all assets held by it to the Trustee and to account for any
assets distributed. Upon distribution to the Trustee of all assets that shall
have been delivered by the Company to the Paying Agent, the Paying Agent shall
have no further liability for such assets.
SECTION 2.05. Securityholder Lists.
The Trustee shall preserve in as current a form as is reasonably
practicable the most recent list available to it of the names and addresses of
Holders. If the Trustee is not the Registrar, the Company shall furnish to the
Trustee before each Record Date and at such other times as the Trustee may
request in writing a list as of such date and in such form as the Trustee may
reasonably require of the names and addresses of Holders, which list may be
conclusively relied upon by the Trustee.
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SECTION 2.06. Transfer and Exchange.
Subject to the provisions of Sections 2.15 and 2.16, when Securities are
presented to the Registrar or a co-Registrar with a request to register the
transfer of such Securities or to exchange such Securities for an equal
principal amount of Securities of other authorized denominations of the same
series, the Registrar or co-Registrar shall register the transfer or make the
exchange as requested if its requirements for such transaction are met;
provided, however, that the Securities surrendered for transfer or exchange
shall be duly endorsed or accompanied by a written instrument of transfer in
form satisfactory to the Company and the Registrar or co-Registrar, duly
executed by the Holder thereof or his attorney duly authorized in writing. To
permit registrations of transfers and exchanges, the Company shall execute and
the Trustee shall authenticate Securities at the Registrar's or co-Registrar's
written request. No service charge shall be made for any registration of
transfer or exchange, but the Company may require payment of a sum sufficient
to cover any transfer tax or similar governmental charge payable in connection
therewith (other than any such transfer taxes or other governmental charge
payable upon exchanges or transfers pursuant to Section 2.02, 2.10, 3.06, 4.12,
4.24 or 9.05). The Registrar or co-Registrar shall not be required to register
the transfer of or exchange of any Security (i) during a period beginning at
the opening of business 15 days before the mailing of a notice of redemption of
Securities and ending at the close of business on the day of such mailing and
(ii) selected for redemption in whole or in part pursuant to Article Three,
except the unredeemed portion of any Security being redeemed in part.
Any Holder of a Global Security shall, by acceptance of such Global
Security, agree that transfers of beneficial interests in such Global Security
may be effected only through a book-entry system maintained by the Depository
(or its agent), and that ownership of a beneficial interest in a Global
Security shall be required to be reflected in a book entry system.
SECTION 2.07. Replacement Securities.
If a mutilated Security is surrendered to the Trustee or if the Holder of
a Security claims that the Security has been lost, destroyed or wrongfully
taken, the Company shall issue and the Trustee shall authenticate upon written
notice from the Company a replacement Security if the Trustee's requirements
are met. If required by the Trustee or the Company, such Holder must provide
an indemnity bond or other indemnity, sufficient in the judgment of both the
Company and the Trustee, to protect the Company, the Trustee and any Agent from
any loss which any of them may suffer if a Security is replaced. The Company
may charge such Holder for its reasonable, out-of-pocket expenses in replacing
a Security, including reasonable fees and expenses of counsel. Every
replacement Security is an additional obligation of the Company.
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SECTION 2.08. Outstanding Securities.
Securities outstanding at any time are all the Securities that have been
authenticated by the Trustee except those cancelled by it, those delivered to
it for cancellation and those described in this Section as not outstanding.
Subject to Section 2.09, a Security does not cease to be outstanding because
the Company or any of its Affiliates holds the Security.
If a Security is replaced pursuant to Section 2.07 (other than a mutilated
Security surrendered for replacement), it ceases to be outstanding unless the
Trustee receives proof satisfactory to it that the replaced Security is held by
a bona fide purchaser. A mutilated Security ceases to be outstanding upon
surrender of such Security and replacement thereof pursuant to Section 2.07.
If on a Redemption Date or the Final Maturity Date the Paying Agent holds
U.S. Legal Tender or U.S. Government Obligations sufficient to pay all of the
principal and interest due on the Securities payable on that date, then on and
after that date such Securities cease to be outstanding and interest on them
ceases to accrue.
SECTION 2.09. Treasury Securities.
In determining whether the Holders of the required principal amount of
Securities have concurred in any direction, waiver or consent, Securities owned
by the Company, the Guarantors, the Subsidiary Guarantors or any of their
respective Affiliates shall be disregarded, except that, for the purposes of
determining whether the Trustee shall be protected in relying on any such
direction, waiver or consent, only Securities that a Responsible Officer of the
Trustee actually knows are so owned shall be disregarded.
The Trustee may require an Officers' Certificate listing Securities owned
by the Company, a Guarantor, a Subsidiary Guarantor or any of their respective
Affiliates.
SECTION 2.10. Temporary Securities.
Until definitive Securities are ready for delivery, the Company may
prepare and the Trustee shall authenticate temporary Securities upon receipt of
a written order of the Company in the form of an Officers' Certificate. The
Officers' Certificate shall specify the amount of temporary Securities to be
authenticated and the date on which the temporary Securities are to be
authenticated. Temporary Securities shall be substantially in the form of
definitive Securities but may have variations that the Company considers
appropriate for temporary Securities. Without unreasonable
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delay, the Company shall prepare and the Trustee shall authenticate upon
receipt of a written order of the Company pursuant to Section 2.02 definitive
Securities in exchange for temporary Securities.
SECTION 2.11. Cancellation.
The Company at any time may deliver Securities to the Trustee for
cancellation. The Registrar and the Paying Agent shall forward to the Trustee
any Securities surrendered to them for transfer, exchange or payment. The
Trustee, or at the direction of the Trustee, the Registrar or the Paying Agent,
and no one else, shall cancel and, at the written direction of the Company,
shall dispose of all Securities surrendered for transfer, exchange, payment or
cancellation. Subject to Section 2.07, the Company may not issue new
Securities to replace Securities that it has paid or delivered to the Trustee
for cancellation. If the Company or any Guarantor or Subsidiary Guarantor
shall acquire any of the Securities, such acquisition shall or Subsidiary
Guarantor not operate as a redemption or satisfaction of the Indebtedness
represented by such Securities unless and until the same are surrendered to the
Trustee for cancellation pursuant to this Section 2.11.
SECTION 2.12. Defaulted Interest.
If the Company defaults in a payment of interest on the Securities, it
shall pay interest on overdue principal and on overdue installments of interest
(without grace periods) from time to time on demand at the rate of 2% per annum
in excess of the rate shown on the Security.
SECTION 2.13. CUSIP Number.
The Company in issuing the Securities will use a "CUSIP" number, and if
so, the Trustee shall use the CUSIP number in notices of redemption or
exchange as a convenience to Holders; provided that any such notice may state
that no representation is made as to the correctness or accuracy of the CUSIP
number printed in the notice or on the Securities, and that reliance may be
placed only on the other identification numbers printed on the Securities.
SECTION 2.14. Deposit of Moneys.
Prior to 11:00 a.m. New York City time on each Interest Payment Date and
the Final Maturity Date, the Company shall have either delivered by wire
transfer or check such interest or principal and interest, as the case may be
to Holders at such Holders registered address or deposited with the Paying
Agent in immediately available funds money sufficient to make cash payments, if
any, due on such Interest Payment Date or the Final Maturity Date, as the case
may be, in a timely manner which permits the Paying Agent to remit payment to
the Holders on such Interest Payment Date or the Final Maturity Date, as the
case may be.
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SECTION 2.15. Book-Entry Provisions for Global Securities.
(a) The Global Securities initially shall (i) be registered in the name of
the Depository or the nominee of such Depository, (ii) be delivered to the
Trustee as custodian for such Depository and (iii) bear legends as set forth in
Exhibit C.
Members of, or participants in, the Depository ("Participants") shall have
no rights under this Indenture with respect to any Global Security held on
their behalf by the Depository, or the Trustee as its custodian, or under the
Global Security, and the Depository may be treated by the Company, the Trustee
and any agent of the Company or the Trustee as the absolute owner of the Global
Security for all purposes whatsoever. Notwithstanding the foregoing, nothing
herein shall prevent the Company, the Trustee or any agent of the Company or
the Trustee from giving effect to any written certification, proxy or other
authorization furnished by the Depository or impair, as between the Depository
and Participants, the operation of customary practices governing the exercise
of the rights of a Holder of any Security.
(b) Transfers of Global Securities shall be limited to transfers in whole,
but not in part, to the Depository, its successors or their respective
nominees. Interests of beneficial owners in the Global Securities may be
transferred or exchanged for Physical Securities in accordance with the rules
and procedures of the Depository and the provisions of Section 2.16. In
addition, Physical Securities shall be transferred to all beneficial owners in
exchange for their beneficial interests in Global Securities if (i) the
Depository notifies the Company that it is unwilling or unable to continue as
Depository for any Global Security and a successor depositary is not appointed
by the Company within 90 days of such notice or (ii) an Event of Default has
occurred and is continuing and the Registrar has received a request from the
Depository to issue Physical Securities.
(c) In connection with the transfer of Global Securities as an entirety to
beneficial owners pursuant to paragraph (b) of this Section 2.15, the Global
Securities shall be deemed to be surrendered to the Trustee for cancellation,
and the Company shall execute, and the Trustee shall upon written instructions
from the Company authenticate and deliver, to each beneficial owner identified
by the Depository in exchange for its beneficial interest in the Global
Securities, an equal aggregate principal amount of Physical Securities of
authorized denominations.
(d) Any Physical Security constituting a Restricted Security delivered in
exchange for an interest in a Global Security pursuant to paragraph (b) or (d)
of this Section 2.15 shall, except as otherwise provided by Section 2.16, bear
the Private Placement Legend.
<PAGE> 39
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(e) The Holder of any Global Security may grant proxies and otherwise
authorize any Person, including Participants and Persons that may hold
interests through Participants, to take any action which a Holder is entitled
to take under this Indenture or the Securities.
SECTION 2.16. Registration of Transfers and Exchanges.
(a) Transfer and Exchange of Physical Securities. When Physical
Securities are presented to the Registrar with a request:
(i) to register the transfer of the Physical Securities;
or
(ii) to exchange such Physical Securities for an equal
number of Physical Securities of other authorized denominations,
the Registrar shall register the transfer or make the exchange as requested if
the requirements under this Indenture as set forth in this Section 2.16 for
such transactions are met; provided, however, that the Physical Securities
presented or surrendered for registration of transfer or exchange:
(I) shall be duly endorsed or accompanied by a written
instrument of transfer in form satisfactory to the Registrar or
co-Registrar, duly executed by the Holder thereof or his
attorney duly authorized in writing; and
(II) in the case of Physical Securities the offer and sale
of which have not been registered under the Securities Act, such
Physical Securities shall be accompanied, in the sole discretion
of the Company, by the following additional information and
documents, as applicable:
(A) if such Physical Security is being delivered to
the Registrar by a holder for registration in the name of such
holder, without transfer, a certification from such holder to
that effect (in substantially the form of Exhibit D hereto);
or
(B) if such Physical Security is being transferred to
a Qualified Institutional Buyer in accordance with Rule 144A
under the Securities Act, a certification to that effect (in
substantially the form of Exhibit D hereto); or
(C) if such Physical Security is being transferred to
an Institutional Accredited Investor, delivery of a
certification to that effect (in substantially the form of
Exhibit D hereto) and a Transferee Certificate for
Institutional Accredited Investors in substantially the form
of Exhibit E hereto; or
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(D) if such Physical Security is being transferred in
reliance on Regulation S, delivery of a certification to that
effect (in substantially the form of Exhibit D hereto) and a
Transferee Certificate for Regulation S Transfers in
substantially the form of Exhibit F hereto and an Opinion of
Counsel reasonably satisfactory to the Company to the effect
that such transfer is in compliance with the Securities Act;
or
(E) if such Physical Security is being transferred in
reliance on Rule 144 under the Securities Act, delivery of a
certification to that effect (in substantially the form of
Exhibit D hereto) and an Opinion of Counsel reasonably
satisfactory to the Company to the effect that such transfer
is in compliance with the Securities Act; or
(F) if such Physical Security is being transferred in
reliance on another exemption from the registration
requirements of the Securities Act, a certification to that
effect (in substantially the form of Exhibit D hereto) and an
Opinion of Counsel reasonably satisfactory to the Company to
the effect that such transfer is in compliance with the
Securities Act.
(b) Restrictions on Transfer of a Physical Security for a Beneficial
Interest in a Global Security. A Physical Security may not be exchanged for a
beneficial interest in a Global Security except upon satisfaction of the
requirements set forth below. Upon receipt by the Registrar of a Physical
Security, duly endorsed or accompanied by appropriate instruments of transfer,
in form satisfactory to the Registrar, together with:
(A) a certification, in substantially the form of
Exhibit D hereto, that such Physical Security is being
transferred to a Qualified Institutional Buyer; and
(B) written instructions directing the Registrar to
make, or to direct the Depository to make, an endorsement on
the Global Security to reflect an increase in the aggregate
amount of the Securities represented by the Global Security,
then the Registrar shall cancel such Physical Security and cause, or direct the
Depository to cause, in accordance with the standing instructions and
procedures existing between the Depository and the Registrar, the number of
Securities represented by the Global Security to be increased accordingly. If
no Global Security is then outstanding, the Company shall issue and the Trustee
shall upon written instructions from the Company authenticate a new Global
Security in the appropriate amount.
<PAGE> 41
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(c) Transfer and Exchange of Global Securities. The transfer and
exchange of Global Securities or beneficial interests therein shall be
effected through the Depository, in accordance with this Indenture (including
the restrictions on transfer set forth herein) and the procedures of the
Depository therefor.
(d) Transfer of a Beneficial Interest in a Global Security for a
Physical Security.
(i) Any Person having a beneficial interest in a Global
Security may upon request exchange such beneficial interest for a
Physical Security. Upon receipt by the Registrar of written
instructions or such other form of instructions as is customary for
the Depository from the Depository or its nominee on behalf of any
Person having a beneficial interest in a Global Security and upon
receipt by the Trustee of a written order or such other form of
instructions as is customary for the Depository or the Person
designated by the Depository as having such a beneficial interest
containing registration instructions and, in the case of any such
transfer or exchange of a beneficial interest in Securities the
offer and sale of which have not been registered under the
Securities Act, the following additional information and documents:
(A) if such beneficial interest is being transferred
to the Person designated by the Depository as being the
beneficial owner, a certification from such Person to that
effect (in substantially the form of Exhibit D hereto); or
(B) if such beneficial interest is being transferred
to a Qualified Institutional Buyer in accordance with Rule
144A under the Securities Act, a certification to that effect
(in substantially the form of Exhibit D hereto); or
(C) if such beneficial interest is being transferred
to an Institutional Accredited Investor, delivery of a
certification to that effect (in substantially the form of
Exhibit D hereto) and a Certificate for Institutional
Accredited Investors in substantially the form of Exhibit E
hereto; or
(D) if such beneficial interest is being transferred
in reliance on Regulation S, delivery of a certification to
that effect (in substantially the form of Exhibit D hereto)
and a Transferee Certificate for Regulation S Transfers in
substantially the form of Exhibit F hereto and an Opinion of
Counsel reasonably satisfactory to the Company to the effect
that such transfer is in compliance with the Securities Act;
or
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(E) if such beneficial interest is being transferred
in reliance on Rule 144 under the Securities Act, delivery of
a certification to that effect (in substantially the form of
Exhibit D hereto) and an Opinion of Counsel reasonably
satisfactory to the Company to the effect that such transfer
is in compliance with the Securities Act; or
(F) if such beneficial interest is being transferred
in reliance on another exemption from the registration
requirements of the Securities Act, a certification to that
effect (in substantially the form of Exhibit D hereto) and an
Opinion of Counsel reasonably satisfactory to the Company to
the effect that such transfer is in compliance with the
Securities Act,
then the Registrar will cause, in accordance with the standing
instructions and procedures existing between the Depository and the
Registrar, the aggregate amount of the Global Security to be
reduced and, following such reduction, the Company will execute
and, upon receipt of an authentication order in the form of an
Officers' Certificate, the Trustee will authenticate and deliver to
the transferee a Physical Security.
(ii) Securities issued in exchange for a beneficial interest in
a Global Security pursuant to this Section 2.16(d) shall be
registered in such names and in such authorized denominations as
the Depository, pursuant to instructions from its direct or
indirect participants or otherwise, shall instruct the Registrar in
writing. The Registrar shall deliver such Physical Securities to
the Persons in whose names such Physical Securities are so
registered.
(e) Restrictions on Transfer and Exchange of Global Securities.
Notwithstanding any other provisions of this Indenture, a Global Security may
not be transferred as a whole except by the Depository to a nominee of the
Depository or by a nominee of the Depository to the Depository or another
nominee of the Depository or by the Depository or any such nominee to a
successor Depository or a nominee of such successor Depository.
(f) Private Placement Legend. Upon the transfer, exchange or
replacement of Securities not bearing the Private Placement Legend, the
Registrar shall deliver Securities that do not bear the Private Placement
Legend. Upon the transfer, exchange or replacement of Securities bearing the
Private Placement Legend, the Registrar shall deliver only Securities that bear
the Private Placement Legend unless, and the Trustee is hereby authorized to
deliver Securities without the Private Placement Legend if, (i) there is
delivered to the Trustee an Opinion of Counsel reasonably satisfactory to the
Company and the Trustee to the effect that neither such legend nor the related
<PAGE> 43
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restrictions on transfer are required in order to maintain compliance with the
provisions of the Securities Act or (ii) such Security has been sold pursuant
to an effective registration statement under the Securities Act.
(g) General. By its acceptance of any Security bearing the Private
Placement Legend, each Holder of such a Security acknowledges the restrictions
on transfer of such Security set forth in this Indenture and in the Private
Placement Legend and agrees that it will transfer such Security only as
provided in this Indenture.
The Registrar shall retain copies of all letters, notices and other
written communications received pursuant to Section 2.15 or this Section 2.16.
The Company shall have the right to inspect and make copies of all such
letters, notices or other written communications at any reasonable time upon
the giving of reasonable written notice to the Registrar.
SECTION 2.17. Designation.
The Indebtedness evidenced by the Securities is hereby irrevocably
designated as "senior indebtedness" or such other term denoting seniority for
the purposes of any future Indebtedness of the Company which the Company makes
subordinate to any senior indebtedness or such other term denoting seniority.
ARTICLE THREE
REDEMPTION
SECTION 3.01. Notices to Trustee.
If the Company elects to redeem Securities pursuant to Paragraph 5 or
Paragraph 6 of the Securities, it shall notify the Trustee in writing of the
Redemption Date, the Redemption Price and the principal amount of Securities to
be redeemed. The Company shall give notice of redemption to Trustee at least
30 days but not more than 60 days before the Redemption Date (unless a shorter
notice shall be agreed to by the Trustee in writing), together with an
Officers' Certificate stating that such redemption will comply with the
conditions contained herein.
<PAGE> 44
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SECTION 3.02. Selection of Securities To Be Redeemed.
If fewer than all of the Securities are to be redeemed, the Trustee shall
select the Securities to be redeemed in compliance with the requirements of the
principal national securities exchange, if any, on which the Securities are
listed or, if the Securities are not listed on a national securities exchange,
on a pro rata basis, by lot or by such method as the Trustee shall deem fair
and appropriate; provided, however, that if the Securities are redeemed
pursuant to Paragraph 6 of the Securities, the Securities shall be redeemed
solely on a pro rata basis or on as nearly a pro rata basis as is practicable
(subject to the procedures of the Depository) unless the securities exchange,
if any, on which the Securities are listed requires a different method. If the
Securities are listed on any national securities exchange, the Company shall
notify the Trustee in writing of the requirements of such exchange in respect
of any redemption. The Trustee shall make the selection from the Securities
outstanding and not previously called for redemption and shall promptly notify
the Company in writing of the Securities selected for redemption and, in the
case of any Security selected for partial redemption, the principal amount
thereof to be redeemed. Securities in denominations of less than $1,000 may be
redeemed only in whole. The Trustee may select for redemption portions (equal
to $1,000 or any integral multiple thereof) of the principal of Securities that
have denominations larger than $1,000. Provisions of this Indenture that apply
to Securities called for redemption also apply to portions of Securities called
for redemption.
SECTION 3.03. Notice of Redemption.
At least 30 days but not more than 60 days before a Redemption Date, the
Company shall mail or cause to be mailed a notice of redemption by first-class
mail, postage prepaid, to each Holder whose Securities are to be redeemed. At
the Company's written request, the Trustee shall give the notice of redemption
in the Company's name and at the Company's expense. Each notice for redemption
shall identify the Securities to be redeemed and shall state:
(1) the Redemption Date;
(2) the Redemption Price and the amount of accrued interest, if any,
to be paid;
(3) the name and address of the Paying Agent;
(4) that Securities called for redemption must be surrendered to the
Paying Agent to collect the Redemption Price plus accrued interest, if
any;
(5) that, unless the Company defaults in making the redemption
payment, interest on Securities called for redemption ceases to accrue on
and after the Redemption Date, and
<PAGE> 45
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the only remaining right of the Holders of such Securities is to receive
payment of the Redemption Price and accrued interest, if any, to the
Redemption Date upon surrender to the Paying Agent of the Securities
redeemed;
(6) if any Security is being redeemed in part, the portion of the
principal amount of such Security to be redeemed and that, after the
Redemption Date, and upon surrender of such Security, a new Security or
Securities in aggregate principal amount equal to the unredeemed portion
thereof will be issued;
(7) if fewer than all the Securities are to be redeemed, the
identification of the particular Securities (or portion thereof) to be
redeemed, as well as the aggregate principal amount of Securities to be
redeemed and the aggregate principal amount of Securities to be
outstanding after such partial redemption; and
(8) the Paragraph of the Securities pursuant to which the Securities
are to be redeemed.
SECTION 3.04. Effect of Notice of Redemption.
Once notice of redemption is mailed in accordance with Section 3.03,
Securities called for redemption become due and payable on the Redemption Date
and at the Redemption Price plus accrued interest, if any. Upon surrender to
the Paying Agent, such Securities called for redemption shall be paid at the
Redemption Price (which shall include accrued interest thereon to the
Redemption Date), but installments of interest, the maturity of which is on or
prior to the Redemption Date, shall be payable to Holders of record at the
close of business on the relevant Record Dates.
SECTION 3.05. Deposit of Redemption Price.
On or before the Redemption Date, the Company shall deposit with the
Paying Agent U.S. Legal Tender sufficient to pay the Redemption Price plus
accrued interest, if any, of all Securities to be redeemed on that date.
If the Company complies with the preceding paragraph, then, unless the
Company defaults in the payment of such Redemption Price plus accrued interest,
if any, interest on the Securities to be redeemed will cease to accrue on and
after the applicable Redemption Date, whether or not such Securities are
presented for payment.
<PAGE> 46
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SECTION 3.06. Securities Redeemed in Part.
Upon surrender of a Security that is to be redeemed in part, the Trustee
shall upon written instruction from the Company authenticate for the Holder a
new Security or Securities equal in principal amount to the unredeemed portion
of the Security surrendered.
ARTICLE FOUR
COVENANTS
SECTION 4.01. Payment of Securities.
The Company shall pay the principal of and interest on the Securities in
the manner provided in the Securities. An installment of principal of or
interest on the Securities shall be considered paid on the date it is due if
the Trustee or Paying Agent holds on that date U.S. Legal Tender designated for
and sufficient to pay the installment.
The Company shall pay, to the extent such payments are lawful, interest on
overdue principal and it shall pay interest on overdue installments of interest
(without regard to any applicable grace periods) from time to time on demand at
the rate borne by the Securities plus 2% per annum. Interest will be computed
on the basis of a 360-day year comprised of twelve 30-day months.
SECTION 4.02. Maintenance of Office or Agency.
The Company shall maintain in the Borough of Manhattan, The City of New
York, the office or agency required under Section 2.03. The Company shall give
prompt written notice to the Trustee of the location, and any change in the
location, of such office or agency. If at any time the Company shall fail to
maintain any such required office or agency or shall fail to furnish the
Trustee with the address thereof, such presentations, surrenders, notices and
demands may be made or served at the address of the Trustee set forth in
Section 11.02. The Company hereby initially designates the Norwest Trust
Company of New York, 3 New York Plaza, 15th Floor, New York, New York 10004, as
its office or agency in the Borough of Manhattan, The City of New York.
<PAGE> 47
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SECTION 4.03. Limitation on Incurrence of Additional
Indebtedness.
The Company will not, and will not permit any of the Restricted
Subsidiaries to, directly or indirectly, create, incur, assume, guarantee,
acquire, become liable with respect to, or otherwise become responsible for
payment of (collectively, "incur") any Indebtedness (other than Permitted
Indebtedness); provided, however, that if no Default or Event of Default shall
have occurred and be continuing at the time of or as a consequence of the
incurrence of any such Indebtedness, the Company or any Subsidiary Guarantor
may incur Indebtedness (including, without limitation, Acquired Indebtedness)
and any Restricted Subsidiary may incur Acquired Indebtedness, in each case, if
on the date of the incurrence of such Indebtedness, after giving effect to the
incurrence thereof, the Consolidated Fixed Charge Coverage Ratio of the Company
is greater than (a) 2.0 to 1.0, if the date of such incurrence is on or prior
to August 13, 1997 or (b) 2.25 to 1.0, if the date of such incurrence is after
August 13, 1997.
Indebtedness of a Person existing at the time such Person becomes a
Restricted Subsidiary or which is secured by a Lien on an asset acquired by the
Company or a Restricted Subsidiary (whether or not such Indebtedness is assumed
by the acquiring Person) shall be deemed incurred at the time the Person
becomes a Restricted Subsidiary or at the time of the asset acquisition, as the
case may be.
The Company will not, and will not permit any Subsidiary Guarantor to
incur any Indebtedness which by its terms (or by the terms of any agreement
governing such Indebtedness) is subordinated in right of payment to any other
Indebtedness of the Company or such Subsidiary Guarantor unless such
Indebtedness is also by its terms (or by the terms of any agreement governing
such Indebtedness) subordinated in right of payment to the Securities or the
Subsidiary Guarantee of such Subsidiary Guarantor, as the case may be, at least
to the same extent and in the same manner as such Indebtedness is subordinated
to any such other Indebtedness.
SECTION 4.04. Limitation on Restricted Payments.
The Company will not, and will not cause or permit any of the Restricted
Subsidiaries to, directly or indirectly, (a) declare or pay any dividend or
make any distribution (other than dividends or distributions payable in
Qualified Capital Stock of the Company) on or in respect of shares of the
Company's Capital Stock to holders of such Capital Stock, (b) purchase, redeem
or otherwise acquire or retire for value any Capital Stock of the Company or
either of the Guarantors or any warrants, rights or options to purchase or
acquire shares of any class of such Capital Stock, (c) make any principal
payment on, purchase, defease, redeem, prepay, decrease or otherwise acquire
or retire for value, prior to any scheduled final maturity, scheduled repayment
or scheduled
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sinking fund payment, any Indebtedness of the Company or a Subsidiary Guarantor
that is subordinate or junior in right of payment to the Securities or such
Subsidiary Guarantor's Subsidiary Guarantee, as the case may be, or (d) make
any Investment (other than a Permitted Investment) (each of the foregoing
actions set forth in clauses (a), (b) (c) and (d) being referred to as a
"Restricted Payment"), if at the time of such Restricted Payment or immediately
after giving effect thereto, (i) a Default or an Event of Default shall have
occurred and be continuing or (ii) the Company is not able to incur at least
$1.00 of additional Indebtedness (other than Permitted Indebtedness) in
compliance with Section 4.03 or (iii) the aggregate amount of Restricted
Payments (including such proposed Restricted Payment) made subsequent to the
Issue Date (the amount expended for such purposes, if other than in cash, being
the fair market value of such property as determined reasonably and in good
faith by the Board of Directors of the Company) shall exceed the sum of: (w)
50% of the cumulative Consolidated Net Income (or if cumulative Consolidated
Net Income shall be a loss, minus 100% of such loss) of the Company earned
subsequent to the Issue Date and on or prior to the date the Restricted Payment
occurs (the "Reference Date") (treating such period as a single accounting
period); plus (x) 100% of the aggregate net cash proceeds received by the
Company from any Person (other than a Subsidiary of the Company) from the
issuance and sale subsequent to the Issue Date and on or prior to the Reference
Date of Qualified Capital Stock of the Company; plus (y) without duplication of
any amounts included in clause (iii)(x) above, 100% of the aggregate net cash
proceeds of any equity contribution received by the Company from a holder of
the Company's Capital Stock (excluding, in the case of clauses (iii)(x) and (y)
above, any net cash proceeds from a Public Equity Offering to the extent used
to redeem the Securities pursuant to the redemption provisions thereof); plus
(z) an amount equal to the consolidated net Investments on the date of
Revocation made by the Company and/or any of the Restricted Subsidiaries in any
Subsidiary of the Company that has been designated an Unrestricted Subsidiary
after the Issue Date upon its redesignation as a Restricted Subsidiary in
accordance with Section 4.23.
Notwithstanding the foregoing, the provisions set forth in the immediately
preceding paragraph shall not prohibit: (1) (A) the payment of a dividend by
the Company on the Issue Date not to exceed $11,715,576 or (B) the payment of
any dividend or distribution within 60 days after the date of declaration of
such dividend or distribution if the dividend or distribution would have been
permitted on the date of declaration; (2) if no Default or Event of Default
shall have occurred and be continuing, the acquisition of any shares of Capital
Stock of the Company, either (A) solely in exchange for shares of Qualified
Capital Stock of the Company or (B) through the application of net proceeds of
a substantially concurrent sale for cash (other than to a Subsidiary of the
Company) of shares of Qualified Capital Stock of the Company; (3) if no Default
or Event of Default shall have occurred and be continuing, the acquisition of
any Indebtedness of the Company or a Subsidiary Guarantor that is subordinate
or junior in right of payment to the Securities or such Subsidiary Guarantor's
Subsidiary Guarantee, as the case may be, either (A) solely in exchange for
shares of Qualified Capital Stock of the Company, or (B) through the
application of net proceeds of a
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substantially concurrent sale for cash (other than to a Subsidiary of the
Company) of (I) shares of Qualified Capital Stock of the Company or (II)
Refinancing Indebtedness; (4) the making of payments by the Company to either
of the Guarantors in an amount not in excess of the Federal, state and local
income tax liability that the Company and its Subsidiaries would have been
liable for if the Company, together with its Subsidiaries, had filed its tax
return on a stand-alone basis; provided that such payments shall be made by the
Company no earlier than five days prior to the date on which such Guarantor is
required to make its payments to the Internal Revenue Service or state or local
taxing authorities, as the case may be; (5) if no Default or Event of Default
shall have occurred and be continuing, the making of payments by the Company to
either of the Guarantors to pay corporate overhead expenses (including, without
limitation, directors' fees and expenses), not to exceed $250,000 in any fiscal
year; (6) if no Default or Event of Default shall have occurred and be
continuing, the making of payments by the Company to either of the Guarantors
to repurchase Capital Stock of such Guarantor beneficially owned by directors,
officers and employees of the Company, any of its Subsidiaries or the
Guarantors pursuant to the terms of employment contracts or employee benefit
plans of the Company, any of its Subsidiaries or the Guarantors not to exceed
$500,000 in any fiscal year; (7) if no Default or Event of Default shall have
occurred and be continuing, the making of other Restricted Payments not to
exceed $2.0 million in the aggregate; and (8) the redemption, repurchase or
other acquisition of shares of Capital Stock of the Company in satisfaction of
indemnification or similar claims arising under any merger, asset purchase,
stock purchase or similar acquisition agreement pursuant to which such shares
of Capital Stock were issued. In determining the aggregate amount of
Restricted Payments made subsequent to the Issue Date in accordance with clause
(iii) of the immediately preceding paragraph, amounts expended pursuant to
clauses (1)(B), (2)(B), (3)(B)(I), (5), (6) and (7) shall be included in such
calculation.
SECTION 4.05. Corporate Existence.
Except as otherwise permitted by Article Five, the Company shall do or
cause to be done all things necessary to preserve and keep in full force and
effect its corporate existence and the corporate, partnership or other
existence of each of the Restricted Subsidiaries in accordance with the
respective organizational documents of each Restricted Subsidiary and the
rights (charter and statutory) and material franchises of the Company and each
of its Restricted Subsidiaries; provided, however, that the Company shall not
be required to preserve any such right or franchise, or the corporate existence
of any Restricted Subsidiary, if the Board of Directors of the Company shall
determine that the preservation thereof is no longer desirable in the conduct
of the business of the Company and its Restricted Subsidiaries, taken as a
whole, and that the loss thereof is not, and will not be, adverse in any
material respect to the Holders.
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SECTION 4.06. Payment of Taxes and Other Claims.
The Company shall pay or discharge or cause to be paid or discharged,
before the same shall become delinquent, (i) all material taxes, assessments
and governmental charges levied or imposed upon it or any of the Restricted
Subsidiaries or upon the income, profits or property of it or any of the
Restricted Subsidiaries and (ii) all lawful claims for labor, materials and
supplies which, in each case, if unpaid, might by law become a material
liability or Lien upon the property of it or any of the Restricted
Subsidiaries; provided, however, that the Company shall not be required to pay
or discharge or cause to be paid or discharged any such tax, assessment, charge
or claim whose amount, applicability or validity is being contested in good
faith by appropriate proceedings and for which appropriate provision has been
made.
SECTION 4.07. Maintenance of Properties and Insurance.
(1) The Company shall cause all material properties owned by or leased by
it or any of the Restricted Subsidiaries used or useful to the conduct of its
business or the business of any of the Restricted Subsidiaries to be improved
or maintained and kept in normal condition, repair and working order and
supplied with all necessary equipment and shall cause to be made all necessary
repairs, renewals, replacements, betterments and improvements thereof, all as
in its judgment may be necessary, so that the business carried on in connection
therewith may be properly and advantageously conducted at all times; provided,
however, that nothing in this Section 4.07 shall prevent the Company or any of
the Restricted Subsidiaries from discontinuing the use, operation or
maintenance of any of such properties, or disposing of any of them, if such
discontinuance or disposal is, in the judgment of the Board of Directors of the
Company or of the Board of Directors of any Restricted Subsidiary, or of an
officer (or other agent employed by the Company or of any of the Restricted
Subsidiaries) of the Company or any of its Restricted Subsidiaries having
managerial responsibility for any such property, desirable in the conduct of
the business of the Company or any Restricted Subsidiary, and if such
discontinuance or disposal is not adverse in any material respect to the
Holders.
(2) The Company shall maintain, and shall cause the Restricted
Subsidiaries to maintain, insurance with responsible carriers against such
risks and in such amounts, and with such deductibles, retentions, self-insured
amounts and co-insurance provisions, as are customarily carried by similar
businesses of similar size, including property and casualty loss, workers'
compensation and interruption of business insurance.
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SECTION 4.08. Compliance Certificate; Notice of Default.
(1) The Company shall deliver to the Trustee, within 100 days after the
close of each fiscal year an Officers' Certificate stating that a review of the
activities of the Company has been made under the supervision of the signing
officers with a view to determining whether it has kept, observed, performed
and fulfilled its obligations under this Indenture and further stating, as to
each such Officer signing such certificate, that to the best of his knowledge
the Company during such preceding fiscal year has kept, observed, performed and
fulfilled each and every such covenant and no Default or Event of Default
occurred during such year and at the date of such certificate no Default or
Event of Default has occurred and is continuing or, if such signers do know of
such Default or Event of Default, the certificate shall describe its status
with particularity. The Officers' Certificate shall also notify the Trustee
should the Company elect to change the manner in which it fixes its fiscal year
end.
(2) The annual financial statements delivered pursuant to Section 4.10
shall be accompanied by a written report of the Company's independent
accountants (who shall be a firm of established national reputation) that in
conducting their audit of such financial statements nothing has come to their
attention that would lead them to believe that the Company has violated any
provisions of Article Four, Five or Six of this Indenture insofar as they
relate to accounting matters or, if any such violation has occurred, specifying
the nature and period of existence thereof, it being understood that such
accountants shall not be liable directly or indirectly to any Person for any
failure to obtain knowledge of any such violation.
(3) The Company shall deliver to the Trustee, within ten days of becoming
aware of any Default or Event of Default in the performance of any covenant,
agreement or condition contained in this Indenture, an Officers' Certificate
specifying the Default or Event of Default and describing its status with
particularity.
SECTION 4.09. Compliance with Laws.
The Company shall comply, and shall cause each of the Restricted
Subsidiaries to comply, with all applicable statutes, rules, regulations,
orders and restrictions of the United States of America, all states and
municipalities thereof, and of any governmental department, commission, board,
regulatory authority, bureau, agency and instrumentality of the foregoing, in
respect of the conduct of their respective businesses and the ownership of
their respective properties, except for such noncompliances as would not in the
aggregate have a material adverse effect on the financial condition or results
of operations of the Company and the Restricted Subsidiaries taken as a whole.
<PAGE> 52
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SECTION 4.10. SEC Reports.
(1) The Company will file with the SEC all information documents and
reports to be filed with the SEC pursuant to Section 13 or 15(d) of the
Exchange Act, whether or not the Company is subject to such filing requirements
so long as the SEC will accept such filings. The Company (at its own expense)
will file with the Trustee within 15 days after it files them with the SEC,
copies of the annual reports and of the information, documents and other
reports (or copies of such portions of any of the foregoing as the SEC may by
rules and regulations prescribe) which the Company files with the SEC pursuant
to Section 13 or 15(d) of the Exchange Act. Upon qualification of this
Indenture under the TIA, the Company shall also comply with the provisions of
TIA Section 314(a).
(2) At the Company's expense, regardless of whether the Company is
required to furnish such reports to its stockholders pursuant to the Exchange
Act, the Company shall cause its consolidated financial statements, comparable
to that which would have been required to appear in annual or quarterly
reports, to be delivered to the Trustee and the Holders. The Company will also
make such reports available to prospective purchasers of the Securities,
securities analysts and broker-dealers upon their request.
(3) For so long as any of the Securities remain outstanding the Company
will make available to any prospective purchaser of the Securities or
beneficial owner of the Securities in connection with any sale thereof the
information required by Rule 144A(d)(4) under the Securities Act during any
period when the Company is not subject to Section 13 or 15(d) under the
Exchange Act.
SECTION 4.11. Waiver of Stay, Extension or Usury Laws.
The Company covenants (to the extent that it may lawfully do so) that it
shall not at any time insist upon, plead, or in any manner whatsoever claim or
take the benefit or advantage of, any stay or extension law or any usury law or
other law that would prohibit or forgive the Company from paying all or any
portion of the principal of and/or interest on the Securities as contemplated
herein, wherever enacted, now or at any time hereafter in force, or which may
affect the covenants or the performance of this Indenture, and (to the extent
that it may lawfully do so) the Company hereby expressly waives all benefit or
advantage of any such law, and covenants that it will not hinder, delay or
impede the execution of any power herein granted to the Trustee, but will
suffer and permit the execution of every such power as though no such law had
been enacted.
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SECTION 4.12. Limitation on Asset Sales.
The Company will not, and will not permit any of the Restricted
Subsidiaries to, consummate an Asset Sale unless (a) the Company or the
applicable Restricted Subsidiary, as the case may be, receives consideration at
the time of such Asset Sale at least equal to the fair market value of the
assets sold or otherwise disposed of (as determined in good faith by the
Company's Board of Directors), (b) at least 75% of the consideration received
by the Company or the Restricted Subsidiary, as the case may be, from such
Asset Sale shall be in the form of cash or Cash Equivalents and is received at
the time of such disposition; and (c) upon the consummation of an Asset Sale,
the Company shall commit in writing to apply, or cause such Restricted
Subsidiary to commit in writing to apply, the Net Cash Proceeds relating to
such Asset Sale within 180 days of receipt thereof, and shall apply, or cause
such Restricted Subsidiary to apply, such Net Cash Proceeds within 270 days of
receipt thereof, either (i) to the extent the properties or assets that were
the subject to such Asset Sale secure Indebtedness incurred in accordance with
this Indenture pursuant to a Lien permitted by this Indenture, to prepay any
such Indebtedness, (ii) to make an investment in properties or assets that
replace the properties or assets that were the subject of such Asset Sale or in
properties or assets that will be used in the business of the Company and the
Restricted Subsidiaries as existing on the Issue Date or in businesses
reasonably related thereto ("Replacement Assets"), or (iii) a combination of
prepayment and investment permitted by the foregoing clauses (c)(i) and
(c)(ii). On the 271st day after an Asset Sale or such earlier date, if any, as
the Board of Directors of the Company determines not to apply the Net Cash
Proceeds relating to such Asset Sale as set forth in clauses (c)(i), (c)(ii)
and (c)(iii) of the next preceding sentence (each, a "Net Proceeds Offer
Trigger Date"), such aggregate amount of Net Cash Proceeds which have not been
applied on or before such Net Proceeds Offer Trigger Date as permitted in
clauses (c)(i), (c)(ii) and (c)(iii) of the next preceding sentence (each a
"Net Proceeds Offer Amount") shall be applied by the Company or such Restricted
Subsidiary, as the case may be, to make an offer to purchase (a "Net Proceeds
Offer") on a date (the "Net Proceeds Offer Payment Date") not less than 30 nor
more than 45 days following the applicable Net Proceeds Offer Trigger Date,
from all Holders on a pro rata basis, that principal amount of Securities equal
to the Net Proceeds Offer Amount at a price equal to 100% of the principal
amount of the Securities to be purchased, plus accrued and unpaid interest, if
any, thereon to the date of purchase; provided, however, that if at any time
any non-cash consideration received by the Company or any Restricted
Subsidiary, as the case may be, in connection with any Asset Sale is converted
into or sold or otherwise disposed of for cash, then such conversion or
disposition shall be deemed to constitute an Asset Sale hereunder and the Net
Cash Proceeds thereof shall be applied in accordance with this covenant. The
Company may defer the Net Proceeds Offer until there is an aggregate unutilized
Net Proceeds Offer Amount equal to or in excess of $5.0 million resulting from
one or more Asset Sales (at which time, the entire unutilized Net Proceeds
Offer Amount, and not just the amount in excess of $5.0 million, shall be
applied as required pursuant to this paragraph).
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In the event of the transfer of substantially all (but not all) of the
property and assets of the Company and the Restricted Subsidiaries as an
entirety to a Person in a transaction permitted under Section 5.01, the
successor corporation shall be deemed to have sold the properties and assets of
the Company and the Restricted Subsidiaries not so transferred for purposes of
this covenant, and shall comply with the provisions of this covenant with
respect to such deemed sale as if it were an Asset Sale. In addition, the fair
market value of such properties and assets of the Company or the Restricted
Subsidiaries deemed to be sold shall be deemed to be Net Cash Proceeds for
purposes of this covenant.
Notwithstanding the two immediately preceding paragraphs, the Company and
the Restricted Subsidiaries will be permitted to consummate an Asset Sale
without complying with such paragraphs to the extent (a) at least 75% of the
consideration for such Asset Sale constitutes Replacement Assets and (b) such
Asset Sale is for fair market value; provided that any consideration not
constituting Replacement Assets received by the Company or any of the
Restricted Subsidiaries in connection with any Asset Sale permitted to be
consummated under this paragraph shall constitute Net Cash Proceeds subject to
the provisions of the two immediately preceding paragraphs.
Notice of each Net Proceeds Offer pursuant to this Section 4.12 will be
mailed or caused to be mailed, by first class mail, by the Company within 30
days following the Net Proceeds Offer Trigger Date to all Holders at their last
registered addresses, with a copy to the Trustee. The notice shall contain all
instructions and materials necessary to enable such Holders to tender
Securities pursuant to the Net Proceeds Offer and shall state the following
terms:
(1) that the Net Proceeds Offer is being made pursuant to Section
4.12 and that all Securities tendered in whole or in part in integral
multiples of $1,000 will be accepted for payment; provided, however, that
if the principal amount of Securities tendered in a Net Proceeds Offer
exceeds the aggregate amount of the Net Cash Proceeds, the Company shall
select the Securities to be purchased on a pro rata basis;
(2) the purchase price (including the amount of accrued interest, if
any) and the Net Proceeds Offer Payment Date (which shall be at least 20
Business Days from the date of mailing of notice of such Net Proceeds
Offer, or such longer period as required by law);
(3) that any Security not tendered will continue to accrue interest;
(4) that, unless the Company defaults in making payment therefor,
any Security accepted for payment pursuant to the Net Proceeds Offer
shall cease to accrue interest after the Net Proceeds Offer Payment Date;
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(5) that Holders electing to have a Security purchased pursuant to a
Net Proceeds Offer will be required to surrender the Security, with the
form entitled "Option of Holder to Elect Purchase" on the reverse of the
Security completed, to the Paying Agent at the address specified in the
notice prior to the close of business on the Net Proceeds Offer Payment
Date;
(6) that Holders will be entitled to withdraw their election if the
Paying Agent receives, not later than the Business Day prior to the Net
Proceeds Offer Payment Date, a facsimile transmission or letter setting
forth the name of the Holder, the principal amount of the Security the
Holder delivered for purchase and a statement that such Holder is
withdrawing his election to have such Security purchased; and
(7) that Holders whose Securities are purchased only in part will be
issued new Securities in a principal amount equal to the unpurchased
portion of the Securities surrendered.
On or before the Net Proceeds Offer Payment Date, the Company shall (i)
accept for payment Securities or portions thereof tendered pursuant to the Net
Proceeds Offer which are to be purchased in accordance with item (1) above,
(ii) deposit with the Paying Agent in accordance with Section 2.14 U.S. Legal
Tender sufficient to pay the purchase price plus accrued interest, if any, of
all Securities to be purchased and (iii) deliver to the Trustee Securities so
accepted together with an Officers' Certificate stating the Securities or
portions thereof being purchased by the Company. The Paying Agent shall
promptly mail to the Holders of Securities so accepted payment in an amount
equal to the purchase price plus accrued interest, if any. For purposes of
this Section 4.12, the Trustee shall act as the Paying Agent.
The Company shall and shall cause its Subsidiaries to comply with all
tender offer rules under state and Federal securities laws, including, but not
limited to, Section 14(e) under the Exchange Act and Rule 14e-1 thereunder, to
the extent applicable to such offer. To the extent that the provisions of any
securities laws or regulations conflict with the foregoing provisions of this
Indenture, the Company shall comply with the applicable securities laws and
regulations and shall not be deemed to have breached its obligations under the
foregoing provisions of this Indenture by virtue thereof.
SECTION 4.13. Limitation on Dividend and Other Payment
Restrictions Affecting Restricted Subsidiaries.
The Company will not, and will not cause or permit any of the Restricted
Subsidiaries to, directly or indirectly, create or otherwise cause or permit to
exist or become effective any encumbrance or restriction on the ability of any
Restricted Subsidiary to (a) pay dividends or make
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any other distributions on or in respect of its Capital Stock; (b) make loans
or advances or to pay any Indebtedness or other obligation owed to the Company
or any other Restricted Subsidiary; or (c) transfer any of its property or
assets to the Company or any other Restricted Subsidiary, except for such
encumbrances or restrictions existing under or by reason of: (i) applicable
law; (ii) this Indenture; (iii) customary non-assignment provisions of any
contract licensing agreement or any lease governing a leasehold interest of any
Restricted Subsidiary; (iv) any instrument governing Acquired Indebtedness,
which encumbrance or restriction is not applicable to any Person, or the
properties or assets of any Person, other than the Person or the properties or
assets of the Person so acquired; (v) agreements existing on the Issue Date to
the extent and in the manner such agreements are in effect on the Issue Date;
(vi) agreements of a Restricted Subsidiary existing at the time such Person
became a Subsidiary of the Company and not entered into in connection with, or
in anticipation or contemplation of, such Person becoming a Subsidiary of the
Company; (vii) restrictions contained in security, pledge or similar agreements
granting a Lien permitted by Section 4.15 to the extent such agreements
restrict the transfer of the property subject to any such Lien; (viii)
contracts for the sale of assets in a transaction in compliance with Section
4.12, or (ix) an agreement governing Refinancing Indebtedness incurred to
Refinance the Indebtedness issued, assumed or incurred pursuant to an agreement
referred to in clause (ii), (iv), (v) or (vii) above; provided, however, that
the provisions relating to such encumbrance or restriction contained in any
such Refinancing Indebtedness are no less favorable to the Holders in any
material respect as determined by the Board of Directors of the Company in
their reasonable and good faith judgment than the provisions relating to such
encumbrance or restriction contained in the applicable agreement referred to in
such clause (ii), (iv), (v) or (vii).
SECTION 4.14. Limitation on Preferred Stock of Restricted Subsidiaries.
The Company will not permit any of the Restricted Subsidiaries to issue
any Preferred Stock (other than to the Company or to a Wholly Owned Restricted
Subsidiary) or permit any Person (other than the Company or a Wholly Owned
Restricted Subsidiary) to own any Preferred Stock of any Restricted Subsidiary.
SECTION 4.15. Limitation on Liens.
The Company will not, and will not cause or permit any of the Restricted
Subsidiaries to, directly or indirectly, create, incur, assume or permit or
suffer to exist any Liens of any kind against or upon any property or assets of
the Company or any of the Restricted Subsidiaries, whether owned on the Issue
Date or acquired after the Issue Date, or any proceeds therefrom, or assign or
otherwise convey any right to receive income or profits therefrom unless (a) in
the case of Liens securing Indebtedness that is expressly subordinate or junior
in right of payment to the
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Securities or any Subsidiary Guarantee, the Securities or such Subsidiary
Guarantee, as the case may be, are secured by a Lien on such property, assets
or proceeds that is senior in priority to such Liens and (b) in all other
cases, the Securities and the Subsidiary Guarantees are equally and ratably
secured, except for (i) Liens existing as of the Issue Date; (ii) to the extent
not included in clause (i), Liens securing Indebtedness under the Revolving
Credit Facility that do not extend to or cover categories or types of property
or assets not covered by Liens securing the Revolving Credit Facility as of the
Issue Date; (iii) Liens securing the Securities and the Subsidiary Guarantees;
(iv) Liens of the Company or a Restricted Subsidiary on assets of any
Restricted Subsidiary; (v) Liens securing Refinancing Indebtedness which is
incurred to Refinance any Indebtedness which has been secured by a Lien
permitted under this Indenture and which has been incurred in accordance with
the provisions of this Indenture; provided, however, that such Liens do not
extend to or cover any property or assets of the Company or any of the
Restricted Subsidiaries not securing the Indebtedness so Refinanced; and (vi)
Permitted Liens.
SECTION 4.16. Limitation on Sale and Leaseback Transactions.
The Company will not, and will not permit any Restricted Subsidiary to,
directly or indirectly, enter into any Sale and Leaseback Transaction unless
(a) immediately after giving pro forma effect to such Sale and Leaseback
Transaction (the Attributable Value of such Sale and Leaseback Transaction
being deemed to be Indebtedness of the Company), the Company could incur at
least $1.00 of additional Indebtedness (other than Permitted Indebtedness) in
compliance with Section 4.03 (assuming a market rate of interest with respect
to such additional Indebtedness) and (b) such Sale and Leaseback Transaction
complies with Section 4.12.
SECTION 4.17. Intentionally Omitted.
SECTION 4.18. Limitations on Transactions with Affiliates.
(1) The Company will not, and will not permit any of the Restricted
Subsidiaries to, directly or indirectly, enter into or permit to exist any
transaction or series of related transactions (including, without limitation,
the purchase, sale, lease or exchange of any property or the rendering of any
service) with, or for the benefit of, any of their respective Affiliates (each
an "Affiliate Transaction"), other than (i) Affiliate Transactions permitted
under paragraph (b) of this covenant and (ii) Affiliate Transactions on terms
that are no less favorable to the Company or the applicable Restricted
Subsidiary than those that might reasonably have been obtained in a comparable
transaction at such time on an arm's-length basis from a Person that is not an
Affiliate of the Company or such Restricted Subsidiary. All Affiliate
Transactions (and each series of related Affiliate Transactions which are
similar or part of a common plan) involving aggregate payments or other
property with a fair market value in excess of $500,000 shall be approved by
the Board of
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Directors of the Company, such approval to be evidenced by a Board Resolution
stating that such Board of Directors has determined that such transaction
complies with the foregoing provisions. If the Company or any Restricted
Subsidiary enters into an Affiliate Transaction (or a series of related
Affiliate Transactions related to a common plan) that involves an aggregate
fair market value of more than $5.0 million, the Company shall, prior to the
consummation thereof, obtain a favorable opinion as to the fairness of such
transaction or series of related transactions to the Company or the relevant
Restricted Subsidiary, as the case may be, from a financial point of view, from
an Independent Financial Advisor and file the same with the Trustee.
(2) The restrictions set forth in clause (a) shall not apply to (i)
reasonable fees and compensation paid to and indemnity provided on behalf of,
officers, directors, employees or consultants of the Company or any Restricted
Subsidiary as determined in good faith by the Company's Board of Directors;
(ii) transactions exclusively between or among the Company and any of the
Restricted Subsidiaries or exclusively between or among such Restricted
Subsidiaries, provided such transactions are not otherwise prohibited by this
Indenture; and (iii) Restricted Payments permitted by this Indenture.
SECTION 4.19. Additional Subsidiary Guarantees.
If the Company or any of the Restricted Subsidiaries transfers or causes
to be transferred, in one transaction or a series of related transactions, any
property to any Restricted Subsidiary that is not a Subsidiary Guarantor, or if
the Company or any of the Restricted Subsidiaries shall organize, acquire or
otherwise invest in or hold an Investment in another Restricted Subsidiary that
is not a Subsidiary Guarantor having total consolidated assets with a book
value in excess of $500,000, then such transferee or acquired or other
Restricted Subsidiary that is not a Subsidiary Guarantor shall (a) execute and
deliver to the Trustee a supplemental indenture in form reasonably satisfactory
to the Trustee pursuant to which such Restricted Subsidiary shall
unconditionally guarantee all of the Company's obligations under the Securities
and this Indenture on the terms set forth in Article Ten and (b) deliver to the
Trustee an Opinion of Counsel that such supplemental indenture has been duly
authorized, executed and delivered by such Restricted Subsidiary and
constitutes a legal, valid, binding and enforceable obligation of such
Restricted Subsidiary. Thereafter, such Restricted Subsidiary shall be a
Subsidiary Guarantor for all purposes of this Indenture.
SECTION 4.20. Intentionally Omitted.
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SECTION 4.21. Lines of Business.
The Company shall not, and shall not permit any of the Restricted
Subsidiaries to, enter into any business, either directly or through any
Restricted Subsidiary, except (i) for those businesses in which the Company and
the Restricted Subsidiaries were engaged on the Issue Date or businesses which,
in the reasonable good faith judgment of the Board of Directors of the Company,
are related to the automotive industry and (ii) Permitted Investments.
SECTION 4.22. Payments for Consent.
Neither the Company nor any of its Subsidiaries shall, directly or
indirectly, pay or cause to be paid any consideration, whether by way of
interest, fee or otherwise, to any holder of any Securities for or as an
inducement to any consent, waiver or amendment of any of the terms or
provisions of this Indenture, the Securities, the Guarantees or any Subsidiary
Guarantee unless such consideration is offered to be paid or agreed to be paid
to all holders of the Securities who so consent, waive or agree to amend in the
time frame set forth in solicitation documents relating to such consent, waiver
or agreement.
SECTION 4.23. Limitation on Designations of Unrestricted Subsidiaries.
The Company may designate any Subsidiary of the Company (other than a
Subsidiary of the Company which owns Capital Stock of a Restricted Subsidiary)
as an "Unrestricted Subsidiary" under this Indenture (a "Designation") only if:
(1) no Default shall have occurred and be continuing at the time of
or after giving effect to such Designation; and
(2) the Company would be permitted under this Indenture to make an
Investment at the time of Designation (assuming the effectiveness of such
Designation) in an amount (the "Designation Amount") equal to the sum of
(i) fair market value of the Capital Stock of such Subsidiary owned by
the Company and the Restricted Subsidiaries on such date and (ii) the
aggregate amount of other Investments of the Company and the Restricted
Subsidiaries in such Subsidiary on such date; and
(3) the Company would be permitted to incur $1.00 of additional
Indebtedness (other than Permitted Indebtedness) pursuant to Section 4.03
at the time of Designation (assuming the effectiveness of such
Designation).
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In the event of any such Designation, the Company shall be deemed to have
made an Investment constituting a Restricted Payment in the Designation Amount
pursuant to Section 4.04 for all purposes of this Indenture. The Company shall
not, and shall not permit any Restricted Subsidiary to, at any time (x) provide
direct or indirect credit support for or a guarantee of any Indebtedness of any
Unrestricted Subsidiary (including of any undertaking, agreement or instrument
evidencing such Indebtedness), (y) be directly or indirectly liable for any
Indebtedness of any Unrestricted Subsidiary or (z) be directly or indirectly
liable for any Indebtedness which provides that the holder thereof may (upon
notice, lapse of time or both) declare a default thereon or cause the payment
thereof to be accelerated or payable prior to its final scheduled maturity upon
the occurrence of a default with respect to any Indebtedness of any
Unrestricted Subsidiary (including any right to take enforcement action against
such Unrestricted Subsidiary), except, in the case of clause (x) or (y), to
the extent permitted under Section 4.04.
The Company may revoke any Designation of a Subsidiary as an Unrestricted
Subsidiary (a "Revocation"), whereupon such Subsidiary shall then constitute a
Restricted Subsidiary, if:
(a) no Default shall have occurred and be continuing at the time of
and after giving effect to such Revocation; and
(b) all Liens and Indebtedness of such Unrestricted Subsidiary
outstanding immediately following such Revocation would, if incurred at
such time, have been permitted to be incurred for all purposes of this
Indenture.
All Designations and Revocations must be evidenced by Board Resolutions of
the Company delivered to the Trustee certifying compliance with the foregoing
provisions.
SECTION 4.24. Change of Control.
(a) Upon the occurrence of a Change of Control (unless, on or prior to the
date of such Change of Control, the Company shall have given a notice of
redemption with respect to all outstanding Securities), the Company shall be
obligated to make an offer to purchase (a "Change of Control Offer"), and shall
purchase, on a Business Day not more than 60 nor less than 30 days following
the occurrence of the Change of Control, other than as required by law (the
"Change of Control Payment Date"), all of the then outstanding Securities at a
purchase price equal to 101% of the principal amount thereof, plus accrued and
unpaid interest, if any, thereon to the Change of Control Payment Date. The
Change of Control Offer shall remain open for 20 Business Days (or such longer
period as may be required by law) and until the close of business on the Change
of Control Payment Date.
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(b) Within 30 days following the date upon which the Change of Control
occurred (the "Change of Control Date"), the Company shall mail, or cause to be
mailed, by first class mail, a notice to each Holder, with a copy to the
Trustee, which notice shall govern the terms of the Change of Control Offer.
The notice to the Holders shall contain all instructions and materials
necessary to enable such Holders to tender Securities pursuant to the Change
of Control Offer. Such notice shall state:
(1) that the Change of Control Offer is being made pursuant to this
Section 4.24 and that all Securities tendered and not withdrawn will be
accepted for payment;
(2) the purchase price (including the amount of accrued interest)
and the Change of Control Payment Date;
(3) that any Security not tendered will continue to accrue interest;
(4) that, unless the Company defaults in making payment therefor,
any Security accepted for payment pursuant to the Change of Control Offer
shall cease to accrue interest after the Change of Control Payment Date;
(5) that Holders electing to have a Security purchased pursuant to a
Change of Control Offer will be required to surrender the Security, with
the form entitled "Option of Holder to Elect Purchase" on the reverse of
the Security completed, to the Paying Agent at the address specified in
the notice prior to the close of business on the Change of Control
Payment Date;
(6) that Holders will be entitled to withdraw their election if the
Paying Agent receives, not later than the third Business Day prior to the
Change of Control Payment Date, a facsimile transmission or letter
setting forth the name of the Holder, the principal amount of the
Securities the Holder delivered for purchase and a statement that such
Holder is withdrawing his election to have such Securities purchased;
(7) that Holders whose Securities are purchased only in part will be
issued new Securities in a principal amount equal to the unpurchased
portion of the Securities surrendered; and
(8) the circumstances and relevant facts regarding such Change of
Control.
On or before the Change of Control Payment Date, the Company shall (i)
accept for payment Securities or portions thereof tendered pursuant to the
Change of Control Offer, (ii) deposit
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with the Paying Agent in accordance with Section 2.14 U.S. Legal Tender
sufficient to pay the purchase price plus accrued interest, if any, of all
Securities so tendered and (iii) deliver to the Trustee Securities so accepted
together with an Officers' Certificate stating the Securities or portions
thereof being purchased by the Company. Upon receipt by the Paying Agent of
the monies specified in clause (ii) above and a copy of the Officers'
Certificate specified in clause (iii) above, the Paying Agent shall promptly
mail to the Holders of Securities so accepted payment in an amount equal to the
purchase price plus accrued interest, if any, and the Trustee shall promptly
authenticate and mail to such Holders new Securities equal in principal amount
to any unpurchased portion of the Securities surrendered. Any Securities not
so accepted shall be promptly mailed by the Company to the Holder thereof. For
purposes of this Section 4.24, the Trustee shall act as the Paying Agent.
Any amounts remaining after the purchase of all validly tendered and not
validly withdrawn Securities pursuant to a Change of Control Offer shall be
returned by the Trustee to the Company.
The Company shall and shall cause its Subsidiaries to comply with all
tender offer rules under state and Federal securities laws, including, but not
limited to, Section 14(e) under the Exchange Act and Rule 14e-1 thereunder, to
the extent applicable to such offer. To the extent that the provisions of any
securities laws or regulations conflict with this Section 4.24, the Company
shall comply with the applicable securities laws and regulations and shall not
be deemed to have breached its obligations under this Section 4.24 by virtue
thereof.
The Company shall 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
applicable to a Change of Control Offer made by the Company and purchases all
Securities validly tendered and not withdrawn under such Change of Control
Offer.
ARTICLE FIVE
SUCCESSOR CORPORATION
SECTION 5.01. Mergers, Consolidations and Sales of Assets.
(a) The Company will not, in a single transaction or series of related
transactions, consolidate or merge with or into any Person, or sell, assign,
transfer, lease, convey or otherwise
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dispose of (or cause or permit any Restricted Subsidiary to sell, assign,
transfer, lease, convey or otherwise dispose of) all or substantially all of
the Company's assets (determined on a consolidated basis for the Company and
the Company's Restricted Subsidiaries), whether as an entirety or substantially
as an entirety, to any Person unless: (i) either (1) the Company shall be the
surviving or continuing corporation or (2) the Person (if other than the
Company) formed by such consolidation or into which the Company is merged or
the Person which acquires by sale, assignment, transfer, lease, conveyance or
other disposition the properties and assets of the Company and of the
Restricted Subsidiaries substantially as an entirety (the "Surviving Entity")
(x) shall be a corporation organized and validly existing under the laws of the
United States or any state thereof or the District of Columbia and (y) shall
expressly assume, by supplemental indenture (in form and substance satisfactory
to the Trustee), executed and delivered to the Trustee, the due and punctual
payment of the principal of, and premium, if any, and interest on all of the
Securities and the performance of every covenant of the Securities, this
Indenture and the Registration Rights Agreement on the part of the Company to
be performed or observed; (ii) immediately after giving effect to such
transaction and the assumption contemplated by clause (i)(2)(y) above
(including giving effect to any Indebtedness incurred or anticipated to be
incurred in connection with or in respect of such transaction), the Company or
such Surviving Entity, as the case may be, (1) shall have a Consolidated Net
Worth equal to or greater than the Consolidated Net Worth of the Company
immediately prior to such transaction and (2) shall be able to incur at least
$1.00 of additional Indebtedness (other than Permitted Indebtedness) pursuant
to Section 4.03 hereof; provided that in determining the Consolidated Fixed
Charge Coverage Ratio of the Company or the Surviving Entity, as the case may
be, such ratio shall be calculated as if the transaction (including the
incurrence of any Indebtedness or Acquired Indebtedness) took place on the
first day of the Four Quarter Period; (iii) immediately before and immediately
after giving effect to such transaction and the assumption contemplated by
clause (i)(2)(y) above (including, without limitation, giving effect to any
Indebtedness and Acquired Indebtedness incurred or anticipated to be incurred
and any Lien granted in connection with or in respect of the transaction) no
Default or Event of Default shall have occurred or be continuing; and (iv) the
Company or the Surviving Entity, as the case may be, shall have delivered to
the Trustee an Officers' Certificate and an Opinion of Counsel, each stating
that such consolidation, merger, sale, assignment, transfer, lease, conveyance
or other disposition and, if a supplemental indenture is required in connection
with such transaction, such supplemental indenture comply with the applicable
provisions of this Indenture and that all conditions precedent in this
Indenture relating to such transaction have been satisfied. Notwithstanding
the foregoing provisions of this Section 5.01(a), nothing in this Indenture
shall prohibit the merger of Aetna Industries, Inc., a Michigan corporation,
with and into the Company on the Issue Date.
(b) For purposes of the foregoing, the transfer (by lease, assignment,
sale or otherwise, in a single transaction or series of transactions) of all or
substantially all of the properties or assets of one or more Restricted
Subsidiaries, the Capital Stock of which constitutes all or
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substantially all of the properties and assets of the Company, shall be deemed
to be the transfer of all or substantially all of the properties and assets of
the Company.
(c) Each of the Guarantors will not, in a single transaction or series of
related transactions, consolidate or merge with or into any Person, or sell,
assign, transfer, lease, convey or otherwise dispose of all or substantially
all of its assets, whether as an entirety or substantially as an entirety, to
any Person unless: (i) either (1) either of the Guarantors shall be the
surviving or continuing corporation or (2) the Person (if other than either of
the Guarantors) formed by such consolidation or into a Guarantor is merged or
the Person which acquires by sale, assignment, transfer, lease, conveyance or
other disposition the property and assets of a Guarantor substantially as an
entirety (x) shall be a corporation organized and validly existing under the
laws of the United States or any state thereof or the District of Columbia and
(y) shall expressly assume, by supplemental indenture (in form and substance
satisfactory to the Trustee), executed and delivered to the Trustee, all of the
obligations of such Guarantor under its Guarantee and the Registration Rights
Agreement on the part of such Guarantor to be performed or observed; and (ii)
such Guarantor or such other Person, as the case may be, shall have delivered
to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating
that such consolidation, merger, sale, assignment, transfer, lease, conveyance
or other disposition complies with, and, if a supplemental indenture is
required in connection with such transaction, such supplemental indenture
complies with, the applicable provisions of this Indenture, and that all
conditions precedent in this Indenture relating to such transactions have been
satisfied.
(d) Each Subsidiary Guarantor (other than any Subsidiary Guarantor whose
Subsidiary Guarantee is to be released in accordance with the terms of the
Subsidiary Guarantee and this Indenture in connection with any transaction
complying with the provisions of Section 4.12) will not, and the Company will
not cause or permit any Subsidiary Guarantor to, consolidate with or merge with
or into any Person other than the Company or another Subsidiary Guarantor
unless: (i) the entity formed by or surviving any such consolidation or merger
(if other than the Subsidiary Guarantor), or to which sale, lease, conveyance
or other disposition shall have been made, is a corporation organized and
existing under the laws of the United States or any state thereof or the
District of Columbia; (ii) such entity assumes by supplemental indenture all of
the obligations of the Subsidiary Guarantor under its Subsidiary Guarantee;
(iii) immediately after giving effect to such transaction, no Default or Event
of Default shall have occurred and be continuing; and (iv) immediately after
giving effect to such transaction and the use of any net proceeds therefrom on
a pro forma basis, the Company could satisfy the provisions of clause (a)(ii)
of this Section 5.01. Any merger or consolidation of a Subsidiary Guarantor
with and into the Company (with the Company being the surviving entity) or
another Subsidiary Guarantor need only comply with clause (a)(iv) of this
Section 5.01.
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SECTION 5.02. Successor Corporation Substituted.
In accordance with the foregoing, upon any such consolidation, merger,
conveyance, lease or transfer of all or substantially all of the assets of the
Company in which the Company is not the continuing corporation, the Surviving
Entity formed by such consolidation or into which the Company is merged or to
which such conveyance, lease or transfer is made shall succeed to, and be
substituted for, and may exercise every right and power of, the Company under
this Indenture and the Securities with the same effect as if such successor had
been named as the Company herein, and thereafter (except in the case of a sale,
assignment, transfer, lease, conveyance or other disposition) the predecessor
corporation will be relieved of all further obligations and covenants under
this Indenture, the Securities and the Registration Rights Agreement; provided
that solely for purposes of computing amounts described in subclause (iii) of
Section 4.04, any such Surviving Entity shall only be deemed to have succeeded
to and be substituted for the Company with respect to periods subsequent to the
effective time of such merger, consolidation or transfer of assets.
ARTICLE SIX
DEFAULT AND REMEDIES
SECTION 6.01. Events of Default.
An "Event of Default" occurs if:
(1) the Company fails to pay interest on any Security for a period
of 30 days after the same becomes due and payable; or
(2) the Company fails to pay the principal of or premium on any
Security, when such principal or premium becomes due and payable, whether
at maturity, upon redemption or otherwise (including the failure to make
a payment to purchase Securities tendered pursuant to a Change of Control
Offer or Net Proceeds Offer); or
(3) the Company, a Guarantor or any Subsidiary Guarantor defaults in
the observance or performance of any other covenant or agreement
contained in this Indenture, the Securities, any Guarantee or any
Subsidiary Guarantee, which default continues for a period of 30 days
after (x) the Company receives written notice specifying the default and
requiring the Company to remedy the same from the Trustee or (y) the
Company and the
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Trustee receive such a notice from Holders of at least 25% in principal
amount of outstanding Securities (except in the case of a default with
respect to Article Five, which will constitute an Event of Default with
such notice requirement but without such passage of time requirement); or
(4) the Company or a Restricted Subsidiary defaults under any
mortgage, indenture or instrument under which there may be issued or by
which there may be secured or evidenced any Indebtedness of the Company
or of any Restricted Subsidiary (or the payment of which is guaranteed by
the Company or any Restricted Subsidiary) which default (a) is caused by
a failure to pay principal of or premium, if any, on such Indebtedness
after any applicable grace period provided in such Indebtedness on the
date of such default (a "principal 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 principal payment default or the maturity of which has
been so accelerated, aggregates at least $5,000,000; or
(5) the Company or any of its Significant Subsidiaries (A) admits in
writing its inability to pay its debts generally as they become due, (B)
commences a voluntary case or proceeding under any Bankruptcy Law with
respect to itself, (C) consents to the entry of a judgment, decree or
order for relief against it in an involuntary case or proceeding under
any Bankruptcy Law, (D) consents to the appointment of a Custodian of it
or for substantially all of its property, (E) consents to or acquiesces
in the institution of a bankruptcy or an insolvency proceeding against
it, (F) makes a general assignment for the benefit of its creditors, or
(G) takes any corporate action to authorize or effect any of the
foregoing; or
(6) a court of competent jurisdiction enters a judgment, decree or
order for relief in respect of the Company or any of its Significant
Subsidiaries in an involuntary case or proceeding under any Bankruptcy
Law, which shall (A) approve as properly filed a petition seeking
reorganization, arrangement, adjustment or composition in respect of the
Company or any of its Significant Subsidiaries, (B) appoint a Custodian
of the Company or any of its Significant Subsidiaries or for
substantially all of any of their property or (C) order the winding-up or
liquidation of its affairs; and such judgment, decree or order shall
remain unstayed and in effect for a period of 60 consecutive days; or
(7) one or more judgments, orders or decrees of any court or
regulatory or administrative agency of competent jurisdiction for the
payment of money in excess of $5,000,000, either individually or in the
aggregate, shall be entered against the Company or any Restricted
Subsidiary of the Company or any of their respective properties and shall
not
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be discharged or fully bonded and there shall have been a period of 60
days after the date on which any period for appeal has expired and during
which a stay of enforcement of such judgment, order or decree shall not
be in effect; or
(8) any of the Guarantees or the Subsidiary Guarantees ceases to be
in full force and effect, or any of the Guarantees or the Subsidiary
Guarantees is declared to be null and void and unenforceable or any of
the Guarantees or the Subsidiary Guarantees is found to be invalid or any
of the Guarantors or the Subsidiary Guarantors denies its liability under
its Guarantee or Subsidiary Guarantee, as the case may be (other than by
reason of release of a Subsidiary Guarantor in accordance with the terms
of this Indenture).
The Trustee shall, within 30 days after the occurrence of any Default
actually known to a Responsible Officer of the Trustee, give to the holders of
Securities notice of such Default; provided that, except in the case of a
Default in the payment of principal of or interest on any of the Securities,
the Trustee shall be protected in withholding such notice if and so long as a
Responsible Officer of the Trustee in good faith determines that the
withholding of such notice is in the interest of the Holders of Securities.
SECTION 6.02. Acceleration.
If an Event of Default (other than an Event of Default specified in clause
(5) or (6) above) occurs and is continuing, then the Trustee or the Holders of
not less than 25% in aggregate principal amount of the then outstanding
Securities may declare the unpaid principal of, premium, if any, and accrued
and unpaid interest on, all the Securities then outstanding to be immediately
due and payable, by a notice in writing to the Company (and to the Trustee, if
given by Holders) and upon such declaration such principal amount, premium, if
any, and accrued and unpaid interest will become immediately due and payable.
If an Event of Default specified in clause (5) or (6) above occurs, all unpaid
principal of, and premium, if any, and accrued and unpaid interest on, the
Securities then outstanding will ipso facto become and be immediately due and
payable without any declaration or other act on the part of the Trustee or any
Holder.
At any time after a declaration of acceleration with respect to the
Securities as described in the preceding paragraph, the Holders of a majority
in principal amount of the Securities then outstanding may rescind and cancel
such declaration and its consequences (a) if the rescission would not conflict
with any judgment or decree, (b) if all existing Events of Default have been
cured or waived except nonpayment of principal or interest that has become due
solely because of the acceleration, (c) to the extent the payment of such
interest is lawful, interest on overdue installments of interest and overdue
principal, which has become due otherwise than by such declaration of
acceleration, has been paid, (d) if the Company has paid the Trustee its
reasonable compensation and
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reimbursed the Trustee for its expenses, disbursements and advances and (e)
in the event of the cure or waiver of an Event of Default of the type described
in clauses (5) and (6) of the description of Events of Default above, the
Trustee shall have received an Officers' Certificate and an Opinion of Counsel
that such Event of Default has been cured or waived. No such rescission shall
affect any subsequent Default or impair any right consequent thereto.
SECTION 6.03. Other Remedies.
If an Event of Default occurs and is continuing, the Trustee may pursue
any available remedy by proceeding at law or in equity to collect the payment
of principal of or interest on the Securities or to enforce the performance of
any provision of the Securities, this Indenture, the Guarantees or any
Subsidiary Guarantees.
The Trustee may maintain a proceeding even if it does not possess any of
the Securities or does not produce any of them in the proceeding. A delay or
omission by the Trustee or any Securityholder in exercising any right or remedy
accruing upon an Event of Default shall not impair the right or remedy or
constitute a waiver of or acquiescence in the Event of Default. No remedy is
exclusive of any other remedy. All available remedies are cumulative to the
extent permitted by law.
SECTION 6.04. Waiver of Past Defaults.
Subject to Sections 6.07 and 9.02, the Holders of not less than a majority
in principal amount of the outstanding Securities by written notice to the
Trustee may waive an existing Default or Event of Default and its consequences,
except a Default in the payment of principal of, premium or interest on any
Security as specified in clauses (1) and (2) of Section 6.01. The Company
shall deliver to the Trustee an Officers' Certificate stating that the
requisite percentage of Holders have consented to such waiver and attaching
copies of such consents upon which the Trustee may conclusively rely. When a
Default or Event of Default is waived, it is cured and ceases.
SECTION 6.05. Control by Majority.
The Holders of not less than a majority in principal amount of the
outstanding Securities may direct the time, method and place of conducting any
proceeding for any remedy available to the Trustee or exercising any trust or
power conferred on it. Subject to Section 7.01, however, the Trustee may
refuse to follow any direction that conflicts with any law or this Indenture,
that the Trustee determines may be unduly prejudicial to the rights of another
Securityholder, or that may involve the Trustee in personal liability; provided
that the Trustee may take any other action deemed proper by the Trustee which
is not inconsistent with such direction.
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In the event the Trustee takes any action or follows any direction
pursuant to this Indenture, the Trustee shall be entitled to indemnification
from the Company satisfactory to it in its sole discretion against any loss,
liability, cost or expense caused by taking such action or following such
direction.
SECTION 6.06. Limitation on Suits.
A Securityholder may not pursue any remedy with respect to this Indenture,
the Securities, any Guarantee or Subsidiary Guarantee unless:
(1) the Holder gives to the Trustee written notice of a continuing
Event of Default;
(2) the Holder or Holders of at least 25% in principal amount of the
outstanding Securities make a written request to the Trustee to pursue
the remedy;
(3) such Holder or Holders offer and, if requested, provide to the
Trustee indemnity satisfactory to the Trustee against any loss, liability
or expense;
(4) the Trustee does not comply with the request within 30 days
after receipt of the request and the offer and, if requested, the
provision of indemnity; and
(5) during such 30-day period the Holder or Holders of a majority in
principal amount of the outstanding Securities do not give the Trustee a
direction which, in the opinion of the Trustee, is inconsistent with the
request.
A Securityholder may not use this Indenture to prejudice the rights of
another Securityholder or to obtain a preference or priority over such other
Securityholder.
SECTION 6.07. Rights of Holders To Receive Payment.
Notwithstanding any other provision of this Indenture, the right of any
Holder to receive payment of principal of, premium and interest on a Security,
on or after the respective due dates expressed in such Security, or to bring
suit for the enforcement of any such payment on or after such respective dates,
shall not be impaired or affected without the consent of the Holder.
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SECTION 6.08. Collection Suit by Trustee.
If an Event of Default in payment of principal, premium or interest
specified in clause (1) or (2) of Section 6.01 occurs and is continuing, the
Trustee may recover judgment in its own name and as trustee of an express trust
against the Company or any other obligor on the Securities for the whole amount
of principal and accrued interest remaining unpaid, together with interest on
overdue principal and, to the extent that payment of such interest is lawful,
interest on overdue installments of interest, in each case at the rate per
annum borne by the Securities and such further amount as shall be sufficient to
cover the costs and expenses of collection, including the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agents
and counsel.
SECTION 6.09. Trustee May File Proofs of Claim.
The Trustee may file such proofs of claim and other papers or documents as
may be necessary or advisable in order to have the claims of the Trustee
(including any claim for the reasonable compensation, expenses, legal fees,
disbursements and advances of the Trustee, its agents, nominees, custodians and
counsel) and the Securityholders allowed in any judicial proceedings relating
to the Company, its creditors or its property and shall be entitled and
empowered to collect and receive any monies or other property payable or
deliverable on any such claims and to distribute the same, and any Custodian in
any such judicial proceedings is hereby authorized by each Securityholder to
make such payments to the Trustee and, in the event that the Trustee shall
consent to the making of such payments directly to the Securityholders, to pay
to the Trustee any amount due to it for the reasonable compensation, expenses,
legal fees, disbursements and advances of the Trustee, its agents, nominees,
custodians and counsel, and any other amounts due the Trustee under Section
7.07. Nothing herein contained shall be deemed to authorize the Trustee to
authorize or consent to or accept or adopt on behalf of any Securityholder any
plan of reorganization, arrangement, adjustment or composition affecting the
Securities or the rights of any Holder thereof, or to authorize the Trustee to
vote in respect of the claim of any Securityholder in any such proceeding.
SECTION 6.10. Priorities.
If the Trustee collects any money or property pursuant to this Article
Six, it shall pay out the money or property in the following order:
First: to the Trustee for amounts due under Section 7.07;
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Second: if the Holders are forced to proceed against the Company, a
Guarantor, a Subsidiary Guarantor or any other obligor on the Securities
directly without the Trustee, to Holders for their collection costs;
Third: to Holders for amounts due and unpaid on the Securities for
principal, premium and interest, ratably, without preference or priority
of any kind, according to the amounts due and payable on the Securities
for principal, premium and interest, respectively; and
Fourth: to the Company, the Guarantors or any Subsidiary
Guarantors, as their respective interests may appear.
The Trustee, upon prior notice to the Company, may fix a record date and
payment date for any payment to Securityholders pursuant to this Section 6.10.
SECTION 6.11. Undertaking for Costs.
In any suit for the enforcement of any right or remedy under this
Indenture or in any suit against the Trustee for any action taken or omitted by
it as Trustee, a court in its discretion may require the filing by any party
litigant in the suit of an undertaking to pay the costs of the suit, and the
court in its discretion may assess reasonable costs, including reasonable
attorneys' fees and expenses, against any party litigant in the suit, having
due regard to the merits and good faith of the claims or defenses made by the
party litigant. This Section 6.11 does not apply to a suit by the Trustee, a
suit by a Holder pursuant to Section 6.07, or a suit by a Holder or Holders of
more than 10% in principal amount of the outstanding Securities.
ARTICLE SEVEN
TRUSTEE
SECTION 7.01. Duties of Trustee.
(a) If an Event of Default actually known to a Responsible Officer of the
Trustee has occurred and is continuing, the Trustee shall exercise such of the
rights and powers vested in it by this Indenture and use the same degree of
care and skill in their exercise as a prudent person would exercise or use
under the circumstances in the conduct of his own affairs. Subject to such
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provisions, the Trustee shall be under no obligation to exercise any of its
rights or powers under this Indenture at the request of any of the holders of
Securities, unless they shall have offered to the Trustee security and
indemnity satisfactory to it.
(b) Except during the continuance of an Event of Default actually known to
a Responsible Officer of the Trustee:
(1) The Trustee need perform only those duties as are specifically
set forth herein and no others and no implied covenants or obligations
shall be read into this Indenture against the Trustee.
(2) In the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the correctness
of the opinions expressed therein, upon certificates or opinions and such
other documents delivered to it pursuant to Section 11.04 hereof
furnished to the Trustee and conforming to the requirements of this
Indenture. However, the Trustee shall examine the certificates and
opinions to determine whether or not they conform to the requirements of
this Indenture.
(c) The Trustee may not be relieved from liability for its own negligent
action, its own negligent failure to act, or its own willful misconduct, except
that:
(1) This paragraph does not limit the effect of paragraph (b) of
this Section 7.01.
(2) The Trustee shall not be liable for any error of judgment made
in good faith by a Responsible Officer of the Trustee, unless it is
proved that the Trustee was negligent in ascertaining the pertinent
facts.
(3) The Trustee shall not be liable with respect to any action it
takes or omits to take in good faith in accordance with a direction
received by it pursuant to Section 6.05.
(d) No provision of this Indenture shall require the Trustee to expend or
risk its own funds or otherwise incur any financial liability in the
performance of any of its duties hereunder or to take or omit to take any
action under this Indenture or take any action at the request or direction of
Holders if it shall have reasonable grounds for believing that repayment of
such funds is not assured to it or it does not receive an indemnity
satisfactory to it in its sole discretion against such risk, liability, loss,
fee or expense which might be incurred by it in compliance with such request or
direction.
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(e) Every provision of this Indenture that in any way relates to the
Trustee is subject to this Section 7.01.
(f) The Trustee shall not be liable for interest on any money received by
it except as the Trustee may agree in writing with the Company. Money held in
trust by the Trustee need not be segregated from other funds except to the
extent required by law.
SECTION 7.02. Rights of Trustee.
Subject to Section 7.01:
(a) The Trustee may conclusively rely and shall be protected in
acting or refraining from acting on any document believed by it to be
genuine and to have been signed or presented by the proper Person. The
Trustee need not investigate any fact or matter stated in the document.
(b) Before the Trustee acts or refrains from acting, it may require
an Officers' Certificate and an Opinion of Counsel, which shall conform
to the provisions of Section 11.05. The Trustee shall not be liable for
any action it takes or omits to take in good faith in reliance on such
certificate or opinion.
(c) The Trustee may act through its attorneys, agents, custodians
and nominees and shall not be responsible for the misconduct or
negligence of any attorney, agent, custodian or nominee (other than such
a person who is an employee of the Trustee) appointed with due care.
(d) The Trustee shall not be liable for any action it takes or omits
to take in good faith which it reasonably believes to be authorized or
within its rights or powers.
(e) The Trustee may consult with counsel and the advice or opinion
of such counsel as to matters of law shall be full and complete
authorization and protection from liability in respect of any action
taken, omitted or suffered by it hereunder in good faith and in
accordance with the advice or opinion of such counsel.
(f) The Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request, order or
direction of any of the Holders pursuant to the provisions of this
Indenture, unless such Holders shall have offered to the Trustee
reasonable security or indemnity against the costs, expenses and
liabilities which may be incurred therein or thereby.
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(g) The Trustee shall not be deemed to have notice or knowledge of
any matter unless a Responsible Officer assigned to and working in the
Trustee's Corporate Trust Office has actual knowledge thereof or unless
written notice thereof is received by the Trustee, attention: Corporate
Trust Services and such notice references the Securities generally, the
Company or this Indenture.
SECTION 7.03. Individual Rights of Trustee.
The Trustee in its individual or any other capacity may become the owner
or pledgee of Securities and may otherwise deal with the Company, its
Subsidiaries, the Guarantors, any Subsidiary Guarantors and their respective
Affiliates with the same rights it would have if it were not Trustee. Any
Agent may do the same with like rights. However, the Trustee must comply with
Sections 7.10 and 7.11.
SECTION 7.04. Trustee's Disclaimer.
The Trustee shall not be responsible for and makes no representation as to
the validity or adequacy of this Indenture or the Securities, it shall not be
accountable for the Company's use of the proceeds from the Securities, and it
shall not be responsible for any statement of the Company in this Indenture or
any document issued in connection with the sale of Securities or any statement
in the Securities other than the Trustee's certificate of authentication. The
Trustee makes no representations with respect to the effectiveness or adequacy
of this Indenture. The Trustee shall not be responsible for independently
ascertaining or maintaining such validity, if any, and shall be fully protected
in relying upon certificates and opinions delivered to it in accordance with
the terms of this Indenture.
SECTION 7.05. Notice of Default.
If a Default or an Event of Default occurs and is continuing and a
Responsible Officer of the Trustee receives actual notice of such event, the
Trustee shall mail to each Securityholder, as their names and addresses appear
on the Securityholder list described in Section 2.05, notice of the uncured
Default or Event of Default within 30 days after the Trustee receives such
notice. Except in the case of a Default or an Event of Default in payment of
principal of, premium or interest on, any Security, including the failure to
make payment on (i) the Change of Control Payment Date pursuant to a Change of
Control Offer or (ii) the Excess Proceeds Payment Date pursuant to an Asset
Sale Offer, or the Trustee may withhold the notice if and so long as the board
of directors, the executive committee, or a trust committee of directors, of
the Trustee in good faith determines that withholding the notice is in the
interest of the Securityholders.
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SECTION 7.06. Reports by Trustee to Holders.
This Section 7.06 shall not be operative as a part of this Indenture until
this Indenture is qualified under the TIA, and, until such qualification, this
Indenture shall be construed as if this Section 7.06 were not contained herein.
Within 60 days after each May 15 of each year beginning with 1996, the
Trustee shall, to the extent that any of the events described in TIA Section
313(a) occurred within the previous twelve months, but not otherwise, mail to
each Securityholder a brief report dated as of such date that complies with TIA
Section 313(a). The Trustee also shall comply with TIA Section Section
313(b), 313(c) and 313(d).
A copy of each report at the time of its mailing to Securityholders shall
be mailed to the Company and filed with the SEC and each securities exchange,
if any, on which the Securities are listed.
The Company shall notify a Responsible Officer of the Trustee if the
Securities become listed on any securities exchange or of any delisting
thereof.
SECTION 7.07. Compensation and Indemnity.
The Company shall pay to the Trustee from time to time reasonable
compensation for its services hereunder. The Trustee's compensation shall not
be limited by any law on compensation of a trustee of an express trust. The
Company shall reimburse the Trustee upon request for all reasonable
disbursements, expenses and advances (including reasonable fees and expenses of
counsel) incurred or made by it in addition to the compensation for its
services, except any such disbursements, expenses and advances as may be
attributable to the Trustee's negligence or bad faith. Such expenses shall
include the reasonable compensation, legal fees, disbursements and expenses of
the Trustee's agents, accountants, experts, nominees, custodians and counsel
and any taxes or other expenses incurred by a trust created pursuant to Section
8.01 hereof.
The Company shall indemnify the Trustee, its directors, officers and
employees and each predecessor trustee for, and hold it harmless against, any
loss, liability or expense incurred by the Trustee without negligence or bad
faith on its part arising out of or in connection with the administration of
this trust and its duties under this Indenture, including the reasonable
expenses and attorneys' fees of defending itself against any claim of liability
arising hereunder. The Trustee shall notify the Company promptly of any claim
asserted against the Trustee for which it may seek indemnity. However, the
failure by the Trustee to so notify the Company shall not relieve the Company
of its obligations hereunder. The Company shall defend the claim and the
Trustee shall
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cooperate in the defense (and may employ its own counsel) at the Company's
expense. The Company need not pay for any settlement made without its written
consent, which consent shall not be unreasonably withheld or delayed. The
Company need not reimburse any expense or indemnify against any loss or
liability incurred by the Trustee as a result of the violation of this
Indenture by the Trustee if such violation arose from the Trustee's negligence
or bad faith.
To secure the Company's payment obligations in this Section 7.07, the
Trustee shall have a senior claim prior to the Securities against all money or
property held or collected by the Trustee, in its capacity as Trustee.
When the Trustee incurs expenses or renders services after an Event of
Default specified in clause (5) or (6) of Section 6.01 occurs, the expenses
(including the reasonable fees and expenses of its agents and counsel) and the
compensation for the services shall be preferred over the status of the Holders
in a proceeding under any Bankruptcy Law and are intended to constitute
expenses of administration under any Bankruptcy Law. The Company's obligations
under this Section 7.07 and any claim arising hereunder shall survive the
resignation or removal of any Trustee, the discharge of the Company's
obligations pursuant to Article Eight and any rejection or termination under
any Bankruptcy Law.
SECTION 7.08. Replacement of Trustee.
The Trustee may resign at any time by so notifying the Company in writing.
The Holders of a majority in principal amount of the outstanding Securities
may remove the Trustee by so notifying the Company and the Trustee in writing
and may appoint a successor trustee with the Company's consent. The Company
may remove the Trustee if:
(1) the Trustee fails to comply with Section 7.10;
(2) the Trustee is adjudged a bankrupt or an insolvent;
(3) a receiver or other public officer takes charge of the Trustee
or its property; or
(4) the Trustee becomes legally incapable of acting with respect to
its duties hereunder.
If the Trustee resigns or is removed or if a vacancy exists in the office
of Trustee for any reason, the Company shall notify each Holder of such event
and shall promptly appoint a successor Trustee. Within one year after the
successor Trustee takes office, the Holders of a majority
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in principal amount of the Securities may appoint a successor Trustee to
replace the successor Trustee appointed by the Company.
A successor Trustee shall deliver a written acceptance of its appointment
to the retiring Trustee and to the Company. Immediately after that, the
retiring Trustee shall transfer, after payment of all sums then owing to the
Trustee pursuant to Section 7.07, all property held by it as Trustee to the
successor Trustee, subject to the lien provided in Section 7.07, the
resignation or removal of the retiring Trustee shall become effective, and the
successor Trustee shall have all the rights, powers and duties of the Trustee
under this Indenture; provided, however, that no Trustee under this Indenture
shall be liable for any act or omission of any successor Trustee. A successor
Trustee shall mail notice of its succession to each Securityholder.
If a successor Trustee does not take office within 30 days after the
retiring Trustee resigns or is removed, the retiring Trustee, the Company or
the Holders of at least 10% in principal amount of the outstanding Securities
may petition any court of competent jurisdiction for the appointment of a
successor Trustee.
If the Trustee fails to comply with Section 7.10, any Securityholder may
petition any court of competent jurisdiction for the removal of the Trustee and
the appointment of a successor Trustee.
Notwithstanding replacement of the Trustee pursuant to this Section 7.08,
the Company's obligations under Section 7.07 shall continue for the benefit of
the retiring Trustee and the Company shall pay to any such replaced or removed
Trustee all amounts owed under Section 7.07 upon such replacement or removal.
SECTION 7.09. Successor Trustee by Merger, Etc.
If the Trustee consolidates with, merges or converts into, or transfers
all or substantially all of its corporate trust business to, another
corporation, the resulting, surviving or transferee corporation without any
further act shall, if such resulting, surviving or transferee corporation is
otherwise eligible hereunder, be the successor Trustee. In case any Securities
shall have been authenticated, but not delivered, by the Trustee then in
office, any successor by merger, conversion or consolidation to such
authenticating Trustee may adopt such authentication and deliver the Securities
so authenticated with the same effect as if such successor Trustee had itself
authenticated such Securities.
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SECTION 7.10. Eligibility; Disqualification.
This Indenture shall always have a Trustee who satisfies the requirement
of TIA Section Section 310(a)(1) and 310(a)(5). The Trustee shall have a
combined capital and surplus of at least $50,000,000 as set forth in its most
recent published annual report of condition. The Trustee shall comply with TIA
Section 310(b); provided, however, that there shall be excluded from the
operation of TIA Section 310(b)(1) any indenture or indentures under which
other securities, or certificates of interest or participation in other
securities, of the Company are outstanding, if the requirements for such
exclusion set forth in TIA Section 310(b)(1) are met.
SECTION 7.11. Preferential Collection of Claims Against Company.
The Trustee, in its capacity as Trustee hereunder shall comply with TIA
Section 311(a), excluding any creditor relationship listed in TIA Section
311(b). A Trustee who has resigned or been removed shall be subject to TIA
Section 311(a) to the extent indicated.
ARTICLE EIGHT
SATISFACTION AND DISCHARGE OF INDENTURE
SECTION 8.01. Legal Defeasance and Covenant Defeasance.
(a) The Company may, at its option by Board Resolution, at any time, with
respect to the Securities, elect to have either paragraph (b) or paragraph (c)
below be applied to the outstanding Securities upon compliance with the
conditions set forth in paragraph (d).
(b) Upon the Company's exercise under paragraph (a) of the option
applicable to this paragraph (b), the Company shall be deemed to have been
released and discharged from its obligations with respect to the outstanding
Securities on the date the conditions set forth below are satisfied
(hereinafter, "Legal Defeasance"). For this purpose, such Legal Defeasance
means that the Company shall be deemed to have paid and discharged the entire
indebtedness represented by the outstanding Securities, which shall thereafter
be deemed to be "outstanding" only for the purposes of the Sections and matters
under this Indenture referred to in (i) and (ii) below, and to have satisfied
all its other obligations under such Securities and this Indenture insofar as
such Securities are
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concerned, except for the following, which shall survive until otherwise
terminated or discharged hereunder: (i) the rights of the Holders of
outstanding Securities to receive payment in respect of the principal of,
premium, if any, and interest on such Securities when such payments are due,
(ii) the Company's obligations to issue temporary Securities, register the
transfer or exchange of any Securities, replace mutilated, destroyed, lost or
stolen Securities and maintain an office or agency for payments in respect of
the Securities, (iii) the rights, powers, trusts, duties and immunities of the
Trustee, and (iv) the defeasance provisions of this Indenture. The Company
may exercise its option under this paragraph (b) notwithstanding the prior
exercise of its option under paragraph (c) below with respect to the
Securities.
(c) Upon the Company's exercise under paragraph (a) of the option
applicable to this paragraph (c), the Company shall be released and discharged
from its obligations under any covenant contained in Article Five and in
Sections 4.03 through 4.24 with respect to the outstanding Securities on and
after the date the conditions set forth below are satisfied (hereinafter,
"Covenant Defeasance"), and the Securities shall thereafter be deemed to be not
"outstanding" for the purpose of any direction, waiver, consent or declaration
or act of Holders (and the consequences of any thereof) in connection with such
covenants, but shall continue to be deemed "outstanding" for all other purposes
hereunder. For this purpose, such Covenant Defeasance means that, with respect
to the outstanding Securities, the Company and any Guarantor or Subsidiary
Guarantor may omit to comply with and shall have no liability in respect of any
term, condition or limitation set forth in any such covenant, whether directly
or indirectly, by reason of any reference elsewhere herein to any such covenant
or by reason of any reference in any such covenant to any other provision
herein or in any other document and such omission to comply shall not
constitute a Default or an Event of Default under Section 6.01(3), nor shall
any event referred to in Section 6.01(4) or (7) thereafter constitute a Default
or an Event of Default thereunder but, except as specified above, the remainder
of this Indenture and such Securities shall be unaffected thereby.
(d) The following shall be the conditions to application of either
paragraph (b) or paragraph (c) above to the outstanding Securities:
(1) The Company shall have irrevocably deposited in trust with the
Trustee, pursuant to an irrevocable trust and security agreement in form
and substance satisfactory to the Trustee, U.S. Legal Tender or direct
non-callable obligations of, or non-callable obligations guaranteed by,
the United States of America for the payment of which obligation or
guarantee the full faith and credit of the United States of America is
pledged ("U.S. Government Obligations") maturing as to principal and
interest in such amounts and at such times as are sufficient, without
consideration of the reinvestment of such interest and after payment of
all Federal, state and local taxes or other charges or assessments in
respect thereof payable by the Trustee, in the opinion of a nationally
recognized firm of Independent
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public accountants expressed in a written certification thereof (in form
and substance reasonably satisfactory to the Trustee) delivered to the
Trustee, to pay the principal of, premium, if any, and interest on all
the outstanding Securities on the dates on which any such payments are
due and payable in accordance with the terms of this Indenture and of the
Securities;
(2) Such deposits shall not cause the Trustee to have a conflicting
interest as defined in and for purposes of the TIA;
(3) The Trustee shall have received Officers' Certificates stating
that No Default of Event of Default or event which with notice or lapse
of time or both would become a Default or an Event of Default with
respect to the Securities shall have occurred and be continuing on the
date of such deposit or, insofar as Section 6.01(5) or (6) is concerned,
at any time during the period ending on the 91st day after the date of
such deposit (it being understood that this condition shall not be deemed
satisfied until the expiration of such period);
(4) The Trustee shall have received Officers' Certificates stating
that such deposit will not result in a Default under this Indenture or a
breach or violation of, or constitute a default under, any other material
instrument or agreement to which the Company or any of its Subsidiaries
is a party or by which it or its property is bound;
(5) (i) In the event the Company elects paragraph (b) hereof, the
Company shall deliver to the Trustee an Opinion of Counsel, in form and
substance reasonably satisfactory to the Trustee to the effect that (A)
the Company has received from, or there has been published by, the
Internal Revenue Service a ruling or (B) since the Issue Date, 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 shall state
that Holders of the Securities will not recognize income gain or loss for
Federal income tax purposes as a result of such deposit and the
defeasance contemplated hereby and will be subject to Federal income
taxes in the same manner and at the same times as would have been the
case of such deposit and defeasance had not occurred, or (ii) in the
event the Company elects paragraph (c) hereof, the Company shall deliver
to the Trustee an Opinion of Counsel, in form and substance reasonably
satisfactory to the Trustee, to the effect that, Holders of the
Securities will not recognize income, gain or loss for Federal income tax
purposes as a result of such deposit and the defeasance contemplated
hereby and will be subject to Federal income tax in the same amounts and
in the same manner and at the same times as would have been the case if
such deposit and defeasance had not occurred;
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(6) The deposit shall not result in the Company, the Trustee or the
trust becoming or being deemed to be an "investment company" under the
Investment Company Act of 1940, as amended;
(7) The Company shall have delivered to the Trustee an Officers'
Certificate, in form and substance reasonably satisfactory to the
Trustee, stating that the deposit under clause (1) was not made by the
Company, a Guarantor, any Subsidiary Guarantor or any Subsidiary of the
Company with the intent of defeating, hindering, delaying or defrauding
any other creditors of the Company, a Guarantor, any Subsidiary Guarantor
or any Subsidiary of the Company or others;
(8) The Company shall have delivered to the Trustee an Opinion of
Counsel, in form and substance reasonably satisfactory to the Trustee, to
the effect that, (A) the trust funds will not be subject to the rights of
holders of Indebtedness of the Company or any Guarantor or Subsidiary
Guarantor other than the Securities and (B) assuming no intervening
bankruptcy of the Company between the date of deposit and the 91st day
following the deposit and that no Holder of Securities is an insider of
the Company, after the passage of 90 days following the deposit, the
trust funds will not be subject to any applicable bankruptcy, insolvency,
reorganization or similar law affecting creditors' rights generally; and
(9) The Company has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent specified herein relating to the defeasance contemplated by
this Section 8.01 have been complied with; provided, however, that no
deposit under clause (1) above shall be effective to terminate the
obligations of the Company under the Securities or this Indenture prior
to 90 days following any such deposit.
In the event all or any portion of the Securities are to be redeemed
through such irrevocable trust, the Company must make arrangements satisfactory
to the Trustee, at the time of such deposit, for the giving of the notice of
such redemption or redemptions by the Trustee in the name and at the expense of
the Company.
SECTION 8.02. Satisfaction and Discharge.
In addition to the Company's rights under Section 8.01, the Company
may terminate all of its obligations under this Indenture (subject to
Section 8.03) when:
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(1) all Securities theretofore authenticated and delivered (other
than Securities which have been destroyed, lost or stolen and which have
been replaced or paid as provided in Section 2.07) have been delivered to
the Trustee for cancellation; or
(2) all Securities not theretofore delivered to the Trustee for
cancellation (except lost, stolen or destroyed Securities which have been
replaced or paid) have been called for redemption pursuant to the terms
of the Securities or have otherwise become due and payable and the
Company has irrevocably deposited or caused to be deposited with the
Trustee funds in an amount sufficient to pay and discharge the entire
Indebtedness on the Securities not theretofore delivered to the Trustee
for cancellation, for principal of, premium, if any, and interest on the
Securities to the date of deposit together with irrevocable instructions
from the Company directing the Trustee to apply such funds to the payment
thereof at maturity or redemption, as the case may be; and
(3) the Company has paid or caused to be paid all other sums payable
hereunder and under the Securities by the Company; and
(4) there exists no Default or Event of Default under this
Indenture; and
(5) the Company has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent specified herein relating to the satisfaction and discharge of
this Indenture have been complied with.
SECTION 8.03. Survival of Certain Obligations.
Notwithstanding the satisfaction and discharge of this Indenture
and of the Securities referred to in Section 8.01 or 8.02, the
respective obligations of the Company and the Trustee under Sections 2.02,
2.03, 2.04, 2.05, 2.06, 2.07, 2.10, 2.12, 2.13, 4.01, 4.02 and 6.07, Article
Seven and Sections 8.05, 8.06 and 8.07 shall survive until the Securities are
no longer outstanding, and thereafter the obligations of the Company and the
Trustee under Sections 7.07, 8.05, 8.06 and 8.07 shall survive. Nothing
contained in this Article Eight shall abrogate any of the rights, obligations
or duties of the Trustee under this Indenture.
SECTION 8.04. Acknowledgment of Discharge by Trustee.
Subject to Section 8.07, after (i) the conditions of Section 8.01
or 8.02 have been satisfied, (ii) the Company has paid or caused to be
paid all other sums payable hereunder by the Company and (iii) the Company has
delivered to the Trustee an Officers' Certificate and an Opinion of Counsel,
each stating that all conditions precedent referred to in clause (i) above
relating to the
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satisfaction and discharge of this Indenture have been complied with, the
Trustee upon written request shall acknowledge in writing the discharge of the
Company's obligations under this Indenture except for those surviving
obligations specified in Section 8.03.
SECTION 8.05. Application of Trust Assets.
The Trustee shall hold any U.S. Legal Tender or U.S. Government
Obligations deposited with it in the irrevocable trust established pursuant to
Section 8.01. The Trustee shall apply the deposited U.S. Legal Tender or the
U.S. Government Obligations, together with earnings thereon, through the Paying
Agent, in accordance with this Indenture and the terms of the irrevocable trust
agreement established pursuant to Section 8.01, to the payment of principal of
and interest on the Securities. The U.S. Legal Tender or U.S. Government
Obligations so held in trust and deposited with the Trustee in compliance with
Section 8.01 shall not be part of the trust estate under this Indenture, but
shall constitute a separate trust fund for the benefit of all Holders entitled
thereto.
SECTION 8.06. Repayment to the Company, Guarantors or Subsidiary Guarantors;
Unclaimed Money.
Subject to Sections 7.07 and 8.01, the Trustee shall promptly pay to the
Company, or if deposited with the Trustee by any Guarantor or Subsidiary
Guarantor, to such Guarantor or Subsidiary Guarantor, as the case may be, upon
receipt by the Trustee of an Officers' Certificate, any excess money,
determined in accordance with Section 8.01, held by it at any time. The
Trustee and the Paying Agent shall pay to the Company or any Guarantor or
Subsidiary Guarantor, as the case may be, upon receipt by the Trustee or the
Paying Agent, as the case may be, of an Officers' Certificate, any money held
by it for the payment of principal, premium, if any, or interest that remains
unclaimed for two years after payment to the Holders is required; provided,
however, that the Trustee and the Paying Agent before being required to make
any payment may, but need not, at the expense of the Company cause to be
published once in a newspaper of general circulation in the City of New York or
mail to each Holder entitled to such money notice that such money remains
unclaimed and that after a date specified therein, which shall be at least 2
years from the date of such publication or mailing, any unclaimed balance of
such money then remaining will be repaid to the Company. After payment to the
Company or any Guarantor or Subsidiary Guarantor, as the case may be, Security
holders entitled to money must look solely to the Company for payment as
general creditors unless an applicable abandoned property law designates
another Person, and all liability of the Trustee or Paying Agent with respect
to such money shall thereupon cease.
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SECTION 8.07. Reinstatement.
If the Trustee or Paying Agent is unable to apply any money or U.S.
Government Obligations in accordance with this Indenture by reason of any legal
proceeding or by reason of any order or judgment of any court or governmental
authority enjoining, restraining or otherwise prohibiting such application,
then and only then the Company's and each Guarantor's and Subsidiary
Guarantor's, if any, obligations under this Indenture and the Securities shall
be revived and reinstated as though no deposit had been made pursuant to this
Indenture until such time as the Trustee is permitted to apply all such money
or U.S. Government Obligations in accordance with this Indenture; provided,
however, that if the Company or the Guarantors or Subsidiary Guarantors, as the
case may be, have made any payment of principal of, premium, if any, or
interest on any Securities because of the reinstatement of their obligations,
the Company or the Guarantors or Subsidiary Guarantors, as the case may be,
shall be, subrogated to the rights of the holders of such Securities to receive
such payment from the money or U.S. Government Obligations held by the Trustee
or Paying Agent.
ARTICLE NINE
AMENDMENTS, SUPPLEMENTS AND WAIVERS
SECTION 9.01. Without Consent of Holders.
The Company, the Guarantors and the Subsidiary Guarantors (when
authorized by Board Resolutions), and the Trustee, together, may amend
or supplement this Indenture or the Securities without notice to or consent of
any Securityholder:
(1) to cure any ambiguity, defect or inconsistency;
(2) to evidence the succession in accordance with Article Five
hereof of another Person to the Company or a Guarantor or Subsidiary
Guarantor and the assumption by any such successor of the covenants of
the Company or a Guarantor or Subsidiary Guarantor herein and in the
Securities or a Guarantee or a Subsidiary Guarantee, as the case may be;
(3) to provide for uncertificated Securities in addition to or in
place of certificated Securities;
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(4) to make any other change that does not materially adversely
affect the rights of any Securityholders hereunder; or
(5) to comply with any requirements of the SEC in connection with
the qualification of this Indenture under the TIA; or
(6) to add or release any Subsidiary Guarantor pursuant to the terms
of this Indenture;
provided that each of the Company, the Guarantors and the Subsidiary Guarantors
has delivered to the Trustee an Opinion of Counsel and an Officers'
Certificate, each stating that such amendment or supplement complies with the
provisions of this Section 9.01.
SECTION 9.02. With Consent of Holders.
Subject to Section 6.07, the Company, the Guarantors and the
Subsidiary Guarantors (when authorized by Board Resolutions) and the Trustee,
together, with the written consent of the Holder or Holders of at least a
majority in aggregate principal amount of the outstanding Securities, may amend
or supplement this Indenture, the Securities, the Guarantees and any Subsidiary
Guarantees without notice to any other Securityholders. Subject to Section
6.07, the Holder or Holders of a majority in aggregate principal amount of the
outstanding Securities may waive compliance by the Company with any provision of
this Indenture or the Securities without notice to any other Securityholder.
Without the consent of each Securityholder affected, however, no amendment,
supplement or waiver, including a waiver pursuant to Section 6.04, may:
(1) reduce the principal amount of Securities whose Holders must
consent to an amendment, supplement or waiver of any provision of this
Indenture, the Securities, the Guarantees or the Subsidiary Guarantees;
(2) reduce the rate or change or have the effect of changing the
time for payment of interest, including default interest, on any
Security;
(3) reduce the principal amount of any Security;
(4) change or have the effect of changing the Final Maturity Date of
any Security, or alter the redemption or repurchase provisions contained
in this Indenture or the Securities in a manner adverse to any Holder;
<PAGE> 86
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(5) make any change in provisions of this Indenture protecting the
right of each Holder to receive payment of principal of and interest on
such Security on or after the due date thereof or to bring suit to
enforce such payment, or permitting Holders of a majority in principal
amount of the Securities to waive Defaults or Events of Default;
(6) make any changes in Section 6.04, 6.07 or this Section 9.02;
(7) make the principal of, premium or the interest on any Security
payable in money other than as provided for in this Indenture, the
Securities, the Guarantees and the Subsidiary Guarantees as in effect on
the date hereof;
(8) affect the ranking of the Securities, the Guarantees or the
Subsidiary Guarantees, in each case in a manner adverse to the Holders;
(9) amend, modify or change the obligation of the Company to make or
consummate a Change of Control Offer, a Net Proceeds Offer or waive any
default in the performance thereof or modify any of the provisions or
definitions with respect to any such offers; or
(10) release any Guarantor or Subsidiary Guarantor from any of its
obligations under its Guarantee or Subsidiary Guarantee, as the case may
be, or this Indenture otherwise than in accordance with the terms of this
Indenture.
It shall not be necessary for the consent of the Holders under this
Section 9.02 to approve the particular form of any proposed amendment,
supplement or waiver, but it shall be sufficient if such consent approves the
substance thereof.
After an amendment, supplement or waiver under this Section 9.02 becomes
effective, the Company shall mail to the Holders affected thereby a notice
briefly describing the amendment, supplement or waiver. Any failure of the
Company to mail such notice, or any defect therein, shall not, however, in any
way impair or affect the validity of any such supplemental indenture.
SECTION 9.03. Compliance with TIA.
From the date on which this Indenture is qualified under the TIA, every
amendment, waiver or supplement of this Indenture or the Securities shall
comply with the TIA as then in effect.
<PAGE> 87
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SECTION 9.04. Revocation and Effect of Consents.
Until an amendment, waiver or supplement becomes effective, a consent to
it by a Holder is a continuing consent by the Holder and every subsequent
Holder of a Security or portion of a Security that evidences the same debt as
the consenting Holder's Security, even if notation of the consent is not made
on any Security. However, any such Holder or subsequent Holder may revoke the
consent as to his Security or portion of his Security by notice to the Trustee
or the Company received before the date on which the Trustee receives an
Officers' Certificate certifying that the Holders of the requisite principal
amount of Securities have consented (and not theretofore revoked such consent)
to the amendment, supplement or waiver.
The Company may, but shall not be obligated to, fix a record date for the
purpose of determining the Holders entitled to consent to any amendment,
supplement or waiver. If a record date is fixed, then notwithstanding the last
sentence of the immediately preceding paragraph, those Persons who were Holders
at such record date (or their duly designated proxies), and only those Persons,
shall be entitled to revoke any consent previously given, whether or not such
Persons continue to be Holders after such record date. No such consent shall
be valid or effective for more than 90 days after such record date.
After an amendment, supplement or waiver becomes effective, it shall bind
every Securityholder, unless it makes a change described in any of clauses (1)
through (10) of Section 9.02, in which case, the amendment, supplement or
waiver shall bind only each Holder of a Security who has consented to it and
every subsequent Holder of a Security or portion of a Security that evidences
the same debt as the consenting Holder's Security; provided that any such
waiver shall not impair or affect the right of any Holder to receive payment of
principal of and interest on a Security, on or after the respective due dates
expressed in such Security, or to bring suit for the enforcement of any such
payment on or after such respective dates without the consent of such Holder.
SECTION 9.05. Notation on or Exchange of Securities.
If an amendment, supplement or waiver changes the terms of a Security, the
Trustee may require the Holder of the Security to deliver it to the Trustee.
The Trustee may place an appropriate notation on the Security about the changed
terms and return it to the Holder. Alternatively, if the Company or the
Trustee so determines, the Company in exchange for the Security shall issue and
the Trustee shall authenticate a new Security that reflects the changed terms.
<PAGE> 88
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SECTION 9.06. Trustee To Sign Amendments, Etc.
The Trustee shall execute any amendment, supplement or waiver authorized
pursuant to this Article Nine; provided that the Trustee may, but shall not be
obligated to, execute any such amendment, supplement or waiver which affects
the Trustee's own rights, duties or immunities under this Indenture. The
Trustee shall be entitled to receive, and shall be fully protected in relying
upon, an Opinion of Counsel and an Officers' Certificate each stating that the
execution of any amendment, supplement or waiver authorized pursuant to this
Article Nine is authorized or permitted by this Indenture and constituted the
legal, valid and binding obligations of the Company enforceable in accordance
with its terms. Such Opinion of Counsel shall be at the expense of the
Company, and the Trustee shall have a lien under Section 7.07 for any such
expense.
ARTICLE TEN
GUARANTEE
SECTION 10.01. Unconditional Guarantee.
Each Guarantor and Subsidiary Guarantor hereby unconditionally, jointly
and severally, guarantees to each Holder of a Security authenticated and
delivered by the Trustee, and to the Trustee and its successors and assigns,
that: (i) the principal of, premium and interest on the Securities will be
promptly paid in full when due, subject to any applicable grace period, whether
at maturity, by acceleration or otherwise and interest on the overdue
principal, if any, and interest on any interest, to the extent lawful, of the
Securities and all other Obligations of the Company to the Holders or the
Trustee hereunder or thereunder will be promptly paid in full or performed, all
in accordance with the terms hereof and thereof; and (ii) in case of any
extension of time of payment or renewal of any Securities or of any such other
Obligations, the same will be promptly paid in full when due or performed in
accordance with the terms of the extension or renewal, subject to any
applicable grace period, whether at stated maturity, by acceleration or
otherwise, subject, however, in the case of clauses (i) and (ii) above, to the
limitations set forth in Section 10.03. Each Guarantor and
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Subsidiary Guarantor hereby agrees that its obligations hereunder shall be
unconditional, irrespective of the validity, regularity or enforceability of
the Securities or this Indenture, the absence of any action to enforce the
same, any waiver or consent by any Holder of the Securities with respect to any
provisions hereof or thereof, the recovery of any judgment against the Company,
any action to enforce the same or any other circumstance which might otherwise
constitute a legal or equitable discharge or defense of a Guarantor or
Subsidiary Guarantor. Each Guarantor and Subsidiary Guarantor hereby waives
diligence, presentment, demand of payment, filing of claims with a court in the
event of insolvency or bankruptcy of the Company, any right to require a
proceeding first against the Company, protest, notice and all demands
whatsoever and covenants that its Guarantee or Subsidiary Guarantee, as the
case may be, will not be discharged except by complete performance of the
obligations contained in the Securities, this Indenture, the Guarantees and
each Subsidiary Guarantee. If any Securityholder or the Trustee is required by
any court or otherwise to return to the Company, any Guarantor, any Subsidiary
Guarantor or any custodian, trustee, liquidator or other similar official
acting in relation to the Company or any Guarantor or Subsidiary Guarantor, any
amount paid by the Company or any Guarantor or Subsidiary Guarantor to the
Trustee or such Securityholder, each Guarantee and Subsidiary Guarantee to the
extent theretofore discharged, shall be reinstated in full force and effect.
Each Guarantor and Subsidiary Guarantor further agrees that, as between each
Guarantor or Subsidiary Guarantor, on the one hand, and the Holders and the
Trustee, on the other hand, (x) the maturity of the obligations guaranteed
hereby may be accelerated as provided in Article Six for the purposes of each
Guarantee and Subsidiary Guarantee notwithstanding any stay, injunction or
other prohibition preventing such acceleration in respect of the obligations
guaranteed hereby, and (y) in the event of any acceleration of such obligations
as provided in Article Six, such obligations (whether or not due and payable)
shall forthwith become due and payable by each Guarantor and Subsidiary
Guarantor for the purpose of its Guarantee or Subsidiary Guarantee, as the case
may be.
SECTION 10.02. Severability
In case any provision of a Guarantee or Subsidiary Guarantee shall be
invalid, illegal or unenforceable, the validity, legality, and enforceability
of the remaining provisions shall not in any way be affected or impaired
thereby.
SECTION 10.03. Release of a Subsidiary Guarantor.
If all of the assets of any Subsidiary Guarantor or all of the Capital
Stock of any Subsidiary Guarantor is sold (including by issuance or otherwise)
by the Company or any of its Subsidiaries in a transaction constituting an
Asset Sale, and if the Net Cash Proceeds from such Asset Sale are used in
accordance with Section 4.12, then such Subsidiary Guarantor (in the event of a
sale or other disposition of all of the Capital Stock of such Subsidiary
Guarantor) or the corporation or other entity acquiring such assets (in the
event of a sale or other disposition of all or substantially all of the assets
of such Subsidiary Guarantor) shall be released and discharged of its
Obligations under its Subsidiary Guarantee.
The Trustee shall deliver an appropriate instrument evidencing such
release upon receipt of a request by the Company accompanied by an Officers'
Certificate and Opinion of Counsel
<PAGE> 90
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certifying as to the compliance with this Section 10.03. Any Subsidiary
Guarantor not so released remains liable for the full amount of principal of an
interest on the Securities as provided in this Article Ten.
SECTION 10.04. Limitation of a Guarantor's or Subsidiary Guarantor's Liability.
Each Guarantor and Subsidiary Guarantor and, by its acceptance hereof,
each Holder hereby confirms that it is the intention of all such parties that
the guarantee by such Guarantor or Subsidiary Guarantor, as the case may be,
pursuant to its Guarantee or Subsidiary Guarantee not constitute a fraudulent
transfer or conveyance for purposes of any Bankruptcy Law, the Uniform
Fraudulent Conveyance Act, the Uniform Fraudulent Transfer Act or any similar
Federal or state law. To effectuate the foregoing intention, the Holders and
each Guarantor and Subsidiary Guarantor hereby irrevocably agree that the
obligations of each Guarantor and Subsidiary Guarantor under its Guarantee or
Subsidiary Guarantee, as the case may be, shall be limited to the maximum
amount as will, after giving effect to all other contingent and fixed
liabilities of such Guarantor or Subsidiary Guarantor, as the case may be, and
after giving effect to any collections from or payments made by or on behalf of
any other Guarantor or Subsidiary Guarantor, as the case may be, in respect of
the obligations of such other Guarantor or Subsidiary Guarantor, as the case
may be, under its Guarantee or Subsidiary Guarantee, as the case may be, or
pursuant to Section 10.05, result in the obligations of such Guarantor or
Subsidiary Guarantor under its Guarantee or Subsidiary Guarantee, as the case
may be, not constituting such fraudulent transfer or conveyance.
SECTION 10.05. Contribution.
In order to provide for just and equitable contribution among the
Guarantors and Subsidiary Guarantors, the Guarantors and Subsidiary Guarantors
agree, inter se, that in the event any payment or distribution is made by any
Guarantor or Subsidiary Guarantor (a "Funding Guarantor") under its Guarantee
or Subsidiary Guarantee, as the case may be, such Funding Guarantor shall be
entitled to a contribution from all other Guarantors and Subsidiary Guarantors
in a pro rata amount based on the Adjusted Net Assets of each Guarantor and
Subsidiary Guarantor (including the Funding Guarantor) for all payments,
damages and expenses incurred by that Funding Guarantor in discharging the
Company's obligations with respect to its Securities or any other Guarantor's
or Subsidiary Guarantor's obligations with respect to its Guarantee or
Subsidiary Guarantee, as the case may be. "Adjusted Net Assets" of a Guarantor
or Subsidiary Guarantor at any date shall mean the lesser of the amount by
which (x) the fair value of the property of such Guarantor or Subsidiary
Guarantor exceeds the total amount of liabilities, including, without
limitation, contingent liabilities (after giving effect to all other fixed and
contingent liabilities incurred or assumed on such date), but excluding
liabilities under the Guarantee or Subsidiary Guarantee, as the
<PAGE> 91
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case may be, of such Guarantor or Subsidiary Guarantor at such date and (y) the
present fair salable value of the assets of such Guarantor or Subsidiary
Guarantor at such date exceeds the amount that will be required to pay the
probable liability of such Guarantor or Subsidiary Guarantor on its debts
(after giving effect to all other fixed and contingent liabilities incurred or
assumed on such date), excluding debt in respect of the Guarantee or Subsidiary
Guarantee of such Guarantor or Subsidiary Guarantor, as the case may be, as
they become absolute and matured.
SECTION 10.06. Waiver of Subrogation.
Until all Guarantee or Subsidiary Guarantee Obligations are paid in full,
each Guarantor and Subsidiary Guarantor hereby irrevocably waives any claims or
other rights which it may now or hereafter acquire against the Company that
arise from the existence, payment, performance or enforcement of such
Guarantor's or Subsidiary Guarantor's obligations under its Guarantee or
Subsidiary Guarantee and this Indenture, including, without limitation, any
right of subrogation, reimbursement, exoneration, indemnification, and any
right to participate in any claim or remedy of any Holder of Securities against
the Company, whether or not such claim, remedy or right arises in equity, or
under contract, statute or common law, including, without limitation, the right
to take or receive from the Company, directly or indirectly, in cash or other
property or by set-off or in any other manner, payment or security on account
of such claim or other rights. If any amount shall be paid to any Guarantor or
Subsidiary Guarantor in violation of the preceding sentence and the Securities
shall not have been paid in full, such amount shall have been deemed to have
been paid to such Guarantor or Subsidiary Guarantor for the benefit of, and
held in trust for the benefit of, the Holders of the Securities, and shall
forthwith be paid to the Trustee for the benefit of such Holders to be credited
and applied upon the Securities, in accordance with the terms of this
Indenture. Each Guarantor and Subsidiary Guarantor acknowledges that it will
receive direct and indirect benefits from the financing arrangements
contemplated by this Indenture and that the waiver set forth in this Section
10.06 is knowingly made in contemplation of such benefits.
SECTION 10.07. Execution of Guarantees and Subsidiary Guarantees.
To evidence their guarantee to the Securityholders set forth in this
Article Ten, the Guarantors and Subsidiary Guarantors hereby agree to execute a
Guarantee or Subsidiary Guarantee, as the case may be, in substantially the
form included in the Securities, which shall be endorsed on each Security
ordered to be authenticated and delivered by the Trustee. Each Guarantor and
Subsidiary Guarantor hereby agrees that its Guarantee and Subsidiary Guarantee
set forth in this Article Ten shall remain in full force and effect
notwithstanding any failure to endorse on each Security a notation of such
Guarantee or Subsidiary Guarantee, as the case may be. Each such Guarantee or
Subsidiary Guarantee shall be signed on behalf of each Guarantor or Subsidiary
<PAGE> 92
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Guarantor, as the case may be, by two Officers, or an Officer and an Assistant
Secretary or one Officer shall sign and one Officer or an Assistant Secretary
(each of whom shall, in each case, have been duly authorized by all requisite
corporate actions) shall attest to such Guarantee or Subsidiary Guarantee prior
to the authentication of the Security on which it is endorsed, and the delivery
of such Security by the Trustee, after the authentication thereof hereunder,
shall constitute due delivery of such Guarantee or Subsidiary Guarantee, as the
case may be, on behalf of such Guarantor or Subsidiary Guarantor. Such
signatures upon the Guarantee or Subsidiary Guarantee may be by manual or
facsimile signature of such officers and may be imprinted or otherwise
reproduced on the Guarantee or Subsidiary Guarantee, and in case any such
officer who shall have signed the Guarantee or Subsidiary Guarantee shall cease
to be such officer before the Security on which such Guarantee or Subsidiary
Guarantee is endorsed shall have been authenticated and delivered by the
Trustee or disposed of by the Company, such Security nevertheless may be
authenticated and delivered or disposed of as though the person who signed the
Guarantee or Subsidiary Guarantee had not ceased to be such officer of the
Guarantor or Subsidiary Guarantor, as the case may be.
SECTION 10.08. Waiver of Stay, Extension or Usury Laws.
Each Guarantor and Subsidiary Guarantor convenants (to the extent that it
may lawfully do so) that it will not at any time insist upon, plead, or in any
manner whatsoever claim or take the benefit or advantage of, any stay or
extension law or any usury law or other law that would prohibit or forgive each
such Guarantor or Subsidiary Guarantor from performing its Guarantee or
Subsidiary Guarantee, as the case may be, as contemplated herein, wherever
enacted, now or at any time hereafter in force, or which may affect the
covenants or the performance of this Indenture; and (to the extent that it may
lawfully do so) each such Guarantor and Subsidiary Guarantor hereby expressly
waives all benefit or advantage of any such law, and covenants that it will not
hinder, delay or impede the execution of any power herein granted to the
Trustee, but will suffer and permit the execution of every such power as though
no such law had been enacted.
ARTICLE ELEVEN
MISCELLANEOUS
SECTION 11.01. TIA Controls.
If any provision of this Indenture limits, qualifies, or conflicts with
the duties imposed by operation of Section 318(c) of the TIA, the imposed
duties shall control.
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SECTION 11.02. Notices.
Any notices or other communications required or permitted hereunder shall
be in writing, and shall be sufficiently given if made by hand delivery, by
telex, by telecopier or registered or certified mail, postage prepaid, return
receipt requested, addressed as follows:
if to the Company, a Guarantor or a Subsidiary Guarantor:
Aetna Industries, Inc.
24331 Sherwood Avenue
P.O. Box 3067
Centerline, Michigan 48015-0067
Attention: Chief Executive Officer
Facsimile: (810) 759-0508
Telephone: (810) 759-2200
if to the Trustee:
Norwest Bank Minnesota National Association
6th and Marquette
Minneapolis, Minnesota 55479-0069
Attention: Corporate Trust Services
Facsimile: (612) 667-9825
Telephone: (612) 667-8058
Each of the Company and the Trustee by written notice to each other such
person may designate additional or different addresses for notices to such
person. Any notice or communication to the Company, a Guarantor or a
Subsidiary Guarantor or the Trustee, shall be deemed to have been given or made
as of the date so delivered if personally delivered; when answered back, if
telexed; when receipt is acknowledged, if telecopied; and five (5) calendar
days after mailing if sent by registered or certified mail, postage prepaid
(except that a notice of change of address shall not be deemed to have been
given until actually received by the addressee).
<PAGE> 94
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Any notice or communication mailed to a Securityholder shall be mailed to
him by first class mail or other equivalent means at his address as it appears
on the registration books of the Registrar and shall be sufficiently given to
him if so mailed within the time prescribed.
Failure to mail a notice or communication to a Securityholder or any
defect in it shall not affect its sufficiency with respect to other
Securityholders. If a notice or communication is mailed in the manner provided
above, it is duly given, whether or not the addressee receives it.
SECTION 11.03. Communications by Holders with Other Holders.
Securityholders may communicate pursuant to TIA Section 312(b) with other
Securityholders with respect to their rights under this Indenture, the
Securities, the Guarantees or the Subsidiary Guarantees. The Company, the
Trustee, the Registrar and any other Person shall have the protection of TIA
Section 312(c).
SECTION 11.04. Certificate and Opinion
as to Conditions Precedent.
Upon any request or application by the Company to the Trustee to take any
action under this Indenture, the Company shall furnish to the Trustee at the
request of the Trustee:
(1) an Officers' Certificate, in form and substance satisfactory to
the Trustee, stating that, in the opinion of the signers, all conditions
precedent, if any, provided for in this Indenture relating to the
proposed action have been complied with; and
(2) an Opinion of Counsel stating that, in the opinion of such
counsel, all such conditions precedent have been complied with.
SECTION 11.05. Statements Required in Certificate or Opinion.
Each certificate or opinion with respect to compliance with a condition or
covenant provided for in this Indenture, other than the Officers' Certificate
required by Section 4.08, shall include:
(1) a statement that the person making such certificate or opinion
has read such covenant or condition;
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(2) a brief statement as to the nature and scope of the examination
or investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(3) a statement that, in the opinion of such person, he has made
such examination or investigation as is necessary to enable him to
express an informed opinion as to whether or not such covenant or
condition has been complied with; and
(4) a statement as to whether or not, in the opinion of each such
person, such condition or covenant has been complied with; provided,
however, that with respect to matters of fact an Opinion of Counsel may
rely on an Officers' Certificate or certificates of public officials.
SECTION 11.06. Rules by Trustee, Paying Agent, Registrar.
The Trustee, Paying Agent or Registrar may make reasonable rules for its
functions.
SECTION 11.07. Legal Holidays.
If a payment date is not a Business Day, payment may be made on the next
succeeding day that is a Business Day with the same force and effect as if made
on such payment date.
SECTION 11.08. Governing Law.
THIS INDENTURE, THE SECURITIES, THE GUARANTEES AND THE SUBSIDIARY
GUARANTEES SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF
THE STATE OF NEW YORK, AS APPLIED TO CONTRACTS MADE AND PERFORMED WITHIN THE
STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW. Each of
the parties hereto agrees to submit to the jurisdiction of the courts of the
State of New York in any action or proceeding arising out of or relating to
this Indenture.
SECTION 11.09. No Adverse Interpretation of Other Agreements.
This Indenture may not be used to interpret another indenture, loan or
debt agreement of any of the Company or any of its Subsidiaries, any Guarantor
or any Subsidiary Guarantor. Any such indenture, loan or debt agreement may
not be used to interpret this Indenture.
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SECTION 11.10. No Recourse Against Others.
A director, officer, employee, stockholder or incorporator, as such, of
the Company or any of its Subsidiaries, any of the Guarantors or any of the
Subsidiary Guarantors shall not have any liability for any obligations of the
Company, the Guarantors or the Subsidiary Guarantors under the Securities, this
Indenture, the Guarantees or the Subsidiary Guarantees or for any claim based
on, in respect of or by reason of such obligations or their creations. Each
Securityholder by accepting a Security waives and releases all such liability.
Such waiver and release are part of the consideration for the issuance of the
Securities.
SECTION 11.11. Successors.
All agreements of the Company, the Guarantors and the Subsidiary
Guarantors in this Indenture, the Securities, the Guarantees and the Subsidiary
Guarantees shall bind their respective successors. All agreements of the
Trustee in this Indenture shall bind its successor.
SECTION 11.12. Duplicate Originals.
All parties may sign any number of copies of this Indenture. Each signed
copy or counterpart shall be an original, but all of them together shall
represent the same agreement.
SECTION 11.13. Severability.
In case any one or more of the provisions in this Indenture, in the
Securities, in the Guarantees or in the Subsidiary Guarantees shall be held
invalid, illegal or unenforceable, in any respect for any reason, the validity,
legality and enforceability of any such provision in every other respect and of
the remaining provisions shall not in any way be affected or impaired thereby,
it being intended that all of the provisions hereof shall be enforceable to the
full extent permitted by law.
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SIGNATURES
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be
duly executed as of the date first written above.
AETNA INDUSTRIES, INC.
By: /s/ Ueli Spring
-------------------------
Name: Ueli Spring
Title: President and Chief
Executive Officer
NORWEST BANK MINNESOTA
NATIONAL ASSOCIATION
as Trustee
By: /s/ Curtis D. Schwegman
-------------------------
Name: Curtis D. Schwegman
Title: Assistant Vice President
THE GUARANTORS:
MS ACQUISITION CORP.
By: /s/ Ueli Spring
-------------------------
Name: Ueli Spring
Title: President and Chief
Executive Officer
AETNA HOLDINGS, INC.
By: /s/ Ueli Spring
-------------------------
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Name: Ueli Spring
Title: President and Chief
Executive Officer
THE SUBSIDIARY GUARANTOR:
AETNA EXPORT SALES CORP.
By: /s/ Ueli Spring
---------------------------------
Name: Ueli Spring
Title: President and Chief
Executive Officer
<PAGE> 1
EXHIBIT 10.2
FORMS OF SENIOR NOTES DUE 2006 OF AETNA,
DATED AS OF AUG. 8, 1996
[FORM OF SERIES A SECURITY]
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD
EXCEPT AS SET FORTH BELOW. BY ITS ACQUISITION HEREOF, THE HOLDER (1)
REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE
144A UNDER THE SECURITIES ACT) OR (B) IT IS AN INSTITUTIONAL "ACCREDITED
INVESTOR" (AS DEFINED IN RULE 501(a)(1), (2), (3) OR (7) UNDER THE SECURITIES
ACT) (AN "ACCREDITED INVESTOR") OR (C) IT IS NOT A U.S. PERSON AND IS ACQUIRING
THIS SECURITY IN AN OFFSHORE TRANSACTION, (2) AGREES THAT IT WILL NOT WITHIN
THREE YEARS AFTER THE ORIGINAL ISSUANCE OF THIS SECURITY RESELL OR OTHERWISE
TRANSFER THIS SECURITY EXCEPT (A) TO THE ISSUER OR ANY SUBSIDIARY THEREOF, (B)
INSIDE THE UNITED STATES TO A QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE WITH
RULE 144A UNDER THE SECURITIES ACT, (C) INSIDE THE UNITED STATES TO AN
ACCREDITED INVESTOR THAT, PRIOR TO SUCH TRANSFER, FURNISHES TO THE TRUSTEE A
SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS (THE FORM OF
WHICH LETTER CAN BE OBTAINED FROM THE TRUSTEE), (D) OUTSIDE THE UNITED STATES
TO PERSONS OTHER THAN U.S. PERSONS IN OFFSHORE TRANSACTIONS MEETING THE
REQUIREMENTS OF RULE 904 UNDER REGULATION S UNDER THE SECURITIES ACT, (E)
PURSUANT TO THE EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE
SECURITIES ACT (IF AVAILABLE), OR (F) PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT AND (3) AGREES THAT IT WILL GIVE TO EACH
PERSON TO WHOM THIS SECURITY IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE
EFFECT OF THIS LEGEND. AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION,"
"UNITED STATES" AND "U.S. PERSON" HAVE THE RESPECTIVE MEANINGS GIVEN TO THEM BY
REGULATION S UNDER THE SECURITIES ACT.
<PAGE> 2
AETNA INDUSTRIES, INC.
11 7/8% Senior Notes
due October 1, 2006, Series A
CUSIP No.:
No. [ ] $[ ]
AETNA INDUSTRIES, INC., a Delaware corporation (the "Company", which term
includes any successor corporation), for value received promises to pay to [ ]
or registered assigns, the principal sum of $[ ] Dollars, on
October 1, 2006.
Interest Payment Dates: April 1 and October 1 commencing April 1, 1997
Record Dates: March 15 and September 15
Reference is made to the further provisions of this Security contained
herein, which will for all purposes have the same effect as if set forth at
this place.
IN WITNESS WHEREOF, the Company has caused this Security to be signed
manually or by facsimile by its duly authorized officers.
Dated:
AETNA INDUSTRIES, INC.
By:
--------------------------
Name:
Title:
By:
--------------------------
Name:
Title:
-2-
<PAGE> 3
[FORM OF TRUSTEE'S CERTIFICATE OF AUTHENTICATION]
This is one of the 11 7/8% Senior Notes due 2006, Series A, described in
the within-mentioned Indenture.
Dated: NORWEST BANK MINNESOTA
NATIONAL ASSOCIATION,
as Trustee
By
---------------------------------
Authorized Signatory
-3-
<PAGE> 4
(REVERSE OF SECURITY)
AETNA INDUSTRIES, INC.
11 7/8% Senior Notes
due October 1, 2006, Series A
1. Interest.
AETNA INDUSTRIES, INC., a Delaware corporation (the "Company"), promises
to pay interest on the principal amount of this Security at the rate per annum
shown above. The Company will pay interest semi-annually on April 1 and
October 1 of each year (an "Interest Payment Date"), commencing April 1, 1997.
Interest on the Securities will accrue from the most recent date to which
interest has been paid or, if no interest has been paid, from August 13, 1996.
Interest will be computed on the basis of a 360-day year of twelve 30-day
months.
The Company shall pay interest on overdue principal from time to time on
demand at the rate borne by the Securities plus 2% and on overdue installments
of interest (without regard to any applicable grace periods) to the extent
lawful.
2. Method of Payment.
The Company shall pay interest on the Securities (except defaulted
interest) to the persons who are the registered Holders at the close of
business on the Record Date immediately preceding the Interest Payment Date
even if the Securities are cancelled on registration of transfer or
registration of exchange after such Record Date. Holders must surrender
Securities to a Paying Agent to collect principal payments. The Company shall
pay principal and interest in money of the United States that at the time of
payment is legal tender for payment of public and private debts ("U.S. Legal
Tender"). However, the Company may pay principal and interest by wire transfer
of Federal funds, or interest by check payable in such U.S. Legal Tender. The
Company may deliver any such interest payment to the Paying Agent or to a
Holder at the Holder's registered address.
3. Paying Agent and Registrar.
Initially, Norwest Bank Minnesota National Association (the "Trustee")
will act as Paying Agent and Registrar. The Company may change any Paying
Agent, Registrar or co-Registrar without notice to the Holders.
4. Indenture, Guarantees and Subsidiary Guarantees.
The Company issued the Securities under an Indenture, dated as of August
1, 1996 (the "Indenture"), among the Company, the Guarantors, the Subsidiary
Guarantor and the Trustee.
-4-
<PAGE> 5
Capitalized terms herein are used as defined in the Indenture unless otherwise
defined herein. The terms of the Securities include those stated in the
Indenture and those made part of the Indenture by reference to the Trust
Indenture Act of 1939 (15 U.S.C. Section Section 77aaa-77bbbb) (the "TIA"), as
in effect on the date of the Indenture until such time as the Indenture is
qualified under the TIA, and thereafter as in effect on the date on which the
Indenture is qualified under the TIA. Notwithstanding anything to the contrary
herein, the Securities are subject to all such terms, and Holders of Securities
are referred to the Indenture and the TIA for a statement of them. The
Securities are general unsecured obligations of the Company limited in
aggregate principal amount to $85,000,000. Payment on each Security is
guaranteed on a senior basis, jointly and severally, by the Guarantors and
Subsidiary Guarantors pursuant to Article Ten of the Indenture.
5. Optional Redemption.
The Securities will be redeemable, at the Company's option, in whole at
any time or in part from time to time, on and after October 1, 2001 at the
following redemption prices (expressed as percentages of the principal amount)
if redeemed during the twelve-month period commencing on October 1 of the years
set forth below, plus, in each case, accrued interest thereon to the date of
redemption:
<TABLE>
<CAPTION>
Year Percentage
---- ----------
<S> <C>
2001 ........................................ 105.938%
2002 ........................................ 103.958%
2003 ........................................ 101.979%
2004 and thereafter ......................... 100.000%
</TABLE>
6. Optional Redemption upon Public Equity Offering.
At any time, or from time to time, on or prior to October 1, 1999, the
Company may, at its option, use the net cash proceeds of one or more Public
Equity Offerings (as defined) to redeem up to $25,000,000 aggregate principal
amount at a redemption price equal to 110.875% of the principal amount thereof
plus accrued and unpaid interest, if any, to the date of redemption; provided
that at least $60,000,000 aggregate principal amount of Securities remains
outstanding immediately after giving effect to any such redemption. In order
to effect the foregoing redemption with the net cash proceeds of a Public
Equity Offering, the Company shall send the redemption notice not later than 90
days after the consummation of such Public Equity Offering.
As used in the preceding paragraph, "Public Equity Offering" means an
underwritten public offering of Qualified Capital Stock of the Company or
either of the Guarantors pursuant to a registration statement filed with and
declared effective by the SEC in accordance with the Securities Act; provided
that, in the event of a Public Equity Offering by either of the Guarantors, it
contributes to the capital of the Company the portion of the net cash proceeds
of such Public
-5-
<PAGE> 6
Equity Offering necessary to pay the aggregate redemption price, plus accrued
and unpaid interest, if any, to the redemption date of the Securities to be
redeemed pursuant to the preceding paragraph.
7. Notice of Redemption.
Notice of redemption will be mailed at least 30 days but not more than 60
days before the Redemption Date to each Holder of Securities to be redeemed at
such Holder's registered address. Securities in denominations of $1,000 may be
redeemed only in whole. The Trustee may select for redemption portions (equal
to $1,000 or any integral multiple thereof) of the principal of Securities that
have denominations larger than $1,000.
If any Security is to be redeemed in part only, the notice of redemption
that relates to such Security shall state the portion of the principal amount
thereof to be redeemed. A new Security in a principal amount equal to the
unredeemed portion thereof will be issued in the name of the Holder thereof
upon cancellation of the original Security. On and after the Redemption Date,
interest will cease to accrue on Securities or portions thereof called for
redemption.
8. Change of Control Offer.
Upon the occurrence of a Change of Control, the Company will be required
to offer to purchase all of the outstanding Securities at a purchase price
equal to 101% of the principal amount thereof plus accrued and unpaid interest,
if any, to the date of repurchase.
9. Limitation on Disposition of Assets.
The Company is subject to certain conditions, obligated to make an offer
to purchase Securities at 100% of their principal amount plus accrued and
unpaid interest to the date of repurchase with certain net cash proceeds of
certain sales or other dispositions of assets in accordance with the Indenture.
10. Denominations; Transfer; Exchange.
The Securities are in registered form, without coupons, in denominations
of $1,000 and integral multiples of $1,000. A Holder shall register the
transfer of or exchange Securities in accordance with the Indenture. The
Registrar may require a Holder, among other things, to furnish appropriate
endorsements and transfer documents and to pay certain transfer taxes or
similar governmental charges payable in connection therewith as permitted by
the Indenture. The Registrar need not register the transfer of or exchange any
Securities or portions thereof selected for redemption, except the unredeemed
portion of any security being redeemed in part.
-6-
<PAGE> 7
11. Persons Deemed Owners.
The registered Holder of a Security shall be treated as the owner of it
for all purposes.
12. Unclaimed Funds.
If funds for the payment of principal or interest remain unclaimed for two
years, the Trustee and the Paying Agent will repay the funds to the Company at
its request. After that, all liability of the Trustee and such Paying Agent
with respect to such funds shall cease.
13. Legal Defeasance and Covenant Defeasance.
The Company may be discharged from its obligations under the Indenture and
the Securities except for certain provisions thereof, and may be discharged
from its obligations to comply with certain covenants contained in the
Indenture and the Securities, in each case upon satisfaction of certain
conditions specified in the Indenture.
14. Amendment; Supplement; Waiver.
Subject to certain exceptions, the Indenture or the Securities may be
amended or supplemented with the written consent of the Holders of at least a
majority in aggregate principal amount of the Securities then outstanding, and
any existing Default or Event of Default or compliance with any provision may
be waived with the consent of the Holders of a majority in aggregate principal
amount of the Securities then outstanding. Without notice to or consent of
any Holder, the parties thereto may amend or supplement the Indenture or the
Securities to, among other things, cure any ambiguity, defect or inconsistency,
provide for uncertificated Securities in addition to or in place of
certificated Securities or comply with any requirements of the SEC in
connection with the qualification of the Indenture under the TIA, or make any
other change that does not materially adversely affect the rights of any Holder
of a Security.
15. Restrictive Covenants.
The Indenture contains certain covenants that, among other things, limit
the ability of the Company and certain of its subsidiaries to make restricted
payments, to incur indebtedness, to create liens, to issue preferred or other
capital stock of subsidiaries, to sell assets, to permit restrictions on
dividends and other payments by subsidiaries to the Company, to consolidate,
merge or sell all or substantially all of its assets, to engage in transactions
with affiliates or to engage in certain businesses. The limitations are
subject to a number of important qualifications and exceptions.
-7-
<PAGE> 8
16. Defaults and Remedies.
If an Event of Default occurs and is continuing, the Trustee or the
Holders of at least 25% in aggregate principal amount of Securities then
outstanding may declare all the Securities to be due and payable immediately in
the manner and with the effect provided in the Indenture. Holders of
Securities may not enforce the Indenture or the Securities except as provided
in the Indenture. The Trustee is not obligated to enforce the Indenture or the
Securities unless it has received indemnity satisfactory to it. The Indenture
permits, subject to certain limitations therein provided, Holders of a majority
in aggregate principal amount of the Securities then outstanding to direct the
Trustee in its exercise of any trust or power. The Trustee may withhold from
Holders of Securities notice of any continuing Default or Event of Default
(except a Default in payment of principal, premium or interest, including an
accelerated payment) if it determines that withholding notice is in their
interest.
17. Trustee Dealings with Company.
The Trustee under the Indenture, in its individual or any other capacity,
may become the owner or pledgee of Securities and may otherwise deal with the
Company, its Subsidiaries, the Guarantors, any Subsidiary Guarantors and their
respective Affiliates as if it were not the Trustee.
18. No Recourse Against Others.
No stockholder, director, officer, employee or incorporator, as such, of
the Company shall have any liability for any obligation of the Company under
the Securities or the Indenture or for any claim based on, in respect of or by
reason of, such obligations or their creation. Each Holder of a Security by
accepting a Security waives and releases all such liability. The waiver and
release are part of the consideration for the issuance of the Securities.
19. Authentication.
This Security shall not be valid until the Trustee or authenticating agent
signs the certificate of authentication on this Security.
20. Abbreviations and Defined Terms.
Customary abbreviations may be used in the name of a Holder of a Security
or an assignee, such as: TEN COM (= tenants in common), TEN ENT (= tenants by
the entireties), JT TEN (= joint tenants with right of survivorship and not as
tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts to Minors
Act).
-8-
<PAGE> 9
21. CUSIP Numbers.
Pursuant to a recommendation promulgated by the Committee on Uniform
Security Identification Procedures, the Company has caused CUSIP numbers to be
printed on the Securities as a convenience to the Holders of the Securities.
No representation is made as to the accuracy of such numbers as printed on the
Securities and reliance may be placed only on the other identification numbers
printed hereon.
22. Registration Rights.
Pursuant to the Registration Rights Agreement, the Company will be
obligated upon the occurrence of certain events to consummate an exchange offer
pursuant to which the Holder of this Security shall have the right to exchange
this Series A Security for the Company's 11 7/8% Senior Notes due 2006, Series
B (the "Series B Securities"), which have been registered under the Securities
Act, in like principal amount and having terms identical in all material
respects as the Series A Securities. The Holders shall be entitled to receive
certain additional interest payments in the event such exchange offer is not
consummated and upon certain other conditions, all pursuant to and in
accordance with the terms of the Registration Rights Agreement.
The Company will furnish to any Holder of a Security upon written request
and without charge a copy of the Indenture. Requests may be made to: Aetna
Industries, Inc., 24331 Sherwood Avenue, P.O. Box 3067, Centerline, Michigan
48015-0067, Attn: Chief Executive Officer.
-9-
<PAGE> 10
GUARANTEES AND SUBSIDIARY GUARANTEE
The Guarantors and the Subsidiary Guarantor (as defined in the Indenture
referred to in the Security upon which this notation is endorsed and each
hereinafter referred to as a "Guarantor" or "Subsidiary Guarantor", as the case
may be, which terms respectively include any successor person under the
Indenture) have unconditionally guaranteed on a senior basis (such guarantees
by each Guarantor and Subsidiary Guarantor being referred to herein as a
"Guarantee" and "Subsidiary Guarantee", respectively) (i) the due and punctual
payment of the principal of and interest on the Securities, whether at
maturity, by acceleration or otherwise, the due and punctual payment of
interest on the overdue principal and interest, if any, on the Securities, to
the extent lawful, and the due and punctual performance of all other
obligations of the Company to the Holders or the Trustee all in accordance with
the terms set forth in Article Ten of the Indenture and (ii) in case of any
extension of time of payment or renewal of any Securities or any of such other
obligations, that the same will be promptly paid in full when due or performed
in accordance with the terms of the extension or renewal, whether at stated
maturity, by acceleration or otherwise.
No stockholder, officer, director or incorporator, as such, past, present
or future, of any Guarantor or Subsidiary Guarantor shall have any liability
under a Guarantee or Subsidiary Guarantee, as the case may be, by reason of his
or its status as such stockholder, officer, director or incorporator.
The Guarantees and Subsidiary Guarantee shall not be valid or obligatory
for any purpose until the certificate of authentication on the Securities upon
which the Guarantees and Subsidiary Guarantee are noted shall have been
executed by the Trustee under the Indenture by the manual signature of one of
its authorized officers.
GUARANTORS:
MS ACQUISITION CORP.
By:
-----------------------------
Name:
Title:
By:
-----------------------------
Name:
Title:
AETNA HOLDINGS INC.
<PAGE> 11
By:
------------------------------
Name:
Title:
By:
------------------------------
Name:
Title:
SUBSIDIARY GUARANTOR:
AETNA EXPORT SALES CORP.
By:
------------------------------
Name:
Title:
By:
------------------------------
Name:
Title:
-2-
<PAGE> 12
ASSIGNMENT FORM
I or we assign and transfer this Security to
________________________________________________________________________________
________________________________________________________________________________
(Print or type name, address and zip code of assignee or transferee)
________________________________________________________________________________
(Insert Social Security or other identifying number of assignee or transferee)
and irrevocably appoint ________________________________________________________
agent to transfer this Security on the books of the Company.
The agent may substitute another to act for him.
Dated: ____________________ Signed:_______________________________
(Sign exactly as
name appears on the
other side of this
Security)
Signature Guarantee: ___________________________________________________________
Participant in a recognized Signature
Guarantee Medallion Program (or other
signature guarantor program reasonably
acceptable to the Trustee)
<PAGE> 13
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Security purchased by the Company
pursuant to Section 4.12 or Section 4.24 of the Indenture, check the
appropriate box:
Section 4.12 [ ] Section 4.24 [ ]
If you want to elect to have only part of this Security purchased by the
Company pursuant to Section 4.12 or Section 4.24 of the Indenture, state the
amount: $_____________
Date:_________________ Your Signature: ______________________________________
(Sign exactly as
your name appears
on the other side
of this Security)
Signature Guarantee:_______________________________________
<PAGE> 14
[FORM OF SERIES B SECURITY]
AETNA INDUSTRIES INC.
11 7/8% Senior Notes
due October 1, 2006, Series B
CUSIP No.: [ ]
No. [ ] $[ ]
AETNA INDUSTRIES INC., a Delaware corporation (the "Company", which term
includes any successor corporation), for value received promises to pay to
[ ] or registered assigns, the principal sum of $[ ] Dollars, on
October 1, 2006.
Interest Payment Dates: April 1 and October 1 commencing April 1, 1997
Record Dates: March 15 and September 15
Reference is made to the further provisions of this Security contained
herein, which will for all purposes have the same effect as if set forth at
this place.
IN WITNESS WHEREOF, the Company has caused this Security to be signed
manually or by facsimile by its duly authorized officers.
Dated:
AETNA INDUSTRIES, INC.
By:
--------------------------------
Name:
Title:
By:
--------------------------------
Name:
Title:
<PAGE> 15
[FORM OF TRUSTEE'S CERTIFICATE OF AUTHENTICATION]
This is one of the 11 7/8% Senior Notes due 2006, Series B, described in
the within-mentioned Indenture.
Dated: NORWEST BANK MINNESOTA
NATIONAL ASSOCIATION,
as Trustee
By
-----------------------------
Authorized Signatory
-2-
<PAGE> 16
(REVERSE OF SECURITY)
AETNA INDUSTRIES, INC.
11 7/8% Senior Notes
due October 1, 2006, Series B
1. Interest.
AETNA INDUSTRIES, INC., a Delaware corporation (the "Company"), promises
to pay interest on the principal amount of this Security at the rate per annum
shown above. The Company will pay interest semi-annually on April 1 and
October 1 of each year (an "Interest Payment Date"), commencing April 1, 1997.
Interest on the Securities will accrue from the most recent date to which
interest has been paid or, if no interest has been paid, from August 13, 1996.
Interest will be computed on the basis of a 360-day year of twelve 30-day
months.
The Company shall pay interest on overdue principal from time to time on
demand at the rate borne by the Securities plus 2% and on overdue installments
of interest (without regard to any applicable grace periods) to the extent
lawful.
2. Method of Payment.
The Company shall pay interest on the Securities (except defaulted
interest) to the persons who are the registered Holders at the close of
business on the Record Date immediately preceding the Interest Payment Date
even if the Securities are cancelled on registration of transfer or
registration of exchange after such Record Date. Holders must surrender
Securities to a Paying Agent to collect principal payments. The Company shall
pay principal and interest in money of the United States that at the time of
payment is legal tender for payment of public and private debts ("U.S. Legal
Tender"). However, the Company may pay principal and interest by wire transfer
of Federal funds, or interest by check payable in such U.S. Legal Tender. The
Company may deliver any such interest payment to the Paying Agent or to a
Holder at the Holder's registered address.
3. Paying Agent and Registrar.
Initially, Norwest Bank Minnesota National Association (the "Trustee")
will act as Paying Agent and Registrar. The Company may change any Paying
Agent, Registrar or co-Registrar without notice to the Holders.
4. Indenture, Guarantees and Subsidiary Guarantees.
The Company issued the Securities under an Indenture, dated as of August
1, 1996 (the "Indenture"), among the Company, the Guarantors, the Subsidiary
Guarantor and the Trustee.
-3-
<PAGE> 17
Capitalized terms herein are used as defined in the Indenture unless otherwise
defined herein. The terms of the Securities include those stated in the
Indenture and those made part of the Indenture by reference to the Trust
Indenture Act of 1939 (15 U.S.C. Section Section 77aaa-77bbbb) (the "TIA"), as
in effect on the date of the Indenture until such time as the Indenture is
qualified under the TIA, and thereafter as in effect on the date on which the
Indenture is qualified under the TIA. Notwithstanding anything to the contrary
herein, the Securities are subject to all such terms, and Holders of Securities
are referred to the Indenture and the TIA for a statement of them. The
Securities are general unsecured obligations of the Company limited in
aggregate principal amount to $85,000,000. Payment on each Security is
guaranteed on a senior basis, jointly and severally, by the Guarantors and
Subsidiary Guarantors pursuant to Article Ten of the Indenture.
5. Optional Redemption.
The Securities will be redeemable, at the Company's option, in whole at
any time or in part from time to time, on and after October 1, 2001 at the
following redemption prices (expressed as percentages of the principal amount)
if redeemed during the twelve-month period commencing on October 1 of the years
set forth below, plus, in each case, accrued interest thereon to the date of
redemption:
<TABLE>
<CAPTION>
Year Percentage
---- ----------
<S> <C>
2001 ........................................... 105.938%
2002 ........................................... 103.958%
2003 ........................................... 101.979%
2004 and thereafter ............................ 100.000%
</TABLE>
6. Optional Redemption upon Public Equity Offering.
At any time, or from time to time, on or prior to October 1, 1999, the
Company may, at its option, use the net cash proceeds of one or more Public
Equity Offerings (as defined) to redeem up to $25,000,000 aggregate principal
amount, at a redemption price equal to 110.875% of the principal amount thereof
plus accrued and unpaid interest, if any, to the date of redemption; provided
that at least $60,000,000 aggregate principal amount of Securities remains
outstanding immediately after giving effect to any such redemption. In order
to effect the foregoing redemption with the net cash proceeds of a Public
Equity Offering, the Company shall send the redemption notice not later than 90
days after the consummation of such Public Equity Offering.
As used in the preceding paragraph, "Public Equity Offering" means an
underwritten public offering of Qualified Capital Stock of the Company or
either of the Guarantors pursuant to a registration statement filed with and
declared effective by the SEC in accordance with the Securities Act; provided
that, in the event of a Public Equity Offering by either of the Guarantors, it
contributes to the capital of the Company the portion of the net cash proceeds
of such Public
-4-
<PAGE> 18
Equity Offering necessary to pay the aggregate redemption price, plus accrued
and unpaid interest, if any, to the redemption date of the Securities to be
redeemed pursuant to the preceding paragraph.
7. Notice of Redemption.
Notice of redemption will be mailed at least 30 days but not more than 60
days before the Redemption Date to each Holder of Securities to be redeemed at
such Holder's registered address. Securities in denominations of $1,000 may be
redeemed only in whole. The Trustee may select for redemption portions (equal
to $1,000 or any integral multiple thereof) of the principal of Securities that
have denominations larger than $1,000.
If any Security is to be redeemed in part only, the notice of redemption
that relates to such Security shall state the portion of the principal amount
thereof to be redeemed. A new Security in a principal amount equal to the
unredeemed portion thereof will be issued in the name of the Holder thereof
upon cancellation of the original Security. On and after the Redemption Date,
interest will cease to accrue on Securities or portions thereof called for
redemption.
8. Change of Control Offer.
Upon the occurrence of a Change of Control, the Company will be required
to offer to purchase all of the outstanding Securities at a purchase price
equal to 101% of the principal amount thereof plus accrued and unpaid interest,
if any, to the date of repurchase.
9. Limitation on Disposition of Assets.
The Company is subject to certain conditions, obligated to make an offer
to purchase Securities at 100% of their principal amount plus accrued and
unpaid interest to the date of repurchase with certain net cash proceeds of
certain sales or other dispositions of assets in accordance with the Indenture.
10. Denominations; Transfer; Exchange.
The Securities are in registered form, without coupons, in denominations
of $1,000 and integral multiples of $1,000. A Holder shall register the
transfer of or exchange Securities in accordance with the Indenture. The
Registrar may require a Holder, among other things, to furnish appropriate
endorsements and transfer documents and to pay certain transfer taxes or
similar governmental charges payable in connection therewith as permitted by
the Indenture. The Registrar need not register the transfer of or exchange any
Securities or portions thereof selected for redemption, except the unredeemed
portion of any security being redeemed in part.
-5-
<PAGE> 19
11. Persons Deemed Owners.
The registered Holder of a Security shall be treated as the owner of it
for all purposes.
12. Unclaimed Funds.
If funds for the payment of principal or interest remain unclaimed for two
years, the Trustee and the Paying Agent will repay the funds to the Company at
its request. After that, all liability of the Trustee and such Paying Agent
with respect to such funds shall cease.
13. Legal Defeasance and Covenant Defeasance.
The Company may be discharged from its obligations under the Indenture and
the Securities except for certain provisions thereof, and may be discharged
from its obligations to comply with certain covenants contained in the
Indenture and the Securities, in each case upon satisfaction of certain
conditions specified in the Indenture.
14. Amendment; Supplement; Waiver.
Subject to certain exceptions, the Indenture or the Securities may be
amended or supplemented with the written consent of the Holders of at least a
majority in aggregate principal amount of the Securities then outstanding, and
any existing Default or Event of Default or compliance with any provision may
be waived with the consent of the Holders of a majority in aggregate principal
amount of the Securities then outstanding. Without notice to or consent of
any Holder, the parties thereto may amend or supplement the Indenture or the
Securities to, among other things, cure any ambiguity, defect or inconsistency,
provide for uncertificated Securities in addition to or in place of
certificated Securities or comply with any requirements of the SEC in
connection with the qualification of the Indenture under the TIA, or make any
other change that does not materially adversely affect the rights of any Holder
of a Security.
15. Restrictive Covenants.
The Indenture contains certain covenants that, among other things, limit
the ability of the Company and certain of its subsidiaries to make restricted
payments, to incur indebtedness, to create liens, to issue preferred or other
capital stock of subsidiaries, to sell assets, to permit restrictions on
dividends and other payments by subsidiaries to the Company, to consolidate,
merge or sell all or substantially all of its assets, to engage in transactions
with affiliates or to engage in certain businesses. The limitations are
subject to a number of important qualifications and exceptions.
-6-
<PAGE> 20
16. Defaults and Remedies.
If an Event of Default occurs and is continuing, the Trustee or the
Holders of at least 25% in aggregate principal amount of Securities then
outstanding may declare all the Securities to be due and payable immediately in
the manner and with the effect provided in the Indenture. Holders of
Securities may not enforce the Indenture or the Securities except as provided
in the Indenture. The Trustee is not obligated to enforce the Indenture or the
Securities unless it has received indemnity satisfactory to it. The Indenture
permits, subject to certain limitations therein provided, Holders of a majority
in aggregate principal amount of the Securities then outstanding to direct the
Trustee in its exercise of any trust or power. The Trustee may withhold from
Holders of Securities notice of any continuing Default or Event of Default
(except a Default in payment of principal, premium or interest, including an
accelerated payment) if it determines that withholding notice is in their
interest.
17. Trustee Dealings with Company.
The Trustee under the Indenture, in its individual or any other capacity,
may become the owner or pledgee of Securities and may otherwise deal with the
Company, its Subsidiaries, the Guarantors, any Subsidiary Guarantors and their
respective Affiliates as if it were not the Trustee.
18. No Recourse Against Others.
No stockholder, director, officer, employee or incorporator, as such, of
the Company shall have any liability for any obligation of the Company under
the Securities or the Indenture or for any claim based on, in respect of or by
reason of, such obligations or their creation. Each Holder of a Security by
accepting a Security waives and releases all such liability. The waiver and
release are part of the consideration for the issuance of the Securities.
19. Authentication.
This Security shall not be valid until the Trustee or authenticating agent
signs the certificate of authentication on this Security.
20. Abbreviations and Defined Terms.
Customary abbreviations may be used in the name of a Holder of a Security
or an assignee, such as: TEN COM (= tenants in common), TEN ENT (= tenants by
the entireties), JT TEN (= joint tenants with right of survivorship and not as
tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts to Minors
Act).
-7-
<PAGE> 21
21. CUSIP Numbers.
Pursuant to a recommendation promulgated by the Committee on Uniform
Security Identification Procedures, the Company has caused CUSIP numbers to be
printed on the Securities as a convenience to the Holders of the Securities.
No representation is made as to the accuracy of such numbers as printed on the
Securities and reliance may be placed only on the other identification numbers
printed hereon.
The Company will furnish to any Holder of a Security upon written request
and without charge a copy of the Indenture. Requests may be made to: Aetna
Industries, Inc., 24331 Sherwood Avenue, P.O. Box 3067, Centerline, Michigan
48015-0067, Attn: Chief Executive Officer.
-8-
<PAGE> 1
EXHIBIT 10.3
AETNA INDUSTRIES, INC.
================================================================================
AMENDED AND RESTATED CREDIT AGREEMENT
DATED AS OF APRIL 10, 1998
================================================================================
THE LENDERS PARTY HERETO
AND
NBD BANK, AS AGENT
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Article Page
<S> <C> <C>
ARTICLE 1 DEFINITIONS.......................................................................................1
1.1 Certain Definitions.........................................................................1
1.2 Other Definitions; Rules of Construction. specifically provided............................17
ARTICLE 2 THE COMMITMENT, THE SWINGLINE FACILITY AND THE ADVANCES..........................................18
2.1 Commitment of the Lenders and the Swingline Facility.......................................18
2.2 Termination and Reduction of Commitments...................................................19
2.3 Fees.......................................................................................20
2.4 Disbursement of Advances...................................................................21
2.5 Conditions for First Disbursement..........................................................22
(a) Corporate Documents...................................................................22
(b) Notes.................................................................................23
(c) Security Documents....................................................................23
(d) Casualty and Other Insurance..........................................................23
(e) Legal Opinions........................................................................23
(f) Fees..................................................................................23
(g) Subordinated Debt Documents...........................................................23
(h) Miscellaneous.........................................................................23
2.6 Further Conditions for Disbursement........................................................21
2.7 Subsequent Elections as to Loans...........................................................24
2.8 Limitation of Requests and Elections.......................................................24
2.9 Minimum Amount; Limitation on Number of Loans; Etc.........................................25
2.10 Borrowing Base Adjustments.................................................................25
2.11 Security and Collateral....................................................................26
ARTICLE 3 PAYMENTS AND PREPAYMENTS OF ADVANCES.............................................................26
3.1 Principal Payments and Prepayments.........................................................26
3.2 Interest Payments..........................................................................24
3.3 Letter of Credit Reimbursement Payments....................................................27
3.4 Payment Method.............................................................................29
3.5 No Setoff or Deduction.....................................................................29
3.6 Payment on Non-Business Day; Payment Computations..........................................29
3.7 Additional Costs...........................................................................30
3.8 Illegality and Impossibility.
3.9 Indemnification............................................................................31
</TABLE>
i
<PAGE> 3
<TABLE>
<CAPTION>
Article Page
<S> <C> <C>
ARTICLE 4 REPRESENTATIONS AND WARRANTIES...................................................................32
4.1 Corporate Existence and Power..............................................................32
4.2 Corporate Authority........................................................................32
4.3 Binding Effect.............................................................................32
4.4 Subsidiaries...............................................................................32
4.5 Litigation.................................................................................32
4.6 Financial Condition........................................................................33
4.7 Use of Advances............................................................................33
4.8 Consents, Etc..............................................................................33
4.9 Taxes......................................................................................33
4.10 Title to Properties........................................................................33
4.11 Borrowing Base.............................................................................34
4.12 ERISA......................................................................................34
4.13 Disclosure.................................................................................34
4.14 Environmental Matters......................................................................34
4.15 No Default.................................................................................35
4.16 No Burdensome Restrictions.................................................................35
4.17 Other Debt.................................................................................35
ARTICLE 5 COVENANTS........................................................................................36
5.1 Affirmative Covenants......................................................................36
5.2 Negative Covenants.........................................................................39
ARTICLE 6 DEFAULT..........................................................................................44
6.1 Events of Default..........................................................................44
(a) Nonpayment............................................................................44
(b) Misrepresentation.....................................................................44
(c) Certain Covenants.....................................................................45
(d) Other Defaults........................................................................45
(e) Cross Default.........................................................................45
(f) Judgments.............................................................................45
(g) ERISA.................................................................................45
(h) Insolvency, Etc.......................................................................46
(i) Loan Documents........................................................................46
(j) Change in Control.....................................................................46
6.2 Remedies...................................................................................46
</TABLE>
ii
<PAGE> 4
ARTICLE
<TABLE>
<CAPTION>
<S> <C> <C>
ARTICLE 7 THE AGENT AND THE BANKS..........................................................................47
7.1 Appointment and Authorization..............................................................47
7.2 Agent and Affiliates.......................................................................47
7.3 Scope of Agent's Duties....................................................................48
7.4 Reliance by Agent..........................................................................48
7.5 Default....................................................................................48
7.6 Liability of Agent.........................................................................48
7.7 Nonreliance on Agent and Other Lenders.....................................................48
7.8 Indemnification............................................................................49
7.9 Successor Agent............................................................................50
7.10 Sharing of Payments........................................................................50
7.11 Withholding Tax Exemption..................................................................51
ARTICLE 8 GUARANTY.........................................................................................51
8.1 Guarantee of Obligations...................................................................51
8.2 Nature of Guaranty.........................................................................52
8.3 Waivers and Other Agreements...............................................................52
8.4 Obligations Absolute.......................................................................52
8.5 No Investigation by Lenders or Agent.......................................................53
8.6 Indemnity..................................................................................53
8.7 Subordination, Subrogation, Etc............................................................53
8.8 Waiver.....................................................................................53
ARTICLE 9 MISCELLANEOUS....................................................................................53
9.1 Amendments, Etc............................................................................53
9.2 Notices....................................................................................54
9.3 Reliance on and Survival of Various Provisions.............................................55
9.4 Expenses; Indemnification..................................................................55
9.5 Successors and Assigns.....................................................................56
9.6 Counterparts...............................................................................59
9.7 Governing Law..............................................................................59
9.8 Table of Contents and Headings.............................................................60
9.9 Construction of Certain Provisions.........................................................60
9.10 Integration and Severability...............................................................60
9.11 Independence of Covenants..................................................................60
9.12 Interest Rate Limitation...................................................................60
9.13 Waiver of Jury Trial.......................................................................60
</TABLE>
iii
<PAGE> 5
EXHIBITS
Exhibit A Borrowing Base Certificate
Exhibit B-1 Facility A Note
Exhibit B-2 Facility B Note
Exhibit B-3 Swingline Note
Exhibit C Security Agreement
Exhibit D Request for Advance
Exhibit E Request for Continuation or Conversion
Exhibit F Assignment and Acceptance
Exhibit G Assumption Agreement
SCHEDULES
Schedule 1.1(a) SOFEDIT Shareholders
Schedule 1.1(b) Subordinated Debt Documents
Schedule 4.4 Subsidiaries
Schedule 4.5 Litigation
Schedule 4.12 ERISA
Schedule 4.14 Environmental Matters
Schedule 5.2(f) Indebtedness
Schedule 5.2(g) Liens
Schedule 5.2(l) Investments, Loans and Advances
Schedule 5.2(m) Transactions with Affiliates
iv
<PAGE> 6
THIS AMENDED AND RESTATED CREDIT AGREEMENT, dated as of April 10, 1998
(this "Agreement"), is by and among AETNA INDUSTRIES, INC. a Michigan
corporation (the "Company"), the Guarantor(s) party hereto from time to time,
the lender(s) party hereto from time to time (collectively, the "Lenders" and
individually, a "Lender") and NBD BANK, a Michigan banking corporation, as agent
for the Lenders (in such capacity, the "Agent").
INTRODUCTION
A. The Company, the Banks party thereto and the Agent are parties to a
Credit Agreement dated as of May 2, 1996, as amended (the "Existing Credit
Agreement") pursuant to which such Banks agreed, subject to the terms and
conditions thereof, to extend credit to the Borrowers.
B. The Company desires to amend and restate the Existing Credit
Agreement to provide a revolving credit facility, including letters of credit, a
revolving credit facility to make term loans, and a revolving credit facility to
issue standby letters of credit, in the aggregate principal amount of up to
$56,500,000, in order to provide funds and other financial accommodations for
working capital and its other general corporate purposes, and the Lenders are
willing to establish such a credit facility in favor of the Company on the terms
and conditions herein set forth.
In consideration of the premises and of the mutual agreements herein
contained, the parties hereto agree as follows:
ARTICLE 1
DEFINITIONS
1.1 Certain Definitions. As used herein the following terms shall have
the following respective meanings:
"Advance" shall mean any Loan and any Letter of Credit Advance.
"Affiliate", when used with respect to any person shall mean any other
person which, directly or indirectly, controls or is controlled by or is under
common control with such person. For purposes of this definition "control"
(including the correlative meanings of the terms "controlled by" and "under
common control with"), with respect to any person, shall mean possession,
directly or indirectly, of the power to direct or cause the direction of the
management and policies of such person, whether through the ownership of voting
securities or by contract or otherwise.
"Applicable Lending Office" shall mean, with respect to any Advance
made by any Lender or with respect to such Lender's Commitment, the office of
such Lender or of any Affiliate of such Lender located at the address specified
as the applicable lending office for such Lender set forth next to the name of
such Lender in the signature pages hereof or any other office or Affiliate of
such Lender or of any Affiliate of such Lender hereafter selected and notified
to the Company and the Agent by such Lender.
1
<PAGE> 7
"Applicable Margin" shall mean, with the respect to any Facility A
Loan, commitment fees payable under Section 2.3(a) or letter of credit fees
payable pursuant to Section 2.3(b)(i), as the case may be, the applicable margin
set forth in the table below based on the Funded Debt Ratio and the Senior
Secured Funded Debt Ratio, as adjusted on the first day of each fiscal quarter
based on the Funded Debt Ratio and the Senior Secured Funded Debt Ratio as of
the last day of the fiscal quarter immediately preceding the fiscal quarter most
recently ended, provided that the Applicable Margin in effect on the first day
of any Eurodollar Interest Period for any Eurodollar Rate Loan shall remain in
effect for the entire Eurodollar Interest Period and, notwithstanding anything
herein to the contrary, upon or during the continuance of any Event of Default,
the Applicable Margin shall be based on the highest possible Applicable Margin
described in the table below, regardless of the Funded Debt Ratio and the Senior
Secured Funded Debt Ratio:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
APPLICABLE MARGIN (EXPRESSED IN BASIS POINTS)
-------------------------------------------------------------------------------------------------------------------
Senior Secured Funded Debt Ratio Eurodollar Floating Commitment Letter of
Funded Debt Rate Loan Rate Loan Fee Credit
Commission
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
>1.50 and =>4.25 275.00 150.00 50.00 275.00
-
-------------------------------------------------------------------------------------------------------------------
<1.50 and * >4.25 250.00 125.00 50.00 250.00
-------------------------------------------------------------------------------------------------------------------
=>3.50<=4.25 225.00 100.00 50.00 225.00
-------------------------------------------------------------------------------------------------------------------
=>2.75<3.50 175.00 50.00 37.50 175.00
-------------------------------------------------------------------------------------------------------------------
=>2.00<2.75 125.00 0.00 25.00 125.00
-------------------------------------------------------------------------------------------------------------------
<2.00 100.00 0.00 25.00 100.00
-------------------------------------------------------------------------------------------------------------------
</TABLE>
*Initial Pricing
"Borrowing" shall mean the aggregation of Advances, including each
Letter of Credit issuance, of the Lenders to be made to the Company, or
continuations and conversions of any Loans, made pursuant to Article II on a
single date and, in the case of any Loans, for a single Eurodollar Interest
Period, which Borrowings may be classified for purposes of this Agreement by
reference to the type of Loans or the type of Advance comprising the related
Borrowing, e.g., a "Eurodollar Rate Borrowing" is a Borrowing comprised of
Eurodollar Rate Loans and a "Letter of Credit Borrowing" is an Advance comprised
of a single Letter of Credit.
"Borrowing Base" shall mean, as of any date, the lesser of (a) the sum,
without duplication, of (i) an amount equal to 85% of the value of Eligible
Accounts Receivable plus (ii) an amount equal to 60% of the value of Eligible
Inventory not to exceed $9,500,000, plus (iii) an amount equal to 50% of
Eligible Tooling Inventory not to exceed (A) $15,000,000 from the Effective Date
hereof to and including June 30, 1999 or (B) $5,000,000 from and including July
1, 1999 and thereafter, plus (iv) 80% of the value of Eligible Fixed Assets
owned by the Company and Manufacturing as of the Effective Date, or (b) the
amount calculated under clause (b) of the definition of "Permitted Indebtedness"
set forth in the Senior Note Indenture; provided, however, that the Borrowing
Base shall be determined on the basis of the most current Borrowing Base
Certificate required to be delivered by the Company hereunder.
2
<PAGE> 8
"Borrowing Base Certificate" for any date shall mean an appropriately
completed report as of such date in substantially the form of Exhibit A hereto,
certified as true and correct as of such date by a duly authorized officer of
the Company.
3
<PAGE> 9
"Business Day" shall mean a day other than a Saturday, Sunday or other
day on which the Agent is not open to the public for carrying on substantially
all of its banking functions in Detroit, Michigan.
"Capital Lease" of any person shall mean any lease which, in accordance
with generally accepted accounting principles, is or should be capitalized on
the books of such person.
"Change of Control" shall mean the occurrence of any event or
transaction or series of related transactions in connection with or as a
consequence of which (i) prior to a registered initial public offering of the
Common Stock of the Company, MS (directly or indirectly) or Holdings shall cease
to own 100% of the Company's outstanding Capital Stock, clear of any Liens;
(ii)(A) prior to a registered initial public offering of the Common Stock of MS
or Holdings, the CVC Investor Group and the SOFEDIT Shareholders, collectively,
shall cease to own Common Stock of, as the case may be, MS or Holdings,
representing not less than 51% of the common equity interest in, as the case may
be, MS's or Holding's, Capital Stock (whether voting or non-voting) on a
fully-diluted basis assuming the exercise of all securities exercisable,
convertible or exchangeable for or into common equity interests or (B) after a
registered initial public offering of the Common Stock of MS, Holdings or the
Company, the CVC Investor Group and the SOFEDIT Shareholders, collectively,
shall cease to own Common Stock of, MS, Holdings or the Company, as the case may
be, representing not less than 20% of the common equity interest in MS's,
Holding's or, as the case may be, the Company's Capital Stock (whether voting or
non-voting) on a fully-diluted basis assuming the exercise of all securities
exercisable, convertible or exchangeable for or into common equity interest; or
(iii) after a registered initial public offering of the Common Stock of MS,
Holdings or the Company, any Person (or group of Persons (as such term is used
under the Exchange Act) shall own, beneficially or of record, a greater
percentage of the common equity interests or total combined voting power of all
classes or Capital Stock of MS, Holdings or the Company, as the case may be,
than is so owned by the CVC Investor Group. For purposes of this definition, the
term "CAPITAL STOCK" of any Person means any and all shares, interests,
participations, or other equivalents, (however designated) of its capital stock
and any rights (other than debt securities convertible into capital stock),
warrants or options to acquire such capital stock and the term "COMMON STOCK"
means, as applicable, the Common Stock, par value $.01, of Holdings and the
Common Stock, par value $.01 of the Company and, collectively, the Class A
Common Stock, par value $.01 per share, and Class B Common Stock, par value
$0.01 per share, of MS, and, in each case, any Capital Stock issued with respect
thereto in a stock consolidation, reclassification or recapitalization.
"CVC" shall mean Citicorp Venture Capital, Ltd.
"CVC Investor Group" means (i) CVC, (ii) Citicorp and any direct or
indirect wholly owned subsidiary of Citicorp; (iii) any officer, director or
employee of CVC, Citicorp or any wholly owned subsidiary of Citicorp, and any
spouse or lineal descendant (including by adoption and stepchildren) of any
officer, director or employee of CVC, Citicorp or any wholly owned subsidiary of
Citicorp and any trust, corporation or partnership the majority in interest of
the beneficiaries, stockholders or partners of which consists of employees,
officers or directors of CVC, Citicorp or any wholly owned subsidiary of
Citicorp provided that none of the Persons listed in the preceding provisions of
this subclause (iii) shall be included as members of the CVC Investor Group
unless CVC owns at least a majority of the Common Stock of MS or, if applicable,
Holdings, owned by CVC and all of such Persons, taken together.
"Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time, and the regulations thereunder.
4
<PAGE> 10
"Commitments" shall mean the Facility A Commitments, the Facility B
Commitments, and the Facility C Commitments.
"Consolidated" or "consolidated" shall mean, when used with reference
to any financial term in this Agreement, the aggregate for two or more persons
of the amounts signified by such term for all such persons determined on a
consolidated basis in accordance with generally accepted accounting principles.
"Contingent Liabilities" of any person shall mean, as of any date, all
obligations of such person or of others for which such person is contingently
liable, as obligor, guarantor, surety, accommodation party, partner or in any
other capacity, or in respect of which obligations such person assures a
creditor against loss or agrees to take any action to prevent any such loss
(other than endorsements of negotiable instruments for collection in the
ordinary course of business), including without limitation all reimbursement
obligations of such person in respect of any letters of credit, surety bonds or
similar obligations (including, without limitation, bankers acceptances) and all
obligations of such person to advance funds to, or to purchase assets, property
or services from, any other person in order to maintain the financial condition
of such other person.
"Contractual Obligation" shall mean as to any person, any provision of
any security issued by such person or of any agreement, instrument or other
undertaking to which such person is a party or by which it or any of its
property is bound.
"Default" shall mean any event or condition which might become an Event
of Default with notice or lapse of time or both.
"Dollars" and "$" shall mean the lawful money of the United States of
America.
"EBITDA" means, for any period, Net Income for such period plus all
amounts deducted in determining such Net Income on account of (a) Interest
Expense (without giving effect to the proviso at the end of such definition) and
(b) income taxes and the State of Michigan single business tax, and (c)
depreciation and amortization expense, all as determined for the Company and its
Subsidiaries on a consolidated basis in accordance with Generally Accepted
Accounting Principles.
"Effective Date" shall mean the effective date specified in the final
paragraph of this Agreement.
"Eligible Accounts Receivable" shall mean, as of any date, those trade
accounts receivable owned by the Company or Manufacturing which are payable in
Dollars and in which the Company or Manufacturing has granted to the Agent for
the benefit of the Lenders and the Agent a first-priority perfected security
interest pursuant to the Security Agreement, valued at the face amount thereof
less sales, excise or similar taxes and less returns, discounts, claims, credits
and allowances of any nature at any time issued, owing, granted, outstanding,
available or claimed, but shall not include any such account receivable (a) that
is not a bona fide existing obligation created by the sale and actual delivery
of inventory, goods or other property or the furnishing of services or other
good and sufficient consideration to customers of the Company or Manufacturing
in the ordinary course of business, (b) that is more than 90 days past due or
that remains outstanding more than 90 days after the earlier of the date of the
invoice or the shipment of the related inventory, goods or other property or the
furnishing of the related services or other consideration, (c) that is subject
to any dispute, contra-account, defense, offset or counterclaim or any Lien
(except those in favor of the Agent for the benefit of itself and the Lenders
under the Security Documents and other Permitted Liens which are junior in
priority to those in favor of the Agent), except as being contested by the
Company or Manufacturing in good faith, or the inventory,
5
<PAGE> 11
goods, property, services or other consideration of which such account
receivable constitutes proceeds is subject to any such Lien, provided that any
account receivable shall be classified as ineligible only to the extent of any
such dispute, contra-account, offset or counterclaim or any Lien, (d) in respect
of which the inventory, goods, property, services or other consideration have
been rejected or the amount is in dispute, except as being contested by the
Company or Manufacturing in good faith, (e) that is due from any Affiliate or
Subsidiary of the Company, (f) that has been classified by the Company or
Manufacturing as doubtful or has otherwise failed to meet established or
customary credit standards of the Company or Manufacturing, (g) that is payable
by any person located outside the United States (which shall not be deemed to
include any territories of the United States) or Canada and are not supported by
letters of credit issued to the Agent by commercial banks, and in form and
substance, acceptable to the Agent, (h) that is payable by the United States or
any of its departments, agencies or instrumentalities or by any state or other
governmental entity, (i) that is payable by any person as to which 50% or more
of the aggregate amount of such accounts receivable payable by such person to
the Company or Manufacturing do not otherwise constitute Eligible Accounts
Receivable, other than due to an offset which General Motors or Chrysler has due
to steel purchases by the Company or Manufacturing from General Motors or
Chrysler, (j) that is payable by any person that is the subject of any
proceeding seeking to adjudicate it a bankrupt or insolvent or seeking
liquidation, winding up or reorganization, arrangement, adjustment, protection,
relief or composition of it or its debts under any law relating to bankruptcy,
insolvency or reorganization or relief or protection of debtors or seeking the
appointment of a receiver, trustee, custodian or other similar official for it
or for any substantial part of its property, or has admitted in writing its
inability to pay its debts generally or has made a general assignment for the
benefit of creditors, (k) that is evidenced by a promissory note or other
negotiable instrument, (l) that is subordinate or junior in right or priority of
payment to any other obligation or claim, or (m) that for any other reason is at
any time reasonably deemed by the Agent to be ineligible.
"Eligible Fixed Assets" shall mean, as of any date, the equipment owned
by the Company or Manufacturing in which the Company or Manufacturing has
granted to the Agent for the benefit of the Lenders a first-priority security
interest pursuant to the Security Agreement, valued, in the case of any
equipment owned as of the Effective Date, at the orderly liquidation value as
determined by appraisals acceptable to the Required Lenders, and, in the case of
any equipment purchased after the Effective Date, at the hard cost of such
equipment, but not including any such fixed asset (a) that is not useable in the
business of the Company or Manufacturing, (b) that is located outside the United
States (which shall not be deemed to include any territories of the United
States) or Canada, (c) that is subject to, or any accounts or other proceeds
resulting from the sale or other disposition thereof could be subject to, any
Lien (except those in favor of the Agent for the benefit of itself and the
Lenders under the Security Documents and other Permitted Liens which are junior
in priority to those in favor of the Agent), (d) that is not in the possession
of the Company or Manufacturing (provided that such assets shall be deemed in
possession of the Company or Manufacturing if they are located on premises owned
or leased by the Company or Manufacturing), (e) that is held for sale or lease
or is subject of any lease, (f) that is subject to any trademark, trade name or
licensing arrangement, or any law, rule or regulation, that would limit or
impair the ability of the Lenders and the Agent to promptly exercise all rights
of the Lenders and the Agent under the Security Documents, (g) if such fixed
asset is located on premises not owned by the Company or Manufacturing and, on
or before sixty (60) days after the Effective Date, the landlord or other owner
of such premises shall not have waived its distraint, lien and similar rights
with respect to such fixed asset, and shall not have agreed to permit the
Lenders and the Agent to enter such premises after the occurrence of an Event of
Default pursuant to a waiver and agreement of such person in favor of and in
form and substance acceptable to the Agent (h) with respect to which any
insurance proceeds are not payable to the Lenders and the Agent as a lender loss
payee or are payable to any loss payee other than the Lenders and the Agent or
the Company or Manufacturing or (i) that for any other reason is at any time
reasonably deemed by the Agent to be ineligible.
6
<PAGE> 12
"Eligible Inventory" shall mean, as of any date, that inventory owned
by the Company or Manufacturing that constitutes raw materials, work in process
or finished goods in which the Company or Manufacturing has granted to the Agent
for the benefit of the Lenders a first-priority perfected security interest
pursuant to the Security Agreement, valued at the lower of cost or market in
accordance with generally accepted accounting principles, but shall not include
any such inventory (a) that does not constitute raw materials or finished goods
readily salable or usable in the business of the Company or Manufacturing, (b)
that is located outside the United States (which shall not be deemed to include
any territories of the United States) or Canada, (c) that is subject to, or any
accounts or other proceeds resulting from the sale or other disposition thereof
could be subject to, any Lien (except those in favor of the Agent for the
benefit of itself and the Lenders under the Security Documents and other
Permitted Liens which are junior in priority to those in favor of the Agent),
including any sale on approval or sale or return transaction or any consignment,
(d) that is not in the possession of the Company or Manufacturing (provided that
such assets shall be deemed in possession of the Company or Manufacturing if
they are located on premises owned or leased by the Company or Manufacturing),
(e) that is held for lease or is the subject of any lease, (f) that is subject
to any trademark, trade name or licensing arrangement, or any law, rule or
regulation, that could materially limit or impair the ability of the Lenders and
the Agent to promptly exercise all rights of the Lenders and the Agent under the
Security Documents, (g) if such inventory is located on premises not owned by
the Company or Manufacturing and, on or before sixty (60) days after the
Effective Date, the landlord or other owner of such premises shall not have
waived its distraint, lien and similar rights with respect to such inventory and
shall not have agreed to permit the Lenders and the Agent to enter such premises
pursuant to a waiver and agreement of such person in favor of and in form and
substance acceptable to the Lenders and the Agent, (h) with respect to which any
insurance proceeds are not payable to the Lenders and the Agent as a lender loss
payee or are payable to any loss payee other than the Lenders and the Agent or
the Company or Manufacturing, or (i) that for any other reason is at any time
reasonably deemed by the Agent to be ineligible.
"Eligible Tooling Inventory" shall mean such portion of long term
assets of the Company or Manufacturing which consists of dies, molds, tooling
and similar items (collectively, "Tooling") provided that each of the following
conditions are satisfied: (a) the sale of such Tooling is covered under specific
written purchase orders or agreements between the Company or Manufacturing and
the purchaser of such Tooling, and the terms and provisions of all such purchase
orders and agreements and the purchaser thereof must be satisfactory to the
Agent, (b) either (i) the Agent has a first priority, enforceable security
interest in such long terms assets, and the purchaser of such Tooling, together
with any other entity who has a Lien on such purchaser's assets, shall have
executed a letter in favor of the Agent acknowledging that neither of them have
any rights with respect to such Tooling or (ii) the purchaser of such Tooling
shall have granted a first priority, enforceable security interest in such
Tooling to the Company or Manufacturing, which security interest shall be
assigned to the Agent, and any entity which has a lien on assets of such
purchaser shall have subordinated its lien on such Tooling to the lien granted
by such purchaser to the Company or Manufacturing and assigned to the Agent, all
of which shall be in form and substance satisfactory to the Required Lenders,
and (c) the unpaid balance of such Tooling as represented by the Company or
Manufacturing is not subject to any defense, counterclaim, setoff,
contra-account, credit, allowance or adjustment.
"Environmental Laws" at any date shall mean all provisions of law,
statute, ordinances, rules, regulations, judgments, writs, injunctions, decrees,
orders, awards and standards promulgated by the government of the United States
of America or any foreign government or by any state, province, municipality or
other political subdivision thereof or therein, or by any court, agency,
instrumentality,
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<PAGE> 13
regulatory authority or commission of any of the foregoing concerning the
protection of, or regulating the discharge of substances into, the environment.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended from time to time, and the regulations thereunder.
"ERISA Affiliate" shall mean any trade or business (whether or not
incorporated) which, together with the Company or any Guarantor, would be
treated as a single employer under Section 414 of the Code and the regulations
promulgated thereunder.
"Eurodollar Business Day" shall mean, with respect to any Eurodollar
Rate Loan, a day which is both a Business Day and a day on which dealings in
Dollar deposits are carried out in the London interbank market.
"Eurodollar Interest Period" shall mean, with respect to any Eurodollar
Rate Loan, the period commencing on the day such Eurodollar Rate Loan is made or
converted to a Eurodollar Rate Loan and ending on the day which is one, two,
three, six months, or, in connection with Eurodollar Rate Loans under Facility A
only and if available to the Required Lenders, twelve months, thereafter, as the
Company may elect under Section 2.4 or 2.7, and each subsequent period
commencing on the last day of the immediately preceding Eurodollar Interest
Period and ending on the day which is one, two, three, six or twelve months
thereafter, as the Company may elect under Section 2.4 or 2.7, provided,
however, that (a) any Eurodollar Interest Period which commences on the last
Eurodollar Business Day of a calendar month (or on any day for which there is no
numerically corresponding day in the appropriate subsequent calendar month)
shall end on the last Eurodollar Business Day of the appropriate subsequent
calendar month, (b) each Eurodollar Interest Period which would otherwise end on
a day which is not a Eurodollar Business Day shall end on the next succeeding
Eurodollar Business Day or, if such next succeeding Eurodollar Business Day
falls in the next succeeding calendar month, on the next preceding Eurodollar
Business Day, and (c) no Eurodollar Interest Period shall be permitted which
would end after Termination Date A with respect to the Facility A Loans or the
Maturity Date with respect to any Facility B Loans.
"Eurodollar Rate" shall mean, with respect to any Eurodollar Rate Loan
and the related Eurodollar Interest Period, the per annum rate that is equal to
the sum of:
(a) (i) with respect to Facility A Loans, the Applicable Margin,
and (ii) with respect to Facility B Loans, 250 basis points during the period
from and including the Effective Date to and including December 30, 1999, or
275 basis points on December 31, 1999 and thereafter, plus
(b) the rate per annum obtained by dividing (i) the per annum rate
of interest at which deposits in Dollars for such Eurodollar Interest Period and
in an aggregate amount comparable to the amount of such Eurodollar Rate Loan
to be made by the Agent in its capacity as a Lender hereunder are offered to
the Agent by other prime banks in the London interbank market at approximately
11:00 a.m. London time on the second Eurodollar Business Day prior to the first
day of such Eurodollar Interest Period by (ii) an amount equal to one minus
the stated maximum rate (expressed as a decimal) of all reserve requirements
(including, without limitation, any marginal, emergency, supplemental, special
or other reserves) that are specified on the first day of such Eurodollar
Interest Period by the Board of Governors of the Federal Reserve System (or
any successor agency thereto) for determining the maximum reserve requirement
with respect to eurocurrency funding (currently referred to as "Eurocurrency
liabilities" in Regulation D of such Board) maintained by a member bank of such
System;
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<PAGE> 14
all as conclusively determined by the Agent, such sum to be rounded up, if
necessary, to the nearest whole multiple of one one-hundredth of one percent
(1/100 of 1%).
"Eurodollar Rate Loan" shall mean any Loan which bears interest at the
Eurodollar Rate.
"Event of Default" shall mean any of the events or conditions
described in Section 6.1.
"Export" shall mean Aetna Export Sales Corp., a corporation organized
under the laws of the United States Virgin Islands.
"Facility A" shall mean the credit facility described in Section 2.1
(a).
"Facility A Advance" shall mean any Revolving Credit Loan or Facility A
Letter of Credit Advance under Section 2.1(a).
"Facility A Commitment" shall mean, with respect to each Lender, the
commitment of such Lender to make Revolving Credit Loans and to participate in
Facility A Letter of Credit Advances made through the Agent pursuant to Section
2.1(a), in amounts not exceeding in aggregate principal amount outstanding the
respective Facility A commitment amounts for each Lender set forth next to the
name of each such Lender in the signature pages hereof, as such amounts may be
reduced or modified from time to time pursuant to Section 2.2(a) or Section 8.6.
"Facility A Letter of Credit" shall mean a standby letter of credit or
a commercial letter of credit having a stated expiry date or a date upon which
the draft must be reimbursed not later than twelve months after the date of
issuance and not later than the fifth Business Day before Termination Date A
issued by the Agent on behalf of the Lenders for the account of the Company
under an application and related documentation acceptable to the Agent
requiring, among other things, immediate reimbursement by the Company to the
Agent in respect of all drafts or other demand for payment honored thereunder
and all expenses paid or incurred by the Agent relative thereto.
"Facility A Note" shall mean any promissory note of the Company
evidencing the Facility A Loans, in substantially the form annexed hereto as
Exhibit B-1, as amended or modified from time o time and together with any
promissory note or notes issued in exchange or replacement therefor.
"Facility B" shall mean the credit facility described in Section 2.1
(b).
"Facility B Commitment" shall mean, with respect to each Lender, the
commitment of such Lender to make Facility B Loans pursuant to Section 2.1(b),
in amounts not exceeding in aggregate principal amount outstanding the
respective Facility B commitment amounts for each Lender set forth next to the
name of each such Lender in the signature pages hereof, as such amount may be
reduced or modified from time to time pursuant to Section 2.2(a) or Section 8.6.
"Facility B Loan" shall mean any borrowing under Section 2.4 evidenced
by the Facility B Notes and made pursuant to Section 2.1(a).
"Facility B Note" shall mean any promissory note of the Company
evidencing the Facility B Loans, in substantially the same form annexed hereto
as Exhibit B-2, as amended or modified from time to time and together with any
promissory note or notes issued in exchange or replacement therefor.
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<PAGE> 15
"Facility C" shall mean the credit facility described in Section 2.1
(c).
"Facility C Advance" shall mean any Facility C Letter of Credit Advance
under Section 2.1(c).
"Facility C Commitment" shall mean, with respect to each Lender, the
commitment of such Lender to participate in Facility C Letters of Credit made
through the Agent pursuant to Section 2.1(c), in amounts not exceeding in
aggregate principal amount outstanding the respective Facility C commitment
amounts for each Lender set forth next to the name of each such Lender in the
signature pages hereof as such amount may be reduced or modified from time to
time pursuant to Section 2.2(a) or Section 8.6.
"Facility C Letter of Credit" shall mean a standby letter of credit
having a stated expiry date or a date upon which the draft must be reimbursed
not later than twelve months after the date of issuance and not later than the
fifth Business Day before Termination Date C issued by the Agent on behalf of
the Lenders for the account of the Company under an application and related
documentation acceptable to the Agent requiring, among other things, immediate
reimbursement by the Company to the Agent in respect of all drafts or other
demand for payment honored thereunder and all expenses paid or incurred by the
Agent relative thereto.
"Federal Funds Rate" shall mean the per annum rate that is equal to the
average of the rates on overnight federal funds transactions with members of the
Federal Reserve System arranged by federal funds brokers, as published by the
Federal Reserve Bank of New York for such day, or, if such rate is not so
published for any day, the average of the quotations for such rates received by
the Agent from three federal funds brokers of recognized standing selected by
the Agent in its discretion; all as conclusively determined by the Agent, such
sum to be rounded up, if necessary, to the nearest whole multiple of one
one-hundredth of one percent (1/100 of 1%), which Federal Funds Rate shall
change simultaneously with any change in such published or quoted rates.
"Fixed Charge Coverage Ratio" shall mean, as of any date, the ratio of
(a) EBITDA of the Company and its Subsidiaries, as calculated for the four
consecutive fiscal quarters of the Company most recently ended, plus Rental
Expense of the Company and its Subsidiaries for such period, to (b) Rental
Expense of the Company and its Subsidiaries for such period plus Interest
Expense of the Company and its Subsidiaries paid in cash by the Company and its
Subsidiaries during such period.
"Floating Rate" shall mean the per annum rate equal to the sum of (a)
(i) with respect to any Facility A Advance or Facility C Advance, the Applicable
Margin or (ii) with respect to any Facility B Loan, (A) 1.25% during the period
from and including the Effective Date to and including December 30, 1999 and (B)
1.50% on December 31, 1999 and thereafter, plus (b) the greater of (x) the Prime
Rate in effect from time to time, or (y) the sum of one percent (1%) per annum
plus the Federal Funds Rate in effect from time to time; which Floating Rate
shall change simultaneously with any change in such Prime Rate or Federal Funds
Rate, as the case may be.
"Floating Rate Loan" shall mean any Loan which bears interest at the
Floating Rate.
"Funded Debt" of any person, as of any date, shall mean: (a) all debt
for borrowed money and similar monetary obligations evidenced by bonds, notes,
debentures, Capital Lease obligations or otherwise, including without limitation
obligations in respect of the deferred purchase price of properties or assets,
in each case whether direct or indirect; (b) all liabilities secured by any Lien
existing on property owned or acquired subject thereto, whether or not the
liability secured thereby shall have been assumed; (c) all
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<PAGE> 16
reimbursements obligations under outstanding letters of credit in respect of
drafts which (i) may be presented or (ii) have been presented and have not yet
been paid, and (d) all Contingent Liabilities relating to any of the obligations
of others similar in character to those described in the foregoing clauses (a)
through (c).
"Funded Debt Ratio" shall mean, as of any date, the ratio of (a) Funded
Debt as of such date to (b) EBITDA, as calculated for the four consecutive
fiscal quarters of the Company and its Subsidiaries on a consolidated basis most
recently ended.
"Generally Accepted Accounting Principles", "GAAP" or "generally
accepted accounting principles" shall mean generally accepted accounting
principles applied on a basis consistent with that reflected in the financial
statements referred to in Section 4.6.
"Guaranties" shall mean the guaranties entered into by each of the
Guarantors for the benefit of the Agent and the Lenders pursuant to Article VIII
of this Agreement, as amended or modified from time to time.
"Guarantor" shall mean Export, Holdings, MS, each Subsidiary of MS,
each Subsidiary of Holdings and each Subsidiary of the Company and each person
otherwise becoming a Subsidiary of the Company, or otherwise entering into a
Guaranty, from time to time, provided that no prohibitions exist under the
Senior Note Indenture to the execution of a Guaranty or other Loan Documents by
such person and provided, further, that SOFEDIT shall not be required to be a
Guarantor hereunder.
"Hazardous Materials" includes, without limitation, any flammable
explosives, radioactive materials, hazardous materials, hazardous wastes,
hazardous or toxic substances or related materials defined in the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended (42
U.S.C. Sections 9601, et seq.), the Hazardous Materials Transportation Act, as
amended (49 U.S.C. Sections 1801, et seq.), the Resource Conservation and
Recovery Act, as amended (42 U.S.C. Sections 6901, et seq.) and in the
regulations adopted and publications promulgated pursuant thereto, or any other
federal, state or local government law, ordinance, rule or regulation.
"Hedging Contract" shall mean, with respect to any person, all
liabilities of such person under interest rate swap, cap or collar agreements,
currency exchange agreements and all similar agreements designed to protect such
person against fluctuations in interest rates or currency exchange rates.
"Holdings" shall mean Aetna Holdings, Inc., a Delaware corporation.
"Indebtedness" of any person shall mean, as of any date, (a) all
obligations of such person for borrowed money, (b) all obligations of such
person as lessee under any Capital Lease, (c) all obligations which are secured
by any Lien existing on any asset or property of such person whether or not the
obligation secured thereby shall have been assumed by such person (to the extent
of such Lien if such obligation is not assumed), (d) all obligations of such
person for the unpaid purchase price for goods, property or services acquired by
such person, except for trade accounts payable arising in the ordinary course of
business that are not materially past due, (e) all obligations of such person to
purchase goods, property or services where payment therefor is required
regardless of whether delivery of such goods or property or the performance of
such services is ever made or tendered (generally referred to as "take or pay
contracts"), (f) all liabilities of such person in respect of Unfunded Benefit
Liabilities under any Plan of such person or of any ERISA Affiliate, (g) all
obligations of such person in respect of any Hedging Contract (valued in an
amount equal to the highest termination payment, if any, that would be payable
by
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<PAGE> 17
such person upon termination for any reason on the date of determination), and
(h) all Contingent Liabilities of such person.
"Interest Expense" means, for any period, total interest and related
expense (including, without limitation, that portion of any Capitalized Lease
obligation attributable to interest expense in conformity with Generally
Accepted Accounting Principles, amortization of debt discount, all capitalized
interest, the interest portion of any deferred payment obligations, all
commissions, discounts and other fees and charges owed with respect to letter of
credit and bankers acceptance financing, the net costs and net payments under
any interest rate hedging, cap or similar agreement or arrangement, prepayment
charges, agency fees, administrative fees, commitment fees and capitalized
transaction costs allocated to interest expense) and all dividends and other
distributions on any preferred capital stock of the Company paid, payable or
accrued during such period, without duplication for any period, with respect to
all outstanding Indebtedness of the Company and its Subsidiaries, all as
determined for the Company and its Subsidiaries on a consolidated basis for such
period in accordance with Generally Accepted Accounting Principles; provided,
however, that interest on Subordinated Debt which is not paid in cash or cash
equivalents but is paid by the issuance by the Company of a promissory note and
dividends and other distributions on any preferred capital stock of the Company
which are not paid in cash or cash equivalents shall be excluded from the
calculation of "Interest Expense" hereunder.
"Interest Payment Date" shall mean (a) with respect to any Eurodollar
Rate Loan, the last day of each Interest Period with respect to such Eurodollar
Rate Loan and, in the case of any Interest Period exceeding three months, those
days that occur during such Interest Period at intervals of three months after
the first day of such Interest Period, and (b) in all other cases, the last
Business Day of each month occurring after the date hereof, commencing with the
first such Business Day occurring after the date of this Agreement.
"Interest Period" shall mean any Eurodollar Interest Period.
"Letter of Credit" shall mean any Facility A Letter of Credit or
Facility C Letter of Credit.
"Letter of Credit Advance" shall mean any issuance of a Letter of
Credit under Section 2.4 made pursuant to Section 2.1 in which each Lender
acquires a pro rata risk participation pursuant to Section 2.4(d).
"Letter of Credit Documents" shall have the meaning ascribed thereto in
Section 3.3(b).
"Lien" shall mean any pledge, assignment, hypothecation, mortgage,
security interest, deposit arrangement, option, conditional sale or title
retaining contract, sale and leaseback transaction, financing statement filing,
lessor's or lessee's interest under any lease, subordination of any claim or
right, or any other type of lien, charge, encumbrance, preferential arrangement
or other claim or right.
"Loan" shall mean any Revolving Credit Loan, any Swingline Loan, and
any Term Loan evidenced by the Notes and made pursuant to Section 2.1. Any such
Loan or portion thereof may also be denominated as a Floating Rate Loan or a
Eurodollar Rate Loan and such Loans are referred to herein as "types" of Loans.
"Loan Documents" shall mean, collectively, this Agreement, the Notes,
the Security Documents and all other agreements, instruments and documents
executed pursuant thereto at any time.
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<PAGE> 18
"Manufacturing" shall mean Aetna Manufacturing Canada Ltd., a Michigan
corporation.
"Material Adverse Effect" shall mean a material adverse effect on (a)
the business, assets, operations or condition (financial or otherwise) of the
Company and its Subsidiaries on a consolidated basis, (b) the ability of the
Company or any Guarantor to perform its obligations under any Loan Document, or
(c) the validity of enforceability of any Loan Document or the rights or
remedies of the Agent or the Lenders under any Loan Document.
"Maturity Date" shall mean the earlier to occur of (a) March 31, 2001
and (b) the date on which the maturity of the Facility B Loans is accelerated
pursuant to Section 6.2.
"MS" shall mean MS Acquisition Corp., a Delaware corporation.
"Multiemployer Plan" shall mean any "multiemployer plan" as defined in
Section 4001(a)(3) of ERISA or Section 414(f) of the Code.
"Net Income" means, for any period, the net income (or loss) of the
Company and its Subsidiaries on a consolidated basis for such period taken as a
single accounting period, determined in accordance with Generally Accepted
Accounting Principles; provided that in determining Consolidated Net Income
there shall be excluded, without duplication: (a) the income of any Person
(other than a Subsidiary of the Company) in which any Person other than the
Company or any of its Subsidiaries has a joint interest or partnership interest,
except to the extent of the amount of dividends or other distributions actually
paid to the Company or any of its Subsidiaries by such Person during such
period, (b) the income of any Person accrued prior to the date it becomes a
Subsidiary of the Company or is merged into or consolidated with the Company or
any of its Subsidiaries or that Person's assets are acquired by the Company or
any of its Subsidiaries, (c) the proceeds of any insurance policy, (d) gains
from the sale, exchange, transfer or other disposition of property or assets not
in the ordinary course of business of the Company and its Subsidiaries, and
related tax effects in accordance with Generally Accepted Accounting Principles,
(e) any other extraordinary or non-recurring gains of the Company or its
Subsidiaries, and related tax effects in accordance with Generally Accepted
Accounting Principles, and (f) the income of any Subsidiary of the Company to
the extent that the declaration or payment of dividends or similar distributions
by that Subsidiary of that income is not at the time permitted by operation of
the terms of its charter or of any agreement, instrument, judgment, decree,
order, statute, rule or governmental regulation applicable to that Subsidiary.
"Net Worth" shall mean, as of any date, the amount of any capital
stock, paid in capital and similar equity accounts plus (or minus in the case of
a deficit) the capital surplus and retained earnings of any Person, all in
accordance with Generally Accepted Accounting Principles.
"Notes" shall mean the Facility A Notes, Swingline Note and Facility B
Notes.
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<PAGE> 19
"Overdue Rate" shall mean (a) in respect of principal of Floating Rate
Loans, a rate per annum that is equal to the sum of three percent (3%) per annum
plus the Floating Rate, (b) in respect of principal of Eurodollar Rate Loans, a
rate per annum that is equal to the sum of three percent (3%) per annum plus the
per annum rate in effect thereon until the end of the then current Interest
Period for such Loan and, thereafter, a rate per annum that is equal to the sum
of three percent (3%) per annum plus the Floating Rate, and (c) in respect of
other amounts payable by the Company hereunder (other than interest), a per
annum rate that is equal to the sum of three percent (3%) per annum plus the
Floating Rate.
"PBGC" shall mean the Pension Benefit Guaranty Corporation and any
entity succeeding to any or all of its functions under ERISA.
"Permitted Liens" shall mean Liens permitted by Section 5.2(d) hereof.
"Person" or "person" shall include an individual, a corporation, an
association, a partnership, a trust or estate, a joint stock company, an
unincorporated organization, a joint venture, a trade or business (whether or
not incorporated), a government (foreign or domestic) and any agency or
political subdivision thereof, or any other entity.
"Plan" shall mean any pension plan (including a Multiemployer Plan)
subject to Title IV of ERISA or to the minimum funding standards of Section 412
of the Code which has been established or maintained by the Company, any
Guarantor or any ERISA Affiliate.
"Prime Rate" shall mean the per annum rate announced by the Agent from
time to time as its "prime rate" (it being acknowledged that such announced rate
may not necessarily be the lowest rate charged by the Agent to any of its
customers); which Prime Rate shall change simultaneously with any change in such
announced rate.
"Prohibited Transaction" shall mean any transaction involving any Plan
which is proscribed by Section 406 of ERISA or Section 4975 of the Code and to
which no statutory or administrative exemption applies.
"Reportable Event" shall mean a reportable event with respect to any
Plan as described in Section 4043(c) of ERISA, excluding those events as to
which the thirty (30) day notice period is waived under Part 2615 of the
regulations promulgated by the PBGC under ERISA.
"Rental Expense" shall mean, with respect to any Person, for any
period, the aggregate of all amounts paid or accrued in respect of Rental
Obligations for such period, as determined in accordance with GAAP.
"Rental Obligations" shall mean, with respect to any Person, for any
period, all rental obligations for which such Person is directly or indirectly
liable (as lessee or as guarantor or as other surety) under all leases in effect
or to be in effect at any time during such period, other than under any Capital
Lease, all as determined in accordance with GAAP.
"Required Lenders" shall mean Lenders holding not less than (i) 66% of
the aggregate principal amount of the Advances then outstanding or (ii) 66% of
the Commitments if no Advances are then outstanding.
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<PAGE> 20
"Requirement of Law" shall mean as to any person, the certificate of
incorporation and by-laws or other organizational or governing documents of such
person, and any law, treaty, rule or regulation or determination of an
arbitrator or a court or other governmental authority, in each case applicable
to or binding upon such person or any of its property to which such person or
any of its property is subject.
"Revolving Credit Loan" shall mean any borrowing under Section 2.1 (a)
evidenced by the Facility A Note and made pursuant to Section 2.1(a).
"Saturn Tooling Project" shall mean the approximately $31,800,000
tooling project undertaken by the Company in connection with Saturn's Innovate
line, which project is expected to conclude by July of 1999.
"Security Agreement" shall mean each security agreement entered into by
the Company or any Guarantor (other than MS and Holdings) for the benefit of the
Agent and the Lenders pursuant to this Agreement or the Existing Credit
Agreement in substantially the form of Exhibit C hereto, as amended or modified
from time to time.
"Security Documents" shall mean, collectively, the Security Agreements,
the Guaranties, the Letter of Credit Documents, any pledge agreement, any note
assignment agreement and all other related agreements and documents, including
financing statements and similar documents, delivered pursuant to this Agreement
or otherwise entered into by any person to secure the Advances.
"Senior Notes" shall mean the 11 7/8% Senior Notes due 2006 issued by
the Company in the original aggregate principal amount of $85,000,000 and issued
pursuant to the Senior Note Indenture.
"Senior Note Documents" shall mean the Senior Note Indenture, the
Senior Notes and all instruments, agreements and documents executed in
connection therewith at any time.
"Senior Note Debt" shall mean all present and future indebtedness,
obligations and liabilities outstanding pursuant to the Senior Note Documents
including, without limitation, any senior notes due 2006 issued by the Company
in an original principal amount of $85,000,000 for which the Senior Notes are
exchangeable pursuant to a registered exchange offer effectuated by the Company
pursuant to the Registration Rights Agreement (as defined in the Senior Note
Indenture) and the guaranties of the Senior Notes by each of MS, Holdings and
Export.
"Senior Note Indenture" shall mean the indenture dated as of August 1,
1996 by and among the Company, MS, Holdings, Export and Norwest Bank Minnesota,
N.A., as trustee, as the same may be amended from time.
"Senior Secured Funded Debt" of any person, as of any date, shall mean
all Funded Debt which is secured by Liens.
"Senior Secured Funded Debt Ratio" shall mean, as of any date, the
ratio of (a) Senior Secured Funded Debt as of such date to (b) EBITDA, as
calculated for the four consecutive fiscal quarters of the Company most recently
ended.
"SOFEDIT" shall mean Societe Financiere de Developpement Industrial et
Technologique, a French societe anonyme.
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<PAGE> 21
"SOFEDIT Shareholders" shall mean the Persons set forth on Schedule
1.1(a) attached hereto and any Permitted Transferees under and as defined in
that certain Stockholders Agreement dated as of April 14, 1998 among MS and
certain of its stockholders.
"Solvent" when used with respect to any person, means that, as of any
date of determination, (a) the amount of the "present fair saleable value" of
the assets of such person will, as of such date, exceed the amount of all
"liabilities of such person, contingent or otherwise", as of such date, as such
quoted terms are determined in accordance with applicable federal and state laws
governing determinations of the insolvency of debtors, (b) the present fair
saleable value of the assets of such person will, as of such date, be greater
than the amount that will be required to pay the liability of such person on its
debts as such debts become absolute and matured, (c) such person will not have,
as of such date, an unreasonably small amount of capital with which to conduct
its business, and (d) such person will be able to pay its debts as they mature.
For purposes of this definition, (i) "debt" means liability on a "claim", and
(ii) "claim" means any (x) right to payment, whether or not such a right is
reduced to judgment, liquidated, unliquidated, fixed, contingent, matured,
unmatured, disputed, undisputed, legal, equitable, secured or unsecured or (y)
right to an equitable remedy for breach of performance if such breach gives rise
to a right to payment, whether or not such right to an equitable remedy is
reduced to judgment, fixed, contingent, matured or unmatured, disputed,
undisputed, secured or unsecured.
"Subordinated Debt" of any person shall mean, as of any date, that
Indebtedness of such person for borrowed money which is expressly subordinate
and junior in right and priority of payment to the Advances and other
Indebtedness of such person to the Lenders in manner and by written agreement
satisfactory in form and substance to the Required Lenders.
"Subordinated Debt Documents" shall mean each of the agreements,
instruments and documents described on Schedule 1.1(b).
"Subsidiary" of any person shall mean any other person (whether now
existing or hereafter organized or acquired) in which (other than directors
qualifying shares required by law) at least a
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<PAGE> 22
majority of the securities or other ownership interests of each class having
ordinary voting power or analogous right (other than securities or other
ownership interests which have such power or right only by reason of the
happening of a contingency), at the time as of which any determination is being
made, are owned, beneficially and of record, by such person or by one or more of
the other Subsidiaries of such person or by any combination thereof. Unless
otherwise specified, reference to "Subsidiary" shall mean a Subsidiary of the
Company.
"Swingline Facility" shall have the meaning specified in Section 2.1
(d).
"Swingline Loan" shall mean any borrowing under Section 2.4 evidenced
by the Swingline Note and made pursuant to Section 2.1(d).
"Swingline Note" shall mean any promissory note of the Company
evidencing the Swingline Loans, in substantially the same form annexed hereto as
Exhibit B-3, as amended or modified from time to time and together with any
promissory note or notes issued in exchange or replacement therefor.
"Termination Date A" shall mean the earlier to occur of (a) August 13,
2001 and (b) the date on which the Facility A Commitment shall be terminated
pursuant to Section 2.2 or 6.2.
"Termination Date B" shall mean the earlier to occur of (a) March 31,
1999 and (b) the date on which the Facility B Commitment shall be terminated
pursuant to Section 2.2 or 6.2.
"Termination Date C" shall mean the earlier to occur of (a) July 1,
1999 and (b) the date on which the Facility C Commitment shall be terminated
pursuant to Section 2.2 or 6.2.
"Total Commitments" shall mean the aggregate amount of Commitments of
all Lenders as set forth on the last signature page of this Agreement, as
reduced or modified from time to time pursuant to Section 2.3(a) or 8.6.
"Unfunded Benefit Liabilities" shall mean, with respect to any Plan as
of any date, the amount of the unfunded benefit liabilities determined in
accordance with Section 4001(a)(18) of ERISA.
1.2 Other Definitions; Rules of Construction. As used herein, the terms
"Agent", "Lenders", "Company" and "this Agreement" shall have the respective
meanings ascribed thereto in the introductory paragraph of this Agreement, and
the term "Guaranteed Obligations" shall have the meaning ascribed thereto in
Section 8.1 of this Agreement. Such terms, together with the other terms defined
in Section 1.1, shall include both the singular and the plural forms thereof and
shall be construed accordingly. All computations required hereunder and all
financial terms used herein shall be made or construed in accordance with
Generally Accepted Accounting Principles unless such principles are inconsistent
with the express requirements of this Agreement; provided that, if the Company
notifies the Agent that the Company wishes to amend any covenant in Article V to
eliminate the effect of any change in Generally Accepted Accounting Principles
in the operation of such covenant (or if the Agent notifies the Company that the
Required Lenders wish to amend Article V for such purpose), then the Company's
compliance with such covenant shall be determined on the basis of Generally
Accepted Accounting Principles in effect immediately before the relevant change
in Generally Accepted Accounting Principles became effective, until either such
notice is withdrawn or such covenant is amended in a manner satisfactory to the
Company and the Required Lenders. Use of the terms "herein", "hereof", and
"hereunder" shall be deemed references to this Agreement in its entirety and not
to the Section or clause in which such term
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appears. References to "Sections" and "subsections" shall be to Sections and
subsections, respectively, of this Agreement unless otherwise specifically
provided.
ARTICLE 2
THE COMMITMENTS, THE SWINGLINE FACILITY AND THE ADVANCES
2.1 Commitment of the Lenders and the Swingline Facility.
(a) Facility A Advances. Each Lender agrees, for itself only, subject
to the terms and conditions of this Agreement, to make Facility A Loans and to
participate in Letter of Credit Advances under Facility A pursuant to Section
2.4 and Section 3.3 from time to time to but excluding Termination Date A, not
to exceed in aggregate principal amount at any time outstanding the amount
determined pursuant to Section 2.1(e).
(b) Facility B Loans. Each Lender agrees, for itself only, subject to
the terms and conditions of this Agreement, to make Term Loans to the Company
pursuant to Section 2.4 and Section 3.3 from time to time to but excluding
Termination Date B, not to exceed in aggregate principal amount at any time
outstanding the amount determined pursuant to Section 2.1(e).
(c) Facility C Advances. Each Lender agrees, for itself only, subject
to the terms and conditions of this Agreement, to make Letter of Credit Advances
under Facility C to the Company pursuant to Section 2.4 from time to time to but
excluding Termination Date C, not to exceed in aggregate principal amount at any
time outstanding the amount determined pursuant to Section 2.1(e).
Notwithstanding anything herein to the contrary, any Facility C Letters of
Credit outstanding on Termination Date C shall automatically be deemed
outstanding under Facility A as of Termination Date C , subject to Section
2.1(e).
(d) Swingline Loans.
(i) The Company may request the Agent to make, and the Agent may,
in its sole discretion, make Swingline Loans to the Company from time to time on
any Business Day during the period from the date hereof until Termination Date A
in an aggregate principal amount not to exceed at any time the lesser of (A)
$5,000,000 and (B) the aggregate amount of Facility A Advances that could be but
is not borrowed as of such date under Facility A. Each Lender's Facility A
Commitment shall be deemed utilized by an amount equal to such Lender's pro rata
share (based on such Lender's Facility A Commitment) of each Swingline Loan for
purposes of determining the amount of Facility A Advances required to be made by
such Lenders, but no Lender's Facility A Commitment, including the Agent's,
shall be deemed utilized for purposes of determining commitment fees under
Section 2.3(a). Swingline Loans shall bear interest at the Floating Rate. Within
the limits of the Swingline Facility, so long as the Agent, in its sole
discretion, elects to make Swingline Loans, the Company may borrow and reborrow
under this Section 2.1(d)(i).
(ii) The Agent may at any time in its sole and absolute discretion
require that any Swingline Loan be refunded by a Floating Rate Borrowing from
the Lenders, and upon written notice thereof by the Agent to the Lenders and the
Company, the Company shall be deemed to have requested a Floating Rate Borrowing
under Facility A in an amount equal to the amount of such Swingline Loan, and
such Floating Rate Borrowing shall be made to refund such Swingline Loan. Each
Lender shall be absolutely and unconditionally obligated to fund its pro rata
share (based on such
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Lender's commitment) of such Floating Rate Borrowing or, if applicable, purchase
a participating interest in the Swingline Loans pursuant to Section 2.1(d)(iii)
and such obligation shall not be affected by any circumstance, including,
without limitation, (A) any set-off, counterclaim, recoupment, defense or other
right which such Lenders has or may have against the Agent or the Company or any
if its Subsidiaries or anyone else for any reason whatsoever; (B) the occurrence
or continuance of a Default or an Event of Default, subject to Section
2.1(d)(iii); (C) any adverse change in the condition (financial or otherwise) of
the Company or any of its Subsidiaries; (D) any breach of this Agreement or any
other agreement by any other Lender, the Company or any Guarantor; or (E) any
other circumstance, happening or event whatsoever, whether or not similar to any
of the foregoing (including without limitation the Company's failure to satisfy
any conditions contained in Article II or any other provision of this
Agreement).
(iii) If, for any reason (including without limitation as a result
of the occurrence of an Event of Default with respect to the Company or any of
its Subsidiaries pursuant to Section 6.1(h) Floating Rate Loans may not be made
by the Lenders as described in Section 2.1(d)(ii), then (A) the Company agrees
that each Swingline Loan not paid pursuant to Section 2.1(d)(ii) shall bear
interest, payable on demand by the Agent, at the Overdue Rate, and (B) effective
on the date each such Floating Rate Loan would otherwise have been made, each
Lender severally agrees that it shall unconditionally and irrevocably, without
regard to the occurrence of any Default or Event of Default or any other
circumstances, in lieu of deemed disbursement of loans, to the extent of such
Lender's Facility A Commitment, purchase a participating interest in the
Swingline Loans by paying its participation percentage thereof. Each Lender will
immediately transfer to the Agent, in same day funds, the amount of its
participation. After such payment to the Agent, each Lender shall share on a pro
rata basis (calculated by reference to its Facility A Commitment) in any
interest which accrues thereon and in all repayments thereof. If and to the
extent that any Lender shall not have so made the amount of such participating
interest available to the Agent, such Lender and the Company severally agree to
pay to the Agent forthwith on demand such amount together with interest thereon,
for each day from the date of demand by the Agent until the date such amount is
paid to the Agent, at (x) in the case of the Company, the interest rate
specified above and (y) in the case of such Lender, the Federal Funds Rate for
the first five days after the date of demand by the Agent and thereafter at the
interest rate specified above.
(e) Limitation on Amount of Advances. Notwithstanding anything in
this Agreement to the contrary, the aggregate principal amount of the Facility A
Advances at any time outstanding to the Company hereunder shall not exceed the
lesser of (i) the amount of the Borrowing Base at such time minus the aggregate
outstanding amount of Facility C Advances at such time and (ii) the aggregate
amount of the Facility A Commitments at such time, provided, however, that: (i)
the aggregate amount of Facility A Letter of Credit Advances shall not exceed
$3,000,000 at any time. Notwithstanding anything in this Agreement to the
contrary, the aggregate principal amount of the Facility B Loans at any time
outstanding to the Company shall not exceed the aggregate amount of the Facility
B Commitments at such time provided, that any Facility B Loan repaid may not
thereafter be reborrowed. Notwithstanding anything in this Agreement to the
contrary, the aggregate principal amount of the Facility C Advances at any time
outstanding to the Company hereunder shall not exceed the lesser of (i) the
amount of the Borrowing Base at such time minus the aggregate outstanding amount
of Facility A Advances at such time and (ii) the aggregate amount of the
Facility C Commitments at such time
2.2 Termination and Reduction of Commitments.
(a) The Company shall have the right to terminate or reduce the
Commitments at any time and from time to time at its option, provided that (i)
the Company shall give notice of such
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termination or reduction to the Agent (with sufficient executed copies for each
Lender) specifying the amount and effective date thereof, (ii) each partial
reduction of the Commitments shall be in a minimum amount of $1,000,000 and in
an integral multiple of $1,000,000 and shall reduce the Commitments of all of
the Lenders proportionately in accordance with the respective commitment amounts
for each such Lender set forth in the signature pages hereof next to name of
each such Lender, (iii) no such termination or reduction shall be permitted with
respect to any portion of the Commitments as to which a request for a Advance
pursuant to Section 2.4 is then pending and (iv) the Commitments may not be
terminated if any Advances are then outstanding and may not be reduced below the
principal amount of Advances then outstanding. The Commitments or any portion
thereof terminated or reduced pursuant to this Section 2.2, whether optional or
mandatory, may not be reinstated.
(b) For purposes of this Agreement, a Letter of Credit Advance (i)
shall be deemed outstanding in an amount equal to the sum of the maximum amount
available to be drawn under the related Letter of Credit on or after the date of
determination and on or before the stated expiry date thereof plus the amount of
any draws under such Letter of Credit that have not been reimbursed as provided
in Section 3.3 and (ii) shall be deemed outstanding at all times on and before
such stated expiry date or such earlier date on which all amounts available to
be drawn under such Letter of Credit have been fully drawn, and thereafter until
all related reimbursement obligations have been paid pursuant to Section 3.3. As
provided in Section 3.3, upon each payment made by the Agent in respect of any
draft or other demand for payment under any Letter of Credit, the amount of any
Letter of Credit Advance outstanding immediately prior to such payment shall be
automatically reduced by the amount of each Loan deemed advanced in respect of
the related reimbursement obligation of the Company.
2.3 Fees.
(a) (i) The Company agrees to pay to each Lender a commitment fee on
the daily average unused amount of its respective Facility A Commitment, for the
period from the Effective Date to but excluding Termination Date A, at a per
annum rate equal to the Applicable Margin. (ii) The Company agrees to pay to
each Lender a commitment fee on the daily average unused amount of its
respective Facility B Commitment, for the period from the Effective Date to but
excluding Termination Date B, at a rate equal to one-half of one percent (1/2 of
1%) per annum. (iii) The Company agrees to pay to each Lender a commitment fee
on the daily average unused amount of its respective Facility C Commitment, for
the period from the Effective Date to but excluding Termination Date C, at a per
annum rate equal to the Applicable Margin. Accrued commitment fees shall be
payable quarterly in arrears on the last Business Day of each March, June,
September and December, commencing on the first such Business Day occurring
after the Effective Date, and on the respective Termination Date.
(b) On or before the date of issuance of any Letter of Credit, the
Company agrees (i) to pay to the Lenders a fee computed at a rate equal to the
Applicable Margin of the maximum amount available to be drawn from time to time
under such Letter of Credit for the period from and including the date of
issuance of such Letter of Credit to and including the stated expiry date of
such Letter of Credit, and (ii) if there is more than one Lender party hereto,
to pay an additional fee to the Agent for its own account computed at the rate
of one-quarter of one percent (1/4 of 1%) per annum of such maximum amount for
such period. Such fees are nonrefundable and the Company shall not be entitled
to any rebate of any portion thereof if such Letter of Credit does not remain
outstanding through its stated expiry date or for any other reason. The Company
further agrees to pay to the Agent, on demand, such other reasonable and
customary administrative fees, charges and expenses of the Agent in respect of
the issuance, negotiation, acceptance, amendment, transfer and payment of such
Letter of Credit or
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other wise payable pursuant to the application and related documentation under
which such Letter of Credit is issued.
(c) The Company agrees to pay to the Agent such reasonable fees in such
amounts as may from time to time be agreed upon by the Company and the Agent.
2.4 Disbursement of Advances.
(a) The Company shall give the Agent notice of its request for each
Advance (other than for a Swingline Loan) in substantially the form of Exhibit D
hereto not later than 10:00 a.m. Detroit time (i) four Eurodollar Business Days
prior to the date such Advance is requested to be made if such Advance is to be
made as a Eurodollar Rate Loan, (ii) five Business Days prior to the date any
Letter of Credit Advance is requested to be made, and (iii) one Business Day
prior to the date such Advance is requested to be made in all other cases, which
notice shall specify whether a Eurodollar Rate Loan, Floating Rate Loan or
Letter of Credit Advance is requested and, in the case of each requested
Eurodollar Rate Loan, the Interest Period to be initially applicable to such
Loan and, in the case of each Letter of Credit Advance, such information as may
be necessary for the issuance thereof by the Agent. The Agent, not later than
the Business Day next succeeding the day such notice is given, shall provide
notice of such requested Advance to each Lender. Subject to the terms and
conditions of this Agreement, the proceeds of each such requested Loan shall be
made available to the Company by depositing the proceeds thereof in immediately
available funds, in an account maintained and designated by the Company at the
principal office of the Agent. Subject to the terms and conditions of this
Agreement, the Agent shall, on the date any Letter of Credit Advance is
requested to be made, issue the related Letter of Credit on behalf of the
Lenders for the account of the Company. Notwithstanding anything herein to the
contrary, the Agent may decline to issue any requested Letter of Credit on the
basis that the beneficiary, the purpose of issuance or the terms or the
conditions of drawing are unacceptable to it in its reasonable discretion.
(b) Each Lender, on the date any Borrowing in the form of a Loan is
requested to be made, shall make its pro rata share of such Borrowing available
in immediately available, freely transferable, cleared funds for disbursement to
the Company pursuant to the terms and conditions of this Agreement at the
principal office of the Agent. Unless the Agent shall have received notice from
any Lender prior to the date such Borrowing is requested to be made under this
Section 2.4 that such Lender will not make available to the Agent such Lender's
pro rata portion of such Borrowing, the Agent may assume that such Lender has
made such portion available to the Agent on the date such Borrowing is requested
to be made in accordance with this Section 2.4. If and to the extent such Lender
shall not have so made such pro rata portion available to the Agent, the Agent
may (but shall not be obligated to) make such amount available to the Company,
and such Lender and the Company severally agree to pay to the Agent forthwith on
demand such amount together with interest thereon, for each day from the date
such amount is made available to the Company by the Agent until the date such
amount is repaid to the Agent, at the Federal Funds Rate. If such Lender shall
pay such amount to the Agent together with interest, such amount so paid shall
constitute a Loan by such Lender as a part of such the related Borrowing for
purposes of this Agreement. The failure of any Lender to make its pro rata
portion of any such Borrowing available to the Agent shall not relieve any other
Lender of its obligations to make available its pro rata portion of such
Borrowing on the date such Borrowing is requested to be made, but no Lender
shall be responsible for failure of any other Lender to make such pro rata
portion available to the Agent on the date of any such Borrowing.
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(c) The Facility A Loans shall be evidenced by the Facility A Note, the
Facility B Loans shall be evidenced by the Facility B Notes, the Swingline Loans
shall be evidenced by the Swingline Note and all such Loans shall be due and
payable and bear interest as provided in Article III. Each Lender is hereby
authorized by the Company to record on the schedule attached to the Notes, or in
its books and records, the date, amount and type of each Loan and the duration
of the related Eurodollar Interest Period (if applicable), the amount of each
payment or prepayment of principal thereon, and the other information provided
for on such schedule, which schedule or books and records, as the case may be,
shall constitute prima facie evidence of the information so recorded, provided,
however, that failure of any Lender to record, or any error in recording, any
such information shall not relieve the Company of its obligation to repay the
outstanding principal amount of the Loans, all accrued interest thereon and
other amounts payable with respect thereto in accordance with the terms of the
Notes and this Agreement. Subject to the terms and conditions of this Agreement,
the Company may borrow Loans under this Section 2.4 and under Section 3.3,
prepay Loans pursuant to Section 3.1 and reborrow Facility A Loans (but not
Facility B Loans) under this Section 2.4 and under Section 3.3.
(d) Nothing in this Agreement shall be construed to require or
authorize any Lender to issue any Letter of Credit, it being recognized that the
Agent has the sole obligation under this Agreement to issue Letters of Credit on
behalf of the Lenders, and the Commitment of each Lender with respect to Letter
of Credit Advances is expressly conditioned upon the Agent's performance of such
obligations. Upon such issuance by the Agent, each Lender shall automatically
acquire a pro rata risk participation interest in such Letter of Credit Advance
based on the amount of its respective Commitment. If the Agent shall honor a
draft or other demand for payment presented or made under any Letter of Credit,
the Agent shall provide notice thereof to each Lender on the date such draft or
demand is honored unless the Company shall have satisfied its reimbursement
obligation under Section 3.3 by payment to the Agent on such date. Each Lender,
on such date, shall make its pro rata share of the amount paid by the Agent
available in immediately available funds at the principal office of the Agent
for the account of the Agent. If and to the extent such Lender shall not have
made such pro rata portion available to the Agent, such Lender and the Company
severally agree to pay to the Agent forthwith on demand such amount together
with interest thereon, for each day from the date such amount was paid by the
Agent until such amount is so made available to the Agent at a per annum rate
equal to the Federal Funds Rate. If such Lender shall pay such amount to the
Agent together with such interest, such amount so paid shall constitute a Loan
by such Lender as part of the Borrowing disbursed in respect of the
reimbursement obligation of the Company under Section 3.3 for purposes of this
Agreement. The failure of any Lender to make its pro rata portion of any such
amount paid by the Agent available to the Agent shall not relieve any other
Lender of its obligation to make available its pro rata portion of such amount,
but no Lender shall be responsible for failure of any other Lender to make such
pro rata portion available to the Agent.
2.5 Conditions for First Disbursement. The obligation of the Lenders to
make the first Advance hereunder is subject to receipt by each Lender and the
Agent of the following documents and completion of the following matters, in
form and substance satisfactory to each Lender and the Agent:
(a) Corporate Documents. Certified copies of such corporate documents,
resolutions and incumbency certificates as requested by the Agent;
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(b) Notes. The Notes duly executed on behalf of the Company for each
Lender;
(c) Security Documents. The Security Documents duly executed on behalf
of the Company and each Guarantor (other than MS and Holdings), as the case may
be, granting to the Lenders and the Agent the collateral and security intended
to be provided pursuant to Section 2.11, together with such financing
statements, UCC searches, pledge agreement, instruments, stock certificates and
other documents in connection therewith requested by the Agent;
(d) Casualty and Other Insurance. Evidence that the casualty and other
insurance required pursuant to Section 5.1(c) and each Security Agreement is in
full force and effect;
(e) Legal Opinions. The favorable written opinion of counsel for the
Company and each Guarantor in form and substance satisfactory to the Agent;
(f) Fees. Payment of any fees due as of the Effective Date;
(g) Subordinated Debt Documents. Copies of all agreements and documents
relating to any Subordinated Debt, all of which are described on Schedule 1.1(b)
hereto, and amendments to all such Subordinated Debt Documents in form or
substance satisfactory to the Agent;
(h) Saturn Tooling Project. A certificate relating to the Saturn
Tooling Project executed by the Company with respect to all matters referred to
in Section 5.1(d)(ix) and a report as to the achievement of milestones under the
Saturn Tooling Project; and
(i) Miscellaneous. Such other documents, and completion of such other
matters, as the Agent may reasonably request.
2.6 Further Conditions for Disbursement. The obligation of the Lenders
to make any Advance (including the first Advance), or any continuation
or conversion under Section 2.7 is further subject to the satisfaction of the
following conditions precedent:
(a) The representations and warranties contained in Article IV hereof
and in the Security Documents shall be true and correct on and as of the date
such Advance is made (both before and after such Advance is made) as if such
representations and warranties were made on and as of such date;
(b) No Default or Event of Default shall exist or shall have occurred
and be continuing on the date such Advance is made (whether before or after such
Advance is made);
(c) The Agent shall have received the most recent Borrowing Base
Certificate required hereunder;
(d) In the case of any Letter of Credit Advance, the Company shall have
delivered to the Agent an application for the related Letter of Credit and other
related documentation requested by and acceptable to the Agent appropriately
completed and duly executed on behalf of the Company; and
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(e) In the case of any Facility B Loan, the Company shall have
delivered to the Agent evidence satisfactory to the Agent that (i) the Company
is purchasing Eligible Fixed Assets with such Facility B Loan, (ii) such
Facility B Loan does not exceed 50% of the hard cost of any new Eligible Fixed
Asset being purchased therewith; (iii) simultaneously with making such Facility
B Loan the Company will own such Eligible Fixed Asset and the Agent, for the
benefit of itself and the Lenders, shall have a first priority security interest
in such Eligible Fixed Asset pursuant to the Security Agreement.
The Company shall be deemed to have made a representation and warranty to the
Lenders at the time of the making of, and the continuation or conversion of,
each Advance to the effects set forth in clauses (a) and (b) of this Section
2.6. For purposes of this Section 2.6 the representations and warranties
contained in Section 4.6 hereof shall be deemed made with respect to both the
financial statements referred to therein and the most recent financial
statements delivered pursuant to Section 5.1(d)(ii) and (iii). The schedules
referenced in the representations and warranties in this Agreement may be
amended from time to time by the Company provided that such amendments reflect
transactions permitted by the Agreement or are immaterial, and shall be
effective when consented to by the Agent.
2.7 Subsequent Elections as to Loans. The Company may elect (a) to
continue a Eurodollar Rate Loan of one type, or a portion thereof, as a
Eurodollar Rate Loan of the then existing type or (b) may elect to convert a
Eurodollar Rate Loan of one type, or a portion thereof, to a Loan of another
type or (c) elect to convert a Floating Rate Loan, or a portion thereof, to a
Eurodollar Rate Loan, in each case by giving notice thereof to the Agent in
substantially the form of Exhibit E hereto not later than 10:00 a.m. Detroit
time four Eurodollar Business Days prior to the date any such continuation of or
conversion to a Eurodollar Rate Loan is to be effective and not later than 10:00
a.m. Detroit time one Business Day prior to the date such continuation or
conversion is to be effective in all other cases, provided that an outstanding
Eurodollar Rate Loan may only be converted on the last day of the then current
Interest Period with respect to such Loan, and provided, further, if a
continuation of a Loan as, or a conversion of a Loan to, a Eurodollar Rate Loan
is requested, such notice shall also specify the Interest Period to be
applicable thereto upon such continuation or conversion. The Agent, not later
than the Business Day next succeeding the day such notice is given, shall
provide notice of such election to the Lenders. If the Company shall not timely
deliver such a notice with respect to any outstanding Eurodollar Rate Loan, the
Company shall be deemed to have elected to convert such Eurodollar Rate Loan to
a Floating Rate Loan on the last day of the then current Interest Period with
respect to such Loan.
2.8 Limitation of Requests and Elections. Notwithstanding any other
provision of this Agreement to the contrary, (a) the Company may not
elect any Eurodollar Rate Loan, including any conversion to a Eurodollar Rate
Loan, and shall not be entitled to request any Eurodollar Rate Loan or any
conversion to a Eurodollar Rate Loan if, upon receiving a request for a
Eurodollar Rate Loan pursuant to Section 2.4, or a request for a continuation
of a Eurodollar Rate Loan as a Eurodollar Rate Loan of the then existing type,
or a request for a conversion of a Floating Rate Loan to a Eurodollar Rate Loan
pursuant to Section 2.7, (i) in the case of any Eurodollar Rate Loan, deposits
in Dollars for periods comparable to the Eurodollar Interest Period elected by
the Company are not available to any Lender in the London interbank market,
(ii) the Eurodollar Rate will not adequately and fairly reflect the cost to any
Lender of making, funding or maintaining the related Eurodollar Rate Loan, or
(iii) by reason of national or international financial, political or economic
conditions or by reason of any applicable law, treaty or other international
agreement, rule or regulation (whether domestic or foreign) now or hereafter in
effect, or the interpretation or administration thereof by any governmental
authority charged with the interpretation or administration thereof, or
compliance by any Lender with any guideline, request or directive of such
authority (whether or not having the force of law), including without
limitation
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exchange controls, it is impracticable, unlawful or impossible for, or shall
limit or impair the ability of, (i) any Lender to make or fund the relevant Loan
or to continue such Loan as a Loan of the then existing type or to convert a
Loan to such a Loan or (ii) the Company to make or any Lender to receive any
payment under this Agreement at the place specified for payment hereunder or to
freely convert any amount paid into Dollars at market rates of exchange or to
transfer any amount paid or so converted to the address of its principal office
specified in Section 9.2, then the Company shall not be entitled, so long as
such circumstances continue, to request a Loan of the affected type pursuant to
Section 2.4 or a continuation of or conversion to a Loan of the affected type
pursuant to Section 2.7. In the event that such circumstances no longer exist,
the Company shall be entitled to request Loans of the affected type pursuant to
Section 2.4, and continuations of and conversions to Loans of the affected type
pursuant to Section 2.7.
2.9 Minimum Amount; Limitation on Number of Loans; Etc. Except for (a)
Advances which exhaust the entire remaining amount of the Commitments and (b)
payments required pursuant to Section 3.1 or Section 3.8:
(i) With respect to Facility A Advances and Facility C Advances:
(A) each such Floating Rate Advance and each prepayment thereof shall be in a
minimum amount of $500,000 and in integral multiples of $10,000; and (B) each
such Eurodollar Rate Advance and each prepayment thereof shall be in a minimum
amount of $1,000,000 and in integral multiples of $100,000.
(ii) With respect to Facility B Loans: (A) each such Floating Rate
Loan and each prepayment thereof shall be in a minimum amount of $250,000; and
(B) each such Eurodollar Rate Loan and each prepayment, continuation or
conversion thereof shall be in a minimum amount of $1,000,000 and in integral
multiples of $100,000; provided, however, that any amounts repaid or prepaid
shall not be available to be reborrowed.
2.10 Borrowing Base Adjustments. The Company agrees that if at any time
any trade account receivable, any inventory, any fixed asset or any other asset
of the Company fails to constitute Eligible Account Receivable, Eligible
Inventory, Eligible Tooling Inventory or Eligible Fixed Assets, as the case may
be, for any reasonable reason, the Agent may, at any time and notwithstanding
any prior classification of eligibility, classify such asset or property as
ineligible and exclude the same from the computation of the Borrowing Base
without in any way impairing the rights of the Lenders and the Agent in and to
the same under the Security Agreements.
2.11 Security and Collateral. To secure the payment when due of the
Notes and all other obligations of the Company under the Loan Documents and
under any Hedging Contract to the Lenders and the Agent, the Company shall
execute and deliver, or cause to be executed and delivered, to the Lenders and
the Agent Security Documents granting the following:
(a) Security interests in all present and future accounts,
inventory, general intangibles, chattel paper, instruments, equipment, fixtures,
and all other personal property of the Company.
(b) Security interests in all present and future accounts,
inventory, general tangibles, chattel paper, instruments, equipment, fixtures
and all other personal property of the Guarantors other than MS and Holdings.
(c) Guarantees of each Guarantor.
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(d) All other security and collateral described in the Security
Documents (other than real property).
ARTICLE 3
PAYMENTS AND PREPAYMENTS OF ADVANCES
3.1 Principal Payments and Prepayments.
(a) Unless earlier payment is required under this Agreement, the
Company shall pay to the Lenders on Termination Date A the entire outstanding
principal amount of the Facility A Loans.
(b) Unless earlier payment is required under this Agreement, the
Company shall pay to the Lenders the outstanding principal amount of the
Facility B Loan in ten equal consecutive quarterly installments with each
payment equal to one-tenth of the outstanding balance of the Facility B Loans on
June 30, 1999, commencing on June 30, 1999, payable on the last Business Day of
each March, June, September and December and on the Maturity Date of the
remaining balance of the Facility B Loans shall be paid in full.
(c) The Company may at any time and from time to time prepay all
or a portion of the Loans, without premium or penalty, provided that (i) the
Company may not prepay any portion of any Loan as to which an election for a
continuation of or a conversion to a Eurodollar Rate Loan is pending pursuant to
Section 2.4, and (ii) unless earlier payment is required under this Agreement,
any Eurodollar Rate Loan may only be prepaid on the last day of the then current
Interest Period with respect to such Loan. Upon the giving of such notice, the
aggregate principal amount of such Loan or portion thereof so specified in such
notice, together with such accrued interest and other amounts, shall become due
and payable on the specified prepayment date.
(d) If at any time the aggregate outstanding principal amount of
the Facility A Advances and Facility C Advances (including Letters of Credit)
shall exceed the amount allowed pursuant to Section 2.1(e), the Company shall
forthwith pay to the Lenders, without demand, an amount not less than the amount
of such excess for application to the outstanding principal amount of the
Facility A Loans, provided that if any such prepayment would be in excess of the
outstanding amount of the Loans, the Company shall deliver cash collateral to
the Agent to secure the outstanding Letters of Credit in the amount of such
excess which is greater than the outstanding Facility A Loans and the Company
hereby grants to the Agent, for the benefit of the Lenders, a first priority
lien and security interest in such collateral, and all such cash collateral
shall be under the sole and exclusive control of the Agent.
(e) If any Borrowing Base Certificate delivered after June 30,
1999 and calculated as of the last day of any month indicates an excess of the
Borrowing Base in excess of $15,000,000, the Company shall make a mandatory
prepayment on the Facility B Loans in an aggregate amount equal to such excess
amount over $15,000,000. To the extent that, on the date any mandatory reduction
of outstanding Advances under this Section 3.1 is due, the outstanding Facility
B Advances are being carried, in whole or in part, at the Eurodollar Rate and no
Default or Event of Default has occurred and is continuing, the Company shall
first repay Facility B Advances being carried at the Floating Rate, and then the
Company may deposit the remaining amount of such mandatory repayment in a cash
collateral account to be held by the Agent, for and on behalf of the Lenders
(which shall be an interest-bearing account), on such terms and conditions as
are reasonably acceptable to Agent and the Required Lenders.
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Subject to the terms and conditions of said cash collateral account, sums on
deposit in said cash collateral account shall be applied (until exhausted) to
reduce the principal balance of the Eurodollar Rate Loans on the last day of
each Interest Period attributable to such Eurodollar Rate Loan.
(f) All payments of the Facility B Loans, in each case whether optional
or mandatory, shall be applied to installments of principal of the Facility B
Loans in the inverse order of their maturities and no partial prepayment of the
Facility B Loans shall reduce the amount or defer the scheduled installments of
principal required to be paid thereon.
3.2 Interest Payments. The Company shall pay interest to the Lenders on
the unpaid principal amount of each Loan, for the period commencing on the date
such Loan is made until such Loan is paid in full, on each Interest Payment Date
and at maturity (whether at stated maturity, by acceleration or otherwise), and
thereafter on demand, at the following rates per annum:
(a) During such periods that such Loan is a Floating Rate Loan,
the Floating Rate.
(b) During such periods that such Loan is a Eurodollar Rate Loan,
the Eurodollar Rate applicable to such Loan for each related Eurodollar Interest
Period.
Notwithstanding the foregoing paragraphs (a) and (b), the Company shall pay
interest on demand by the Agent at the Overdue Rate on the outstanding principal
amount of any Loan and any other amount payable by the Company hereunder (other
than interest) at any time on or after an Event of Default if required in
writing by the Required Lenders.
3.3 Letter of Credit Reimbursement Payments.
(a) (i) The Company agrees to pay to the Lenders, on the day on
which the Agent shall honor a draft or other demand for payment presented or
made under any Letter of Credit, an amount equal to the amount paid by the Agent
in respect of such draft or other demand under such Letter of Credit and all
expenses paid or incurred by the Agent relative thereto. Unless the Company
shall have made such payment to the Lenders on such day, upon each such payment
by the Agent, the Agent shall be deemed to have disbursed to the Company, and
the Company shall be deemed to have elected to satisfy its reimbursement
obligation by, a Loan bearing interest at the Floating Rate for the account of
the Lenders in an amount equal to the amount so paid by the Agent in respect of
such draft or other demand under such Letter of Credit. Such Loan shall be
disbursed notwithstanding any failure to satisfy any conditions for disbursement
of any Loan set forth in Article II hereof and, to the extent of the Loan so
disbursed, the reimbursement obligation of the Company under this Section 3.3
shall be deemed satisfied; provided, however, that nothing in this Section 3.3
shall be deemed to constitute a waiver of any Default or Event of Default caused
by the failure to the conditions for disbursement or otherwise.
(ii) If, for any reason (including without limitation as a result
of the occurrence of an Event of Default with respect to the Company pursuant to
Section 6.1(h)), Floating Rate Loans may not be made by the Lenders as described
in Section 3.3(a)(i), then (A) the Company agrees that each reimbursement amount
not paid pursuant to the first sentence of Section 3.3(a)(i) shall bear
interest, payable on demand by the Agent, at the interest rate then applicable
to Floating Rate Loans, and (B) effective on the date each such Floating Rate
Loan would otherwise have been made, each Lender severally agrees that it shall
unconditionally and irrevocably, without regard to the occurrence of any Default
or Event of Default, in lieu of deemed disbursement of loans, to the extent of
such Lender's Commitment, purchase a participating interest in each
reimbursement amount. Each Lender will
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immediately transfer to the Agent, in same day funds, the amount of its
participation. Each Lender shall share on a pro rata basis (calculated by
reference to its Commitment) in any interest which accrues thereon and in all
repayments thereof. If and to the extent that any Lender shall not have so made
the amount of such participating interest available to the Agent, such Lender
and the Company severally agree to pay to the Agent forthwith on demand such
amount together with interest thereon, for each day from the date of demand by
the Agent until the date such amount is paid to the Agent, at (x) in the case of
the Company, the interest rate then applicable to Floating Rate Loans and (y) in
the case of such Lender, the Federal Funds Rate.
(b) The reimbursement obligation of the Company under this Section 3.3
shall be absolute, unconditional and irrevocable and shall remain in full force
and effect until all obligations of the Company to the Lenders hereunder shall
have been satisfied, and such obligations of the Company shall not be affected,
modified or impaired upon the happening of any event, including without
limitation, any of the following, whether or not with notice to, or the consent
of, the Company:
(i) Any lack of validity or enforceability of any Letter of Credit or
any documentation relating to any Letter of Credit or to any transaction related
in any way to such Letter of Credit (the "Letter of Credit Documents");
(ii) Any amendment, modification, waiver, consent, or any substitution,
exchange or release of or failure to perfect any interest in collateral or
security, with respect to any of the Letter of Credit Documents;
(iii) The existence of any claim, setoff, defense or other right which
the Company may have at any time against any beneficiary or any transferee of
any Letter of Credit (or any persons or entities for whom any such beneficiary
or any such transferee may be acting), the Agent or any Lender or any other
person or entity, whether in connection with any of the Letter of Credit
Documents, the transactions contemplated herein or therein or any unrelated
transactions;
(iv) Any draft or other statement or document presented under any
Letter of Credit proving to be forged, fraudulent, invalid or insufficient in
any respect or any statement therein being untrue or inaccurate in any respect;
(v) Payment by the Agent to the beneficiary under any Letter of Credit
against presentation of a documents which do not comply with the terms of the
Letter of Credit, including failure of any documents to bear any reference or
adequate reference to such Letter of Credit;
(vi) Any failure, omission, delay or lack on the part of the Agent or
any Lender or any party to any of the Letter of Credit Documents to enforce,
assert or exercise any right, power or remedy conferred upon the Agent, any
Lender or any such party under this Agreement or any of the Letter of Credit
Documents, or any other acts or omissions on the part of the Agent, any Lender
or any such party;
(vii) Any other event or circumstance that would, in the absence of
this clause, result in the release or discharge by operation of law or otherwise
of the Company from the performance or observance of any obligation, covenant or
agreement contained in this Section 3.3.
No setoff, counterclaim, reduction or diminution of any obligation or any
defense of any kind or nature which the Company has or may have against the
beneficiary of any Letter of Credit shall be available
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hereunder to the Company against the Agent or any Lender. Nothing in this
Section 3.3 shall limit the liability, if any, of the Lenders to the Company
pursuant to Section 9.5.
3.4 Payment Method.
(a) All payments to be made by the Company hereunder will be made to
the Agent for the account of the Lenders in Dollars and in immediately
available, freely transferable, cleared funds not later than 1:00 p.m. at the
principal office of the Agent specified in Section 9.2. Payments received after
1:00 p.m. at the place for payment shall be deemed to be payments made prior to
1:00 p.m. at the place for payment on the next succeeding Business Day. The
Company hereby authorizes the Agent to charge its account with the Agent in
order to cause timely payment of amounts due hereunder to be made (subject to
sufficient funds being available in such account for that purpose).
(b) At the time of making each such payment, the Company shall, subject
to the other terms and conditions of this Agreement, specify to the Agent that
Loan or other obligation of the Company hereunder to which such payment is to be
applied. In the event that the Company fails to so specify the relevant
obligation or if an Event of Default shall have occurred and be continuing, the
Agent may apply such payments as it may determine in its sole discretion.
(c) On the day such payments are deemed received, the Agent shall remit
to the Lenders their pro rata shares of such payments in immediately available
funds to the Lenders at their respective address in the United States specified
for notices pursuant to Section 9.2. In the case of payments of principal and
interest on any Borrowing, such pro rata shares shall be determined with respect
to each such Lender by the ratio which the outstanding principal balance of its
Loan included in such Borrowing bears to the outstanding principal balance of
the Loans of all of the Lenders included in such Borrowing, and in the case of
fees paid pursuant to Section 2.3 and other amounts payable hereunder (other
than the Agent's fees payable pursuant to Section 2.3(c) and amounts payable to
any Lender under Section 3.7), such pro rata shares shall be determined with
respect to each such Lender by the ratio which the Commitment of such Lender
bears to the Commitments of all the Lenders.
3.5 No Setoff or Deduction. All payments of principal of and interest
on the Loans and other amounts payable by the Company hereunder shall be made by
the Company without setoff or counterclaim, and, subject to the next succeeding
sentence, free and clear of, and without deduction or withholding for, or on
account of, any present or future taxes, levies, imposts, duties, fees,
assessments, or other charges of whatever nature, imposed by any governmental
authority, or by any department, agency or other political subdivision or taxing
authority. If any such taxes, levies, imposts, duties, fees, assessments or
other charges are imposed, the Company will pay such additional amounts as may
be necessary so that payment of principal of and interest on the Loans and other
amounts payable hereunder, after withholding or deduction for or on account
thereof, will not be less than any amount provided to be paid hereunder and, in
any such case, the Company will furnish to the Lenders certified copies of all
tax receipts evidencing the payment of such amounts within 45 days after the
date any such payment is due pursuant to applicable law.
3.6 Payment on Non-Business Day; Payment Computations. Except as
otherwise provided in this Agreement to the contrary, whenever any installment
of principal of, or interest on, any Loan or any other amount due hereunder
becomes due and payable on a day which is not a Business Day, the maturity
thereof shall be extended to the next succeeding Business Day and, in the case
of any installment of principal, interest shall be payable thereon at the rate
per annum determined in accordance with this Agreement during such extension.
Computations of interest and other amounts due under this
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Agreement shall be made on the basis of a year of 360 days for the actual number
of days elapsed, including the first day but excluding the last day of the
relevant period.
3.7 Additional Costs.
(a) In the event that any applicable law, treaty or other international
agreement, rule or regulation (whether domestic or foreign) now or hereafter in
effect and whether or not presently applicable to any Lender or the Agent, or
any interpretation or administration thereof by any governmental authority
charged with the interpretation or administration thereof, or compliance by any
Lender or the Agent with any guideline, request or directive of any such
authority (whether or not having the force of law), shall (a) affect the basis
of taxation of payments to any Lender or the Agent of any amounts payable by the
Company under this Agreement (other than taxes imposed on the overall net income
of any Lender or the Agent, by the jurisdiction, or by any political subdivision
or taxing authority of any such jurisdiction, in which any Lender or the Agent,
as the case may be, has its principal office), or (b) shall impose, modify or
deem applicable any reserve, special deposit or similar requirement against
assets of, deposits with or for the account of, or credit extended by any Lender
or the Agent, or (c) shall impose any other condition with respect to this
Agreement, or any of the Commitments, the Notes or the Loans or any Letter of
Credit, and the result of any of the foregoing is to increase the cost to any
Lender or the Agent, as the case may be, of making, funding or maintaining any
Eurodollar Rate Loan or any Letter of Credit or to reduce the amount of any sum
receivable by any Lender or the Agent, as the case may be, thereon, then the
Company shall pay to such Lender or the Agent, as the case may be, from time to
time, upon request by such Lender (with a copy of such request to be provided to
the Agent) or the Agent, additional amounts sufficient to compensate such Lender
or the Agent, as the case may be, for such increased cost or reduced sum
receivable to the extent, in the case of any Eurodollar Rate Loan, such Lender
or the Agent is not compensated therefor in the computation of the interest rate
applicable to such Eurodollar Rate Loan. A statement as to the amount of such
increased cost or reduced sum receivable, prepared in good faith and in
reasonable detail by such Lender or the Agent, as the case may be, and submitted
by such Lender or the Agent, as the case may be, to the Company, shall be
conclusive and binding for all purposes absent manifest error in computation. No
Lender shall charge any amount under this Section 3.7(a) unless it is charging
other borrowers similar to the Company, as reasonably determined by such Lender,
such similar amounts if allowed.
(b) In the event that any applicable law, treaty or other international
agreement, rule or regulation (whether domestic or foreign) now or hereafter in
effect and whether or not presently applicable to any Lender or the Agent, or
any interpretation or administration thereof by any governmental authority
charged with the interpretation or administration thereof, or compliance by any
Lender or the Agent with any guideline, request or directive of any such
authority (whether or not having the force of law), including any risk-based
capital guidelines, affects or would affect the amount of capital required or
expected to be maintained by such Lender or the Agent (or any corporation
controlling such Lender or the Agent) and such Lender or the Agent, as the case
may be, determines that the amount of such capital is increased by or based upon
the existence of such Lender's or the Agent's obligations hereunder and such
increase has the effect of reducing the rate of return on such Lender's or the
Agent's (or such controlling corporation's) capital as a consequence of such
obligations hereunder to a level below that which such Lender or the Agent (or
such controlling corporation) could have achieved but for such circumstances
(taking into consideration its policies with respect to capital adequacy), then
the Company shall pay to such Lender or the Agent, as the case may be, from time
to time, upon request by such Lender (with a copy of such request to be provided
to the Agent) or the Agent, additional amounts sufficient to compensate such
Lender or the Agent (or such controlling corporation) for any increase in the
amount of capital and reduced rate of return which such Lender or the Agent
reasonably
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determines to be allocable to the existence of such Lender's or the Agent's
obligations hereunder. A statement as to the amount of such compensation,
prepared in good faith and in reasonable detail by such Lender or the Agent, as
the case may be, and submitted by such Lender or the Agent to the Company, shall
be conclusive and binding for all purposes absent manifest error in computation.
Such Lender or the Agent may, at its option, specify that such amounts be paid
by way of an increase in the commitment fees payable by the Company pursuant to
Section 2.3(a). No Lender shall charge any amount under this Section 3.7(b)
unless it is charging other borrowers similar to the Company, as reasonably
determined by such Lender, such similar amounts if allowed.
3.8 Illegality and Impossibility. In the event that any applicable law,
treaty or other international agreement, rule or regulation (whether domestic or
foreign) now or hereafter in effect and whether or not presently applicable to
any Lender, or any interpretation or administration thereof by any governmental
authority charged with the interpretation or administration thereof, or
compliance by any Lender with any guideline, request or directive of such
authority (whether or not having the force of law), including without limitation
exchange controls, shall make it unlawful or impossible for any Lender to
maintain any Loan under this Agreement, shall make it impracticable, unlawful or
impossible for, or shall in any way limit or impair ability of, the Company to
make or any Lender to receive any payment under this Agreement at the place
specified for payment hereunder, the Company shall upon receipt of notice
thereof from such Lender, repay in full the then outstanding principal amount of
each Loan so affected, together with all accrued interest thereon to the date of
payment and all amounts owing to such Lender under Section 3.8, (a) on the last
day of the then current Eurodollar Interest Period applicable to such Loan if
such Lender may lawfully continue to maintain such Loan to such day, or (b)
immediately if such Lender may not continue to maintain such Loan to such day.
3.9 Indemnification. If the Company makes any payment of principal with
respect to any Eurodollar Rate Loan on any other date than the last day of an
Interest Period applicable thereto (whether pursuant to Section 3.1, Section
3.7, Section 6.2 or otherwise), or if the Company fails to borrow any Eurodollar
Rate Loan after notice has been given to the Lenders in accordance with Section
2.4, or if the Company fails to make any payment of principal or interest in
respect of a Eurodollar Rate Loan when due, the Company shall reimburse each
Lender on demand for any resulting loss or expense incurred by each such Lender,
including without limitation any loss incurred in obtaining, liquidating or
employing deposits from third parties, whether or not such Lender shall have
funded or committed to fund such Loan. A statement as to the amount of such loss
or expense, prepared in good faith and in reasonable detail by such Lender and
submitted by such Lender to the Company, shall be conclusive and binding for all
purposes absent manifest error in computation. Calculation of all amounts
payable to such Lender under this Section 3.9 shall be made as though such
Lender shall have actually funded or committed to fund the relevant Eurodollar
Rate Loan through the purchase of an underlying deposit in an amount equal to
the amount of such Loan in the relevant market and having a maturity comparable
to the related Interest Period and, through the transfer of such deposit to a
domestic office of such Lender in the United States; provided, however, that
such Lender may fund any Eurodollar Rate Loan in any manner it sees fit and the
foregoing assumption shall be utilized only for the purpose of calculation of
amounts payable under this Section 3.9.
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ARTICLE 4
REPRESENTATIONS AND WARRANTIES
The Company represents and warrants to the Lenders and the Agent that:
4.1 Corporate Existence and Power. Each of the Company and each
Guarantor is a corporation duly organized, validly existing and in good standing
under the laws of the state or territory of its jurisdiction of incorporation or
organization, as the case may be, and is duly qualified to do business, and is
in good standing, in all additional jurisdictions where such qualification is
necessary under applicable law, except where failure to so qualify would not
have a Material Adverse Effect. Each of the Company and each Guarantor has all
requisite corporate power to own or lease the properties used in its business
and to carry on its business as now being conducted and as proposed to be
conducted, and to execute and deliver the Loan Documents to which it is a party
and to engage in the transactions contemplated by the Loan Documents.
4.2 Corporate Authority. The execution, delivery and performance by the
Company and each Guarantor of the Loan Documents to which it is a party have
been duly authorized by all necessary corporate action and are not in
contravention of any law, rule or regulation, or any judgment, decree, writ,
injunction, order or award of any arbitrator, court or governmental authority,
or of the terms of the Company's or the Guarantor's charter or by-laws, or of
any contract or undertaking to which the Company or any Guarantor is a party or
by which the Company or any Guarantor or any of their respective property may be
bound or affected and will not result in the imposition of any Lien on any of
their property or of any of their Subsidiaries except for Permitted Liens.
4.3 Binding Effect. The Loan Documents to which the Company or any
Guarantor is a party are the legal, valid and binding obligations of the Company
and each Guarantor, respectively, enforceable against the Company and each
Guarantor in accordance with their respective terms.
4.4 Subsidiaries. Schedule 4.4 hereto correctly sets forth the
corporate name, jurisdiction of incorporation and ownership of each Subsidiary
of the Company and each Guarantor. Each such Subsidiary and each corporation
becoming a Subsidiary of the Company or any Guarantor after the date hereof is
and will be a corporation duly organized, validly existing and in good standing
under the laws of its jurisdiction of incorporation and is and will be duly
qualified to do business in each additional jurisdiction where such
qualification is or may be necessary under applicable law, except where the
failure to so qualify would not have a Material Adverse Effect. Each Subsidiary
of the Company and each Guarantor has and will have all requisite corporate
power to own or lease the properties used in its business and to carry on its
business as now being conducted and as proposed to be conducted. All outstanding
shares of capital stock of each class of each Subsidiary of the Company and each
Guarantor have been and will be validly issued and are and will be fully paid
and nonassessable and, except as otherwise indicated in Schedule 4.4 hereto or
disclosed in writing to the Agent and the Lenders from time to time, are and
will be owned, beneficially and of record, by the Company or another Subsidiary
of the Company free and clear of any Liens.
4.5 Litigation. Except as set forth in Schedule 4.5 hereto, there is no
action, suit or proceeding pending or, to the best of the Company's and the
Guarantors' knowledge, threatened against or affecting the Company, any
Guarantor or any of their respective Subsidiaries before or by any court,
governmental authority or arbitrator, which if adversely decided might have a
Material Adverse Effect
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and, to the best of the Company's and the Guarantor's knowledge, there is no
basis for any such action, suit or proceeding.
4.6 Financial Condition. The consolidated and consolidating balance
sheet of the Company and its Subsidiaries and the consolidated and consolidating
statements of income, retained earnings and cash flows of the Company and its
Subsidiaries for the fiscal year ended December 31, 1997 and audited by Price
Waterhouse, independent certified public accountants, copies of which have been
furnished to the Lenders, fairly present, and the financial statements of the
Company and its Subsidiaries delivered pursuant to Section 5.1(d) will fairly
present, the consolidated financial position of the Company and its Subsidiaries
as at the respective dates thereof, and the consolidated results of operations
of the Company and its Subsidiaries for the respective periods indicated, all in
accordance with Generally Accepted Accounting Principles consistently applied
(subject, in the case of said interim statements, to year-end audit
adjustments). There has been no event or development which has had or could
reasonably be expected to have a Material Adverse Effect since December 31,
1997. There is no material Contingent Liability of the Company or any of its
Subsidiaries that is not reflected in such financial statements or in the notes
thereto.
4.7 Use of Advances. The Company will use the proceeds of the Advances
for its general corporate purposes, including working capital and the financing
of capital expenditures. Neither the Company nor any Guarantor nor any of their
respective Subsidiaries extends or maintains, in the ordinary course of
business, credit for the purpose, whether immediate, incidental, or ultimate, of
buying or carrying margin stock (within the meaning of Regulation U of the Board
of Governors of the Federal Reserve System), and no part of the proceeds of any
Advance will be used for the purpose, whether immediate, incidental, or
ultimate, of buying or carrying any such margin stock or maintaining or
extending credit to others for such purpose. After applying the proceeds of each
Advance, such margin stock will not constitute more than 25% of the value of the
assets (either of the Company or any Guarantor alone or of the Company and the
Guarantors and their respective Subsidiaries on a consolidated basis) that are
subject to any provisions of this Agreement or any Security Document that may
cause the Advances to be deemed secured, directly or indirectly, by margin
stock.
4.8 Consents, Etc. No consent, approval or authorization of or
declaration, registration or filing (other than financing statements which have
been executed) with any governmental authority or any nongovernmental person or
entity, including without limitation any creditor, lessor or stockholder of the
Company or any Guarantor or any of their respective Subsidiaries, is required on
the part of the Company or any Guarantor in connection with the execution,
delivery and performance of the Loan Documents or the transactions contemplated
hereby or as a condition to the legality, validity or enforceability of any of
the Loan Documents.
4.9 Taxes. The Company and the Guarantors and their respective
Subsidiaries have filed all tax returns (federal, state and local) required to
be filed and have paid all taxes shown thereon to be due, including interest and
penalties, or have established adequate financial reserves on their respective
books and records for payment thereof in accordance with Generally Accepted
Accounting Principles. Neither the Company nor any Guarantor nor any of their
respective Subsidiaries knows of any actual or proposed tax assessment or any
basis therefor, and no extension of time for the assessment of deficiencies in
any federal or state tax has been granted by the Company, any Guarantor or any
such Subsidiary.
4.10 Title to Properties. Except as otherwise disclosed in the latest
balance sheet delivered pursuant to Section 4.6 or 5.1(d) of this Agreement, the
Company, the Guarantors or one or more of their respective Subsidiaries have
good and marketable fee simple title to all of the real property owned by
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them, and a valid and indefeasible ownership interest in all of the other
properties and assets (including, without limitation, the collateral subject to
the Security Documents to which any of them is a party) reflected in said
balance sheet or subsequently acquired by the Company, any Guarantor or any such
Subsidiary. All of such properties and assets are free and clear of any Lien,
except for Permitted Liens. Subject to the Permitted Liens, the Security
Documents grant a first priority, perfected and enforceable lien and security
interest which is not void or voidable in all collateral described therein,
securing all Indebtedness described therein.
4.11 Borrowing Base. All trade accounts receivable and inventory and
fixed assets of the Company and Manufacturing represented or reported by the
Company and Manufacturing to be, or otherwise included in, Eligible Accounts
Receivable, Eligible Inventory, Eligible Tooling Inventory and Eligible Fixed
Assets comply in all respects with the requirements therefor set forth in the
definition thereof, and the computations of the Borrowing Base set forth in each
Borrowing Base Certificate is true and correct.
4.12 ERISA. Except as disclosed on Schedule 4.12, the Company, the
Guarantors, the ERISA Affiliates and the Plans are in compliance in all material
respects with those provisions of ERISA and of the Code which are applicable
with respect to any Plan. No Prohibited Transaction and no Reportable Event has
occurred that could result in material liability to the Company or any Guarantor
or any Material Adverse Effect. Neither the Company, any Guarantor nor any ERISA
Affiliate is an employer with respect to any Multiemployer Plan. The Company,
the Guarantors, and the ERISA Affiliates have met the minimum funding
requirements under ERISA and the Code with respect to each Plan and have not
incurred any material liability to the PBGC or any Plan other than liability for
PBGC premiums and Plan contributions, none of which is overdue. The execution,
delivery and performance of this Agreement, the Notes and the Security Documents
does not constitute a Prohibited Transaction. Except with respect to any Plan
identified on Schedule 4.12 (the funding status of which is addressed therein),
there is no material Unfunded Benefit Liability.
4.13 Disclosure. No report or other information furnished in writing or
on behalf of the Company or any Guarantor to any Lender or the Agent in
connection with the negotiation or administration of this Agreement contains any
material misstatement of fact or omits to state any material fact or any fact
necessary to make the statements contained therein not misleading in light of
the circumstances in which they were made. Neither this Agreement, the Notes,
the Security Documents nor any other document, certificate, or report or
statement or other information furnished to any Lender or the Agent by or on
behalf of the Company or any Guarantor in connection with the transactions
contemplated hereby contains any untrue statement of a material fact or omits to
state a material fact in order to make the statements contained herein and
therein not misleading in light of the circumstances in which they were made.
There is no fact known to the Company or any Guarantor which has or which in the
future may have (so far as the Company or any Guarantor can now foresee) a
Material Adverse Effect, which has not been set forth in this Agreement or in
the other documents, certificates, statements, reports and other information
furnished in writing to the Lenders by or on behalf of the Company or any
Guarantor in connection with the transactions contemplated hereby.
4.14 Environmental Matters. Except as disclosed on Schedule 4.14, the
Company, the Guarantor and each of their respective Subsidiaries are in
substantial compliance with all Environmental Laws in jurisdictions in which the
Company, the Guarantor or any such Subsidiary owns or operates, or has owned or
operated, a facility or site, or arranges or has arranged for disposal or
treatment of hazardous substances, solid waste, or other wastes, accepts or has
accepted for transport any hazardous substances, solid wastes or other wastes or
holds or has held any interest in real property or otherwise.
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No demand, claim, notice, action, administrative proceeding, investigation or
inquiry whether brought by any governmental authority, private person or entity
or otherwise, arising under, relating to or in connection with any Environmental
Laws is pending or threatened against the Company, the Guarantor or any of their
respective Subsidiaries, any real property in which the Company, the Guarantor
or any such Subsidiary holds or has held an interest or any past or present
operation of the Company, the Guarantor or any such Subsidiary which could
result in a Material Adverse Effect. Neither the Company, the Guarantor nor any
of their respective Subsidiaries (a) is the subject of any federal or state
investigation evaluating whether any remedial action is needed to respond to a
release of any toxic substances, radioactive materials, hazardous wastes or
related materials into the environment which could result in a Material Adverse
Effect, (b) has received any notice of any toxic substances, radioactive
materials, hazardous waste or related materials in, or upon any of its
properties in violation of any Environmental Laws which could result in a
Material Adverse Effect, (c) knows of any basis for any such investigation,
notice or violation, or (d) owns or operates, or has owned or operated, property
which appears on the United States National Priority List or any other
governmental listing which identifies sites for remedial clean-up or
investigatory actions, except as disclosed on Schedule 4.14 hereto, and as to
such matters disclosed on such Schedule, none will have a Material Adverse
Effect. No release, threatened release or disposal of hazardous waste, solid
waste or other wastes is occurring or has occurred on, under or to any real
property in which the Company, the Guarantor or any of their respective
Subsidiaries holds any interest or performs any of its operations, in violation
of any Environmental Law which could result in a Material Adverse Effect.
4.15 No Default. Neither the Company nor any Subsidiary is in default
or has received any written notice of default under or with respect to any of
its Contractual Obligations in any respect which could have a Material Adverse
Effect. No Default or Event of Default has occurred and is continuing.
4.16 No Burdensome Restrictions. No Requirement of Law or Contractual
Obligation applicable to the Company or any Subsidiary could have a Material
Adverse Effect on the financial condition or business of the Company and its
Subsidiaries.
4.17 Other Debt. All agreements, instruments and documents relating in
any way to any Subordinated Debt, the Senior Note Debt or any preferred stock of
the Company, and all scheduled payments thereon, are described on Schedules
1.1(b) hereto, and accurate and complete copies thereof have been delivered to
the Agent. All Advances, all liabilities pursuant to any Hedging Contracts and
all other present and future indebtedness, obligations and liabilities owing by
the Company to the Agent or any of the Lenders under the Loan Documents
constitute Senior Debt as defined in the Subordinated Debt Documents. All
representations and warranties contained in the Subordinated Debt Documents and
the Senior Note Indenture are true and correct and there is no default or event
or condition which with notice or with lapse of time could become a default
under the Subordinated Debt Documents or the Senior Note Documents. After giving
effect to all transactions contemplated by the Subordinated Debt Documents and
the Senior Note Documents, including without limitation the incurrence of Senior
Note Debt, the Company is, and will at all times thereafter be, Solvent. All
Indebtedness incurred under this Agreement, including all Facility A Advances,
Facility B Loans and Facility C Advances, is Permitted Indebtedness under the
Senior Note Indenture.
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ARTICLE 5
COVENANTS
5.1 Affirmative Covenants. Each of the Company and the Guarantors
covenants and agrees that, until Termination Date A and thereafter until payment
in full of the principal of and accrued interest on the Notes and the
performance of all other obligations of the Company and the Guarantors under the
Loan Documents, unless the Required Lenders shall otherwise consent in writing,
it shall, and shall cause each of their respective Subsidiaries to:
(a) Preservation of Corporate Existence, Etc. Do or cause to be
done all things necessary to preserve, renew and keep in full force and effect
its legal existence (provided that the Company may nonetheless reincorporate as
a Delaware corporation and may take whatever actions are necessary to do so),
and its qualification as a foreign corporation in good standing in each
jurisdiction except where it would not have a Material Adverse Effect, and the
rights, licenses, permits (including those required under Environmental Laws),
franchises, patents, copyrights, trademarks and trade names material to the
conduct of its businesses; and defend all of the foregoing against all claims,
actions, demands, suits or proceedings at law or in equity or by or before any
governmental instrumentality or other agency or regulatory authority, except
where it would not have a Material Adverse Effect.
(b) Compliance with Laws, Etc. Comply in all material respects
with all applicable laws, rules, regulations and orders of any governmental
authority, whether federal, state, local or foreign (including without
limitation ERISA, the Code and Environmental Laws), in effect from time to time;
and pay and discharge promptly when due all taxes, assessments and governmental
charges or levies imposed upon it or upon its income, revenues or property,
before the same shall become delinquent or in default, as well as all lawful
claims for labor, materials and supplies or otherwise, which, if unpaid, might
give rise to Liens upon such properties or any portion thereof, except where it
would not have a Material Adverse Effect, and except to the extent that payment
of any of the foregoing is then being contested in good faith by appropriate
legal proceedings and with respect to which adequate financial reserves have
been established on the books and records of the Company, any Guarantor or any
of their respective Subsidiaries in accordance with Generally Accepted
Accounting Principles.
(c) Maintenance of Properties; Insurance. Maintain, preserve and
protect all property that is material to the conduct of the business of the
Company, any Guarantor or any of their respective Subsidiaries and keep such
property in good repair, working order and condition and from time to time make,
or cause to be made all needful and proper repairs, renewals, additions,
improvements and replacements thereto necessary in order that the business
carried on in connection therewith may be properly conducted at all times in
accordance with customary and prudent business practices for similar businesses,
except if in the Company's reasonable business judgment it is in its best
interest not to do the foregoing; and, in addition to that insurance required
under the Security Documents, maintain in full force and effect insurance with
responsible and reputable insurance companies or associations in such amounts,
on such terms and covering such risks, including fire and other risks insured
against by extended coverage, as is usually carried by companies engaged in
similar businesses and owning similar properties similarly situated and maintain
in full force and effect public liability insurance, insurance against claims
for personal injury or death or property damage occurring in connection with any
of its activities or any properties owned, occupied or controlled by it, in such
amount as it shall reasonably deem necessary, and maintain such other insurance
as may be required by law or as may be reasonably requested by the Required
Lenders for purposes of assuring compliance with this Section 5.1(c).
(d) Reporting Requirements. Furnish to the Lenders and the Agent
the following:
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(i) Promptly and in any event within three calendar days after
becoming aware of the occurrence of (A) any Default or Event of Default, (B) the
commencement of any material litigation against, by or affecting the Company,
any Guarantor or any of their respective Subsidiaries, and any material
developments therein, or (C) entering into any material contract or undertaking
that is not entered into in the ordinary course of business or (D) any
development in the business or affairs of the Company, any Guarantor or any of
their respective Subsidiaries which has resulted in or which is likely in the
reasonable judgment of the Company or any Guarantor, to result in a Material
Adverse Effect, a statement of the chief financial officer of the Company or the
Guarantor, as the case may be setting forth details of each such Default or
Event of Default or such litigation, material contract or undertaking or
development and the action which the Company, such Guarantor or such Subsidiary,
as the case may be, has taken and proposes to take with respect thereto;
(ii) As soon as available and in any event within 30 days after
the end of each month, the consolidated and consolidating balance sheet of the
Company and its Subsidiaries as of the end of such month, and the related
consolidated and consolidating statements of income, retained earnings and cash
flows for the period commencing at the end of the previous fiscal year and
ending with the end of such month, setting forth in each case in comparative
form the corresponding figures for the corresponding date or period of the
preceding fiscal year, all in reasonable detail and duly certified (subject to
year-end audit adjustments) by the chief financial officer of the Company as
having been prepared in accordance with Generally Accepted Accounting
Principles, together with a certificate of the chief financial officer of the
Company stating (A) that no Default or Event of Default has occurred and is
continuing or, if a Default or Event of Default has occurred and is continuing,
a statement setting forth the details thereof and the action which the Company
has taken and proposes to take with respect thereto, and (B) that a computation
(which computation shall accompany such certificate and shall be in reasonable
detail) showing compliance with Section 5.2(a) and (b) hereof is in conformity
with the terms of this Agreement;
(iii) As soon as available and in any event within 90 days after
the end of each fiscal year of the Company, a copy of the consolidated balance
sheet of the Company and its Subsidiaries as of the end of such fiscal year and
the related consolidated statements of income, retained earnings and changes in
financial position of the Company and its Subsidiaries for such fiscal year,
with a customary audit report of Price Waterhouse, or other independent
certified public accountants selected by the Company and acceptable to the
Required Lenders, without qualifications unacceptable to the Required Lenders,
together with a certificate of such accountants stating (A) that they have
reviewed this Agreement and stating further whether, in the course of their
review of such financial statements, they have become aware of any Default or
Event of Default and, if such a Default or Event of Default exists and is
continuing, a statement setting forth the nature and status thereof, and (B)
that a computation by the Company (which computation shall accompany such
certificate and shall be in reasonable detail) showing compliance with Section
5.2(a) and (b) hereof is in conformity with the terms of this Agreement;
(iv) Promptly after the sending or filing thereof, copies of all
reports, proxy statements and financial statements which the Company or any
Guarantor or any of their respective Subsidiaries sends to or files with any of
their respective security holders or any securities exchange or the Securities
and Exchange Commission or any successor agency thereof; and
(v) As soon as available and in any event not later than three
calendar days after the end of each week in the case of weekly reporting on the
following Business Day in the case of
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daily reporting, a Borrowing Base Certificate prepared as of the close of
business on the last day of each week or, in the event the aggregate principal
amount of Facility A Advances exceeds $32,500,000 or in connection with any
request for a Facility A Advance which would cause the aggregate principal
amount of Facility A Advances to exceed $32,500,000, prepared as of the close of
business on each Business Day, together with supporting schedules, in form and
detail satisfactory to the Agent, setting forth such information as the Agent
may request with respect to the aging, value, location and other information
relating to the computation of the Borrowing Base and the eligibility of any
property or assets included in such computation, certified as true and correct
by a corporate officer of the Company;
(vi) Promptly and in any event within 10 calendar days after
receiving or becoming aware thereof (A) a copy of any notice of intent to
terminate any Plan filed with the PBGC, (B) a statement of the chief financial
officer of the Company or any Guarantor, as the case may be, setting forth the
details of the occurrence of any Reportable Event, (C) a copy of any notice that
the Company, any Guarantor, or any ERISA Affiliate may receive from the PBGC
relating to the intention of the PBGC to terminate any Plan or to appoint a
trustee to administer any such Plan, or (D) a copy of any notice of failure to
make a required installment or other payment within the meaning of Section
412(n) of the Code or Section 302(f) of ERISA with respect to any Plan;
(vii) As soon as available and in any event within 30 days after
the end of each month, a report with respect to the Company setting forth a
summary and aging of accounts payable of the Company, a listing of any checks
held after the due date of the related vendor invoice and setting forth the
corresponding due dates of such invoices, in form and detail satisfactory to the
Agent, certified as true and correct by the chief financial officer of the
Company;
(viii) Promptly, such other information respecting the business,
properties, operations or condition, financial or otherwise, of the Company, any
Guarantor or any of their respective Subsidiaries as any Lender or the Agent may
from time to time reasonably request;
(ix) As soon as available and in any event within 10 days after
the end of each month, an analysis of the Saturn Tooling Project relating to
ownership and containing a description of competing Liens, completion
percentage, copies of the minutes of all substantive meetings among the Company,
the Guarantors and Saturn or tool suppliers, cost comparisons to the original
budget and the location of tooling and any other related information which the
Agent shall reasonably request.
(e) Accounting; Access to Records, Books, Etc. Maintain a system of
accounting established and administered in accordance with sound business
practices to permit preparation of financial statements in accordance with
Generally Accepted Accounting Principles and to comply with the requirements of
this Agreement and, at any reasonable time and from time to time, (i) permit any
Lender or the Agent or any agents or representatives thereof to examine and make
copies of and abstracts from the records and books of account of, and visit the
properties of, the Company, the Guarantors and their respective Subsidiaries,
and to discuss the affairs, finances and accounts of the Company, the Guarantors
and their respective Subsidiaries with their respective directors, officers,
employees and independent auditors, and by this provision each of the Company
and the Guarantors hereby authorizes such persons to discuss such affairs,
finances and accounts with any Lender or the Agent, provided that such Lender or
the Agent, as the case may be, shall provide prior notice of any of the actions
described in this clause (i) if no Event of Default exists, and (ii) permit the
Agent or any of its agents or representatives to conduct a comprehensive field
audit of its books, records, properties and assets, including without limitation
all collateral subject to the Security Documents, at the expense of the
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Company, provided that prior to occurrence of an Event of Default no more than
two such field audits shall be performed in any twelve month period; and
(f) Additional Security and Collateral. Promptly (i) execute and
deliver and cause each Subsidiary of the Company and the Guarantors to execute
and deliver, additional Security Documents, within 30 days after request
therefor by the Lenders and the Agent, sufficient to grant to the Agent for the
benefit of the Lenders liens and security interests in any after acquired
property of the type described in Section 2.11, and (ii) cause each person
becoming a Subsidiary of the Company or any Guarantor from time to time to
execute and deliver to the Lenders and the Agent, within 30 days after such
person becomes a Subsidiary, a Guaranty (or become a party hereto as a Guarantor
as required by the Agent) and Security Documents, together with other related
documents described in Section 2.5, sufficient to grant to the Agent for the
benefit of the Lenders liens and security interests in all collateral of the
type described in Section 2.11. The Company shall notify the Lenders and the
Agent, within 10 days after the occurrence thereof, of the acquisition of any
property that is covered by Section 2.11 by the Company or any Guarantor that is
not subject to the existing Security Documents, any person's becoming a
Subsidiary and any other event or condition that may require additional action
of any nature in order to preserve the effectiveness and perfected status of the
liens and security interests of the Lenders and the Agent with respect to such
property pursuant to the Security Documents.
(g) Further Assurances. Will, and will cause each Guarantor to, execute
and deliver within 30 days after request therefor by the Lenders and the Agent,
all further instruments and documents and take all further action that may be
reasonably necessary or desirable, or that the Agent may request, in order to
give effect to, and to aid in the exercise and enforcement of the rights and
remedies of the Lenders under, this Agreement, the Notes and the Security
Documents, including without limitation using reasonable efforts to cause, on or
before sixty (60) days after the Effective Date, each lessor of real property to
the Company, any Guarantor or any of their respective Subsidiaries to execute
and deliver to the Agent, prior to or upon the commencement of any tenancy, an
agreement in form and substance acceptable to the Lenders and the Agent duly
executed on behalf of such lessor waiving any distraint, lien and similar rights
with respect to any property subject to the Security Documents and agreeing to
permit the Lenders and the Agent to enter such premises in connection therewith.
At all times on and after the date requested by the Agent in its discretion, the
Company and the Guarantors shall direct all customers and other account debtors
to make all payments in connection with any obligations to the Company or any
Guarantor directly to a lock-box account, which account shall be a non-interest
bearing account over which the Agent shall have the power of application and
withdrawal, and all amounts received in such lock-box account shall be applied
to the Advances on such terms reasonably required by the Agent, and the Company
and the Guarantors shall promptly execute such lock-box agreements, dominion of
funds agreements and related agreements in connection therewith, each in form
and substance satisfactory to the Agent.
5.2 Negative Covenants. Until Termination Date A and thereafter until
payment in full of the principal of and accrued interest on the Notes and the
performance of all other obligations of the Company and the Guarantors under the
Loan Documents, the Company agrees that, unless the Required Lenders shall
otherwise consent in writing it shall not, and shall not permit any of its
Subsidiaries to:
(a) Funded Debt Ratio. Permit or suffer the Funded Debt Ratio of the
Company and its Subsidiaries at any time to be greater than: (i) 5.0:1.0 during
the period from and including December 31, 1999 to and including December 30,
2000; and (ii) 4.5:1.0 during the period from and including December 31, 2000
and thereafter.
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(b) Fixed Charge Coverage Ratio. Permit or suffer the Fixed Charge
Coverage Ratio to be less than: (i) 1.25:1.00 from and including the Effective
Date through and including July 30, 1998; (ii) 1.10:1.00 from and including July
31, 1998 through and including October 30, 1998; (iii) 0.90:1.00 from and
including October 31, 1998 through and including July 30, 1999; (iv) 1.25:1.00
from and including July 31, 1999 through and including October 30, 1999; and (v)
1.50:1.00 from and including October 31, 1999 and thereafter.
(c) Senior Secured Funded Debt Ratio. Permit or suffer the Senior
Secured Funded Debt Ratio of the Company and Subsidiaries to exceed at any time:
(i) 2.00:1.00 from and including the Effective Date through and including July
30, 1998; (ii) 3.00:1.00 from and including July 31, 1998 through and including
October 30, 1998; (iii) 4.00:1.00 from and including October 31, 1998 through
and including January 30, 1999; (iv) 4.25:1.00 from and including January 31,
1999 to and including April 29, 1999; (v) 3.00:1.00 from and including April 30,
1999 to and including July 30, 1999 and (vi) 2.00:1.00 from and including July
31, 1999 through and including December 31, 1999.
(d) Capital Expenditures. Acquire any fixed asset or make any other
capital expenditure if the aggregate purchase price and other acquisition costs
of all such fixed assets acquired and other capital expenditures made by the
Company or an of its Subsidiaries during any fiscal year of the Company would
exceed: (i) $23,000,000 for the fiscal year ending December 31, 1998 or (ii)
$10,000,000 (plus the unused availability from the prior year up to $5,000,00)
at the end of any fiscal year thereafter.
(e) Net Worth. Permit or suffer the consolidated Net Worth of the
Company and its Subsidiaries to be less than the sum of: (a)(i) negative
$6,500,000 from the Effective Date through and including July 30, 1998; (ii)
negative $10,500,000 from and including July 31, 1998 through and including
October 30, 1998; (iii) negative $11,500,000 from and including October 31, 1998
and thereafter, plus (b) 50% of Net Income, commencing on January 1, 1998,
adjusted as of the last day of each fiscal quarter of the Company in 1998 and as
of each fiscal year of the Company thereafter; provided, that if such net income
is negative in any fiscal quarter or any fiscal year, as the case may be, the
amount added for such period shall be zero and shall not reduce the amount added
for any other period.
(f) Indebtedness. Create, incur, assume or in any manner become liable
in respect of, or suffer to exist, any Indebtedness other than:
(i) The Advances;
(ii) The Indebtedness described in Schedule 5.2(f) hereto, but no
increase in the amount thereof shall be permitted;
(iii) Indebtedness in aggregate outstanding principal amount not
exceeding $1,000,000 which is secured by one or more Liens permitted by Section
5.2(g)(vi) hereof;
(iv) Subordinated Debt of the Company or any of its Subsidiaries
in aggregate principal amount not to exceed $7,000,000; and Senior Note Debt in
aggregate principal not to exceed $85,000,000, in each case as reduced from time
to time by any payments thereon;
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(v) Indebtedness pursuant to any Hedging Contracts with any
Lender, provided that the Company and the Guarantors shall not enter into any
Hedging Contracts for the purposes of financial speculation; and
(vi) Indebtedness of Manufacturing to the Company; and
(vii) Other Indebtedness with the prior written permission of the
Required Lenders.
(g) Liens. Create, incur or suffer to exist any Lien on any of the
assets, rights, revenues or property, real, personal or mixed, tangible or
intangible, whether now owned or hereafter acquired, of the Company or any of
its Subsidiaries, other than:
(i) Liens for taxes not delinquent or for taxes being contested in
good faith by appropriate proceedings and as to which adequate financial
reserves have been established on its books and records in accordance with
Generally Accepted Accounting Principles;
(ii) Liens (other than any Lien imposed by ERISA or any
Environmental Law) created and maintained in the ordinary course of business
which are not material in the aggregate, and which would not have a Material
Adverse Effect and which constitute (A) pledges or deposits under worker's
compensation laws, unemployment insurance laws or similar legislation, (B) good
faith deposits in connection with bids, tenders, contracts or leases to which
the Company or any of its Subsidiaries is a party for a purpose other than
borrowing money or obtaining credit, including rent security deposits, (C) liens
imposed by law, such as those of carriers, warehousemen and mechanics, if
payment of the obligation secured thereby is not yet due, (D) Liens securing
taxes, assessments or other governmental charges or levies not yet subject to
penalties for nonpayment, and (E) pledges or deposits to secure public or
statutory obligations of the Company or any of its Subsidiaries, or surety,
customs or appeal bonds to which the Company or any of its Subsidiaries is a
party;
(iii) Liens affecting real property which constitute minor survey
exceptions or defects or irregularities in title, minor encumbrances, easements
or reservations of, or rights of others for, rights of way, sewers, electric
lines, telegraph and telephone lines and other similar purposes, or zoning or
other restrictions as to the use of such real property, provided that all of the
foregoing, in the aggregate, do not at any time materially detract from the
value of said properties or materially impair their use in the operation of the
businesses of the Company or any of its Subsidiaries;
(iv) Liens created pursuant to the Security Documents and Liens
expressly permitted by the Security Documents;
(v) Each Lien described in Schedule 5.2(g) hereto may be suffered
to exist, but no increase in the amount secured thereby shall be permitted; and
(vi) Any Lien created to secure payment of a portion of the
purchase price of, or existing at the time of acquisition of, any tangible fixed
asset acquired by the Company or any of its Subsidiaries may be created or
suffered to exist upon such fixed asset if the outstanding principal amount of
the Indebtedness secured by such Lien does not at any time exceed the purchase
price paid by the Company or such Subsidiary for such fixed asset and the
aggregate principal amount of all Indebtedness secured by such Liens does not
exceed $1,000,000, provided that such Lien does not encumber any other
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asset at any time owned by the Company or such Subsidiary, and provided,
further, that not more than one such Lien shall encumber such fixed asset at any
one time.
(h) Merger; Acquisitions; Etc. Subject to Section 5.2(l), purchase
or otherwise acquire, whether in one or a series of transactions, all or a
substantial portion of the business assets, rights, revenues or property, real,
personal or mixed, tangible or intangible, of any person, or all or a
substantial portion of the capital stock of or other ownership interest in any
other person; nor merge or consolidate or amalgamate with any other person or
take any other action having a similar effect, nor enter into any joint venture
or similar arrangement with any other person, provided, however, that this
Section 5.2(h) shall not prohibit any merger of any Subsidiary into another
Subsidiary or of any Subsidiary into the Company, provided that the Company
shall be the surviving corporation and any merger required to reincorporate the
Company as a Delaware corporation.
(i) Disposition of Assets; Etc. Sell, lease, license, transfer,
assign or otherwise dispose of all or a substantial portion of its business,
assets, rights, revenues or property, real, personal or mixed, tangible or
intangible, whether in one or a series of transactions, other than inventory
sold in the ordinary course of business upon customary credit terms and sales of
scrap or obsolete material or equipment, provided, however, that this Section
5.2(i) shall not prohibit any such sale, lease, license, transfer, assignment or
other disposition if the aggregate book value (disregarding any write-downs of
such book value other than ordinary depreciation and amortization) of all of the
business, assets, rights, revenues and property disposed of after the date of
this Agreement shall be less than $1,000,000 in the aggregate and if,
immediately before and after such transaction, no Default or Event of Default
shall exist or shall have occurred and be continuing.
(j) Nature of Business. Make any substantial change in the nature
of its business from that engaged in on the date of this Agreement or engage in
any other businesses other than those in which it is engaged on the date of this
Agreement.
(k) Dividends and Other Restricted Payments. Make, pay, declare,
authorize or distribute directly or indirectly any of the following: (i) any
dividend, payment or other distribution in respect of any class of its capital
stock, other than any dividend, payment or other distribution from a Subsidiary
to the Company, (ii) any dividend, payment or distribution in connection with
the redemption, purchase, retirement or other acquisition, directly or
indirectly, of any shares of its capital stock, other than any dividend, payment
or other distribution from a Subsidiary to the Company, (iii) any payment,
prepayment or redemption of any Subordinated Debt, whether of principal,
interest or otherwise, or any other payment or arrangement or agreement
providing for the defeasance of any Subordinated Debt, and (iv) any prepayment
or redemption of any Senior Note Debt, whether of principal, interest or
otherwise, or any other payment or arrangement or agreement providing for the
defeasance of any Senior Note Debt other than required prepayment or redemption
payments on the Senior Note Debt as described in the Senior Note Indenture (all
of the foregoing described in the above clauses (i), (ii), (iii) and (iv)
collectively referred to as "Restricted Payments") from the Effective Date
hereof to and including June 30, 1999.
After July 1, 1999, the Company may make, pay, declare, authorize or distribute
directly or indirectly such dividends or Restricted Payments up to $1,000,000 in
any year if both of the following conditions are satisfied, both before any such
dividend or Restricted Payment is made and on a pro forma basis satisfactory to
the Agent after giving effect to any such dividend or Restricted Payment: (x) no
Default or Event of Default shall exist or shall have occurred and be continuing
and (y) the Company shall have the ability to borrow at least $2,000,000 in
Loans under this Agreement. The Company acknowledges and
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agrees that this Section 5.2(k) shall be deemed breached and an Event of Default
shall be deemed to have occurred 2 Business Days prior to the date any payment
of principal, interest or other payment is due on the Subordinated Debt if the
Company is unable to comply with this Section 5.2(k) on a proforma basis as of
the date such payment is to be made. For purposes of this Agreement, "capital
stock" shall include capital stock, whether common, preferred or otherwise, and
any securities exchangeable for or convertible into capital stock and any
warrants, rights or other options to purchase or otherwise acquire capital stock
or such securities.
(l) Investments, Loans and Advances. Purchase or otherwise acquire any
capital stock of or other ownership interest in, or debt securities of or other
evidences of Indebtedness of, any other person; nor make any loan or advance of
any of its funds or property or make any other extension of credit to, or make
any investment or acquire any interest whatsoever in, any other person; nor
incur any Contingent Liability; other than (i) extensions of trade credit made
in the ordinary course of business on customary credit terms and commission,
travel and similar advances made to officers and employees in the ordinary
course of business, including for personal computers, (ii) commercial paper of
any United States issuer having the highest rating then given by Moody's
Investors Service, Inc., or Standard & Poor's Rating Group, direct obligations
of and obligations fully guaranteed by the United States of America or any
agency or instrumentality thereof, or certificates of deposit of any commercial
bank which is a member of the Federal Reserve System and which has capital,
surplus and undivided profit (as shown on its most recently published statement
of condition) aggregating not less than $100,000,000, (iii) those investments,
loans, advances and other transactions described in Schedule 5.2(l) hereto,
having the same terms as existing on the date of this Agreement, but no
extension or renewal thereof shall be permitted and, (iv) investments, loans and
advances from a Subsidiary to the Company or from the Company to a Guarantor.
(m) Transactions with Affiliates. Enter into, become a party to, or
become liable in respect of, any contract or undertaking with any Affiliate,
other than those shown on Schedule 5.2(m) hereto, except in the ordinary course
of business and on terms not less favorable to the Company or such Subsidiary
than those which could be obtained if such contract or undertaking were an arms
length transaction with a person other than an Affiliate. The Company agrees
that it will not pay, or allow any Subsidiaries to pay, whether directly or
indirectly, any amounts to MS or Holdings pursuant to the management agreement
referenced on Schedule 5.2(m) or under any similar agreement or arrangement if
any Event of Default exists hereunder or would be caused by any such payment,
and MS and Holdings agree not to receive any such payment.
(n) Modification of Subordinated Debt and Senior Note Debt. Amend or
modify, or consent or agree to any amendment or modification of, (i) any Senior
Note Document that increases the interest rate, makes the covenants or defaults
thereunder more burdensome or shortens any maturity thereunder or (ii) any
Subordinated Debt Document, in each case without the prior written consent of
the Required Lenders.
(o) Negative Pledge Limitation. Enter into any agreement, other than
the Senior Notes Indenture as in effect on the Effective Date and without giving
effect to any subsequent amendment or modification thereof, with any person
other than the Lenders, which prohibits or limits the ability of the Company or
any Guarantor to create, incur, assume or suffer to exist any lien upon any of
its assets, rights, revenues or property, real, personal or mixed, tangible or
intangible, whether now owned or hereafter acquired.
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(p) Inconsistent Agreements. Enter into any agreement containing any
provision which would be violated or breached by any Loan Document or any of the
transactions contemplated thereby or by performance by the Company or any of its
Subsidiaries or any Guarantor of its obligations in connection therewith.
(q) Accounting Changes. The Company shall not change its fiscal year or
make any significant changes (i) in accounting treatment and reporting practices
except as permitted by generally accepted accounting principles and disclosed to
the Lenders, or (ii) in tax reporting treatment except as permitted by law and
disclosed to the Lenders.
(r) Additional Covenants. If at any time the Company or any Guarantor
shall enter into or be a party to any instrument or agreement, including all
such instruments or agreements in existence as of the date hereof and all such
instruments or agreements entered into after the date hereof, relating to or
amending any terms or conditions applicable to any of its Indebtedness which
includes covenants, terms, conditions or defaults not substantially provided for
in this Agreement or more favorable to the lender or lenders thereunder than
those provided for in this Agreement, then the Company shall promptly so advise
the Agent and the Lenders. Thereupon, if the Agent shall request, upon notice to
the Company, the Agent and the Lenders shall enter into an amendment to this
Agreement or an additional agreement (as the Agent may request), providing for
substantially the same covenants, terms, conditions and defaults as those
provided for in such instrument or agreement to the extent required and as may
be selected by the Agent. In addition to the foregoing, any covenants, terms,
conditions or defaults in the Subordinated Debt Documents or in the Senior Note
Documents not substantially provided for in this Agreement or more favorable to
the holders of the Subordinated Debt or the Senior Note Debt, as the case may
be, are hereby incorporated by reference into this Agreement to the same extent
as if set forth fully herein, and no subsequent amendment, waiver or
modification thereof shall affect any such covenants, terms, conditions or
defaults as incorporated herein. Without limiting the foregoing, each of MS and
Holdings agree that they will not amend or modify the terms of any subordinated
debt issued by them, including without limitation the junior subordinated
promissory note due 2007 issued by Holdings, if such amendment or modification
would shorten the due date of any payment due thereunder or increase the amount
of any payment due thereunder.
ARTICLE 6
DEFAULT
6.1 Events of Default. The occurrence of any one of the following
events or conditions shall be deemed an "Event of Default" hereunder unless
waived pursuant to Section 9.1:
(a) Nonpayment. The Company shall fail to pay when due or within
five days of when due any principal of the Notes, or any reimbursement
obligation under Section 3.3 (whether by deemed disbursement of a Loan or
otherwise), or any interest on the Notes or any fees or any other amount payable
hereunder; or
(b) Misrepresentation. Any representation or warranty made by the
Company or any Guarantor in any Loan Document or any other certificate, report,
financial statement or other document furnished by or on behalf of the Company
or any Guarantor in connection with this Agreement, shall prove to have been
incorrect in any material respect when made or deemed made; or
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(c) Certain Covenants. The Company or any Guarantor shall fail to
perform or observe any term, covenant or agreement contained in Article V (other
than Section 5.1(a)) hereof; or
(d) Other Defaults. The Company or any Guarantor shall fail to
perform or observe any other term, covenant or agreement contained in this
Agreement or in any Security Document, and any such failure shall remain
unremedied for 30 calendar days after notice thereof shall have been given to
the Company or such Guarantor, as the case may be, by the Agent (or such longer
or shorter period of time as may be specified in such Security Document); or
(e) Cross Default. The Company or any Guarantor or any of their
respective Subsidiaries shall fail to pay any part of the principal of, the
premium, if any, or the interest on, or any other payment of money due under any
of its Indebtedness (other than Indebtedness hereunder), beyond any period of
grace provided with respect thereto, which individually or together with other
such Indebtedness as to which any such failure exists has an aggregate
outstanding principal amount in excess of $1,000,000; or if the Company or any
Guarantor or any of their respective Subsidiaries fails to perform or observe
any other term, covenant or agreement contained in, or if any other event or
condition occurs or exists under, any agreement, document or instrument
evidencing or securing any such Indebtedness having such aggregate outstanding
principal amount, or under which any such Indebtedness was incurred, issued or
created, beyond any period of grace, if any, provided with respect thereto if
the effect of such failure is either (i) to cause, or permit the holders of such
Indebtedness (or a trustee on behalf of such holders) to cause, any payment in
respect of such Indebtedness to become due prior to its due date or (ii) to
permit the holders of such Indebtedness (or a trustee on behalf of such holders)
to elect a majority of the board of directors of the Company; or
(f) Judgments. One or more judgments or orders for the payment of
money in an aggregate amount of $1,000,000, other than those covered by
insurance (provided that only such a judgments for which the relevant insurance
company has accepted coverage thereof shall be considered covered by insurance)
shall be rendered against the Company or any Guarantor or any of their
respective Subsidiaries, or any other judgment or order (whether or not for the
payment of money) shall be rendered against or shall affect the Company or any
Guarantor or any of their respective Subsidiaries which causes or could cause a
Material Adverse Effect, and either (i) such judgment or order shall have
remained unsatisfied and the Company or such Guarantor or such Subsidiary shall
not have taken action necessary to stay enforcement thereof by reason of pending
appeal or otherwise, prior to the expiration of the applicable period of
limitations for taking such action or, if such action shall have been taken, a
final order denying such stay shall have been rendered, or (ii) enforcement
proceedings shall have been commenced by any creditor upon any such judgment or
order; or
(g) ERISA. The occurrence of any of the following events, if such
event could alone or in combination with any other such event or events have a
Material Adverse Effect: a Reportable Event that results in or could result in
material liability of the Company, or any Guarantor to the PBGC or to any Plan
which could constitute grounds for termination of any Plan by the PBGC or for
the appointment by the appropriate United States District Court of a trustee to
administer any Plan or the filing by the Company, any Guarantor, or any ERISA
Affiliate of a notice of intent to terminate a Plan or the institution of other
proceedings to terminate a Plan; or the Company, any Guarantor, or any ERISA
Affiliate shall fail to pay when due any material liability to the PBGC or to a
Plan; or the PBGC shall have instituted proceedings to terminate, or to cause a
trustee to be appointed to administer, any Plan; or any person engages in a
Prohibited Transaction with respect to any Plan which results in or could result
in material liability of the Company, or any Guarantor; or failure by the
Company, any Guarantor, or any ERISA Affiliate to make a required installment or
other payment to any Plan within the meaning of
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Section 302(f) of ERISA or Section 412(n) of the Code that results in or could
result in material liability of the Company, or any Guarantor to the PBGC or any
Plan; or the withdrawal of the Company, any Guarantor, or any ERISA Affiliate
from a Plan during a plan year in which it was a "substantial employer" as
defined in Section 4001(a)(2) of ERISA; or the Company, any Guarantor or any
ERISA Affiliate becomes an employer with respect to any Multiemployer Plan
without the prior written consent of the Required Lenders; or
(h) Insolvency, Etc. The Company, any Guarantor or any of their
respective Subsidiaries shall be dissolved or liquidated (or any judgment, order
or decree therefor shall be entered), or shall generally not pay its debts as
they become due, or shall admit in writing its inability to pay its debts
generally, or shall make a general assignment for the benefit of creditors, or
shall institute, or there shall be instituted against the Company, any Guarantor
or any of their respective Subsidiaries, any proceeding or case seeking to
adjudicate it a bankrupt or insolvent or seeking liquidation, winding up,
reorganization, arrangement, adjustment, protection, relief or composition of it
or its debts under any law relating to bankruptcy, insolvency or reorganization
or relief or protection of debtors or seeking the entry of an order for relief,
or the appointment of a receiver, trustee, custodian or other similar official
for it or for any substantial part of its assets, rights, revenues or property,
and, if such proceeding is instituted against the Company, such Guarantor or
such Subsidiary and is being contested by the Company, such Guarantor or such
Subsidiary, as the case may be, in good faith by appropriate proceedings, such
proceeding shall remain undismissed or unstayed for a period of 60 days; or the
Company, such Guarantor or such Subsidiary shall take any action (corporate or
other) to authorize any of the actions described above in this subsection; or
(i) Loan Documents. Any event of default described in any Loan Document
shall have occurred and be continuing, or any material provision of Article VIII
hereof or of any Loan Document shall at any time for any reason cease to be
valid and binding and enforceable against any obligor thereunder, or the
validity, binding effect or enforceability thereof shall be contested by any
person, or any obligor, shall deny that it has any or further liability or
obligation thereunder, or any Loan Document shall be terminated, invalidated or
set aside, or be declared ineffective or inoperative or in any way cease to give
or provide to the Lenders and the Agent the benefits purported to be created
thereby.
(j) Change in Control. Any Change in Control shall occur.
6.2 Remedies.
(a) Upon the occurrence and during the continuance of any Event of
Default, the Agent may and, upon being directed to do so by the Required
Lenders, shall by notice to the Company (i) terminate the Commitments or (ii)
declare the outstanding principal of, and accrued interest on, the Notes, all
unpaid reimbursement obligations in respect of drawings under Letters of Credit
and all other amounts owing under this Agreement to be immediately due and
payable, or (iii) demand immediate delivery of cash collateral, and the Company
agrees to deliver such cash collateral upon demand, in an amount equal to the
maximum amount that may be available to be drawn at any time prior to the stated
expiry of all outstanding Letters of Credit, or any one or more of the
foregoing, whereupon the Commitments shall terminate forthwith and all such
amounts, including such cash collateral, shall become immediately due and
payable, provided that in the case of any event or condition described in
Section 6.1(h) with respect to the Company or any Guarantor, the Commitments
shall automatically terminate forthwith and all such amounts, including such
cash collateral, shall automatically become immediately due and payable without
notice; in all cases without demand, presentment, protest, diligence, notice of
dishonor or other formality, all of which are hereby expressly waived. Such cash
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collateral delivered in respect of outstanding Letters of Credit shall be
deposited in a special cash collateral account to be held by the Agent as
collateral security for the payment and performance of the Company's obligations
under this Agreement to the Lenders and the Agent.
(b) The Agent may and, upon being directed to do so by the Required
Lenders, shall, in addition to the remedies provided in Section 6.2(a), exercise
and enforce any and all other rights and remedies available to it, whether
arising under any Loan Document or under applicable law, in any manner deemed
appropriate by the Agent, including suit in equity, action at law, or other
appropriate proceedings, whether for the specific performance (to the extent
permitted by law) of any covenant or agreement contained in any Loan Document or
in aid of the exercise of any power granted in any Loan Document.
(c) Upon the occurrence and during the continuance of any Event of
Default, each Lender may at any time and from time to time, without notice to
the Company or any Guarantor (any requirement for such notice being expressly
waived by the Company and each Guarantor) set off and apply against any and all
of the obligations of the Company and each Guarantor now or hereafter existing
under this Agreement, whether owing to such Lender or any other Lender or the
Agent, any and all deposits (general or special, time or demand, provisional or
final) at any time held and other indebtedness at any time owing by such Lender
to or for the credit or the account of the Company or any Guarantor and any
property of the Company or any Guarantor from time to time in possession of such
Lender, irrespective of whether or not such Lender shall have made any demand
hereunder and although such obligations may be contingent and unmatured. Each of
the Company and the Guarantors hereby grants to the Lenders and the Agent a lien
on and security interest in all such deposits, indebtedness and property as
collateral security for the payment and performance of the obligations of the
Company and each Guarantor under this Agreement. The rights of such Lender under
this Section 6.2(c) are in addition to other rights and remedies (including,
without limitation, other rights of setoff) which such Lender may have.
ARTICLE 7
THE AGENT AND THE BANKS
7.1 Appointment and Authorization. Each Lender hereby irrevocably
appoints and authorizes the Agent to take such action as agent on its behalf and
to exercise such powers under the Loan Documents as are delegated to the Agent
by the terms hereof or thereof, together with all such powers as are reasonably
incidental thereto. The provisions of this Article VII are solely for the
benefit of the Agent and the Lenders, and neither the Company nor any Guarantor
shall have any rights as a third party beneficiary of any of the provisions
hereof. In performing its functions and duties under this Agreement, the Agent
shall act solely as agent of the Lenders and does not assume and shall not be
deemed to have assumed any obligation towards or relationship of agency or trust
with or for the Company.
7.2 Agent and Affiliates. NBD Bank in its capacity as a Lender
hereunder shall have the same rights and powers hereunder as any other Lender
and may exercise or refrain from exercising the same as though it were not the
Agent. NBD Bank and its affiliates may (without having to account therefor to
any Lender) accept deposits from, lend money to, and generally engage in any
kind of banking, trust, financial advisory or other business with the Company,
any Guarantor or any of their respective Subsidiaries as if it were not acting
as Agent hereunder, and may accept fees and other consideration therefor without
having to account for the same to the Lenders.
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7.3 Scope of Agent's Duties. The Agent shall have no duties or
responsibilities except those expressly set forth herein, and shall not, by
reason of any Loan Document, have a fiduciary relationship with any Lender, and
no implied covenants, responsibilities, duties, obligations or liabilities shall
be read into any Loan Document or shall otherwise exist against the Agent. As to
any matters not expressly provided for by any Loan Document the Agent shall not
be required to exercise any discretion or take any action, but the Agent shall
take such action or omit to take any action pursuant to the reasonable written
instructions of the Required Lenders and may request instructions from the
Required Lenders. The Agent shall in all cases be fully protected in acting, or
in refraining from acting, pursuant to the written instructions of the Required
Lenders (or all of the Lenders, as the case may be, in accordance with the
requirements of this Agreement), which instructions and any action or omission
pursuant thereto shall be binding upon all of the Lenders; provided, however,
that the Agent shall not be required to act or omit to act if, in the judgment
of the Agent, such action or omission may expose the Agent to personal liability
or is contrary to the Loan Documents or applicable law.
7.4 Reliance by Agent. The Agent shall be entitled to rely upon any
certificate, notice, document or other communication (including any cable,
telegram, telex, facsimile transmission or oral communication) believed by it to
be genuine and correct and to have been sent or given by or on behalf of a
proper person. The Agent may treat the payee of any Note as the holder thereof
unless and until the Agent receives written notice of the assignment thereof
pursuant to the terms of this Agreement signed by such payee and the Agent
receives the written agreement of the assignee that such assignee is bound
hereby to the same extent as if it had been an original party hereto. The Agent
may employ agents (including without limitation collateral agents) and may
consult with legal counsel (who may be counsel for the Company), independent
public accountants and other experts selected by it and shall not be liable to
the Lenders, except as to money or property received by it or its authorized
agents, for the negligence or misconduct of any such agent selected by it with
reasonable care or for any action taken or omitted to be taken by it in good
faith in accordance with the advice of such counsel, accountants or experts.
7.5 Default. The Agent shall not be deemed to have knowledge of the
occurrence of any Default or Event of Default, unless the Agent has received
written notice from a Lender or the Company or any Guarantor specifying such
Default or Event of Default and stating that such notice is a "Notice of
Default". In the event that the Agent receives such a notice, the Agent shall
give written notice thereto to the Lenders.
7.6 Liability of Agent. Neither the Agent nor any of its directors,
officers, agents, or employees shall be liable to the Lenders for any action
taken or not taken by it or them in connection herewith with the consent or at
the request of the Required Lenders or in the absence of its or their own gross
negligence or willful misconduct. Neither the Agent nor any of its directors,
officers, agents or employees shall be responsible for or have any duty to
ascertain, inquire into or verify (i) any recital, statement, warranty or
representation contained in this Agreement, any Note or any Security Document,
or in any certificate, report, financial statement or other document furnished
in connection with this Agreement, (ii) the performance or observance of any of
the covenants or agreements of the Company or any Guarantor, (iii) the
satisfaction of any condition specified in Article II hereof, or (iv) the
validity, effectiveness, legal enforceability, value or genuineness of the Loan
Documents or any collateral subject thereto or any other instrument or document
furnished in connection herewith.
7.7 Nonreliance on Agent and Other Lenders. Each Lender acknowledges
and agrees that it has, independently and without reliance on the Agent or any
other Lender, and based on such documents and information as it has deemed
appropriate, made its own credit analysis of the Company and the
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Guarantors and decision to enter into this Agreement and that it will,
independently and without reliance upon the Agent or any other Lender, and based
on such documents and information as it shall deem appropriate at the time,
continue to make its own analysis and decision in taking or not taking action
under this Agreement. The Agent shall not be required to keep itself informed as
to the performance or observance by the Company or any Guarantor of the Loan
Documents or any other documents referred to or provided for herein or to
inspect the properties or books of the Company or any Guarantor and, except for
notices, reports and other documents and information expressly required to be
furnished to the Lenders by the Agent hereunder, the Agent shall not have any
duty or responsibility to provide any Lender with any information concerning the
affairs, financial condition or business of the Company, any Guarantor or any of
their respective Subsidiaries which may come into the possession of the Agent or
any of its affiliates.
7.8 Indemnification. The Lenders agree to indemnify the Agent (to the
extent not reimbursed by the Company or any Guarantor, but without limiting any
obligation of the Company or any Guarantor to make such reimbursement), ratably
according to the respective principal amounts of the Advances then outstanding
made by each of them (or if no Advances are at the time outstanding, ratably
according to the respective amounts of their Commitments), from and against any
and all claims, damages, losses, liabilities, costs or expenses of any kind or
nature whatsoever (including, without limitation, fees and disbursements of
counsel) which may be imposed on, incurred by, or asserted against the Agent in
any way relating to or arising out of any Loan Document or the transactions
contemplated hereby or any action taken or omitted by the Agent under any Loan
Document, provided, however, that no Lender shall be liable for any portion of
such claims, damages, losses, liabilities, costs or expenses resulting from the
Agent's gross negligence or willful misconduct. Without limitation of the
foregoing, each Lender agrees to reimburse the Agent promptly upon demand for
its ratable share of any out-of-pocket expenses (including without limitation
fees and expenses of counsel) incurred by the Agent in connection with the
preparation, execution, delivery, administration, modification, amendment or
enforcement (whether through negotiations, legal proceedings or otherwise) of,
or legal advice in respect of rights or responsibilities under, this Agreement,
to the extent that the Agent is not reimbursed for such expenses by the Company
or any Guarantor, but without limiting the obligation of the Company or any
Guarantor to make such reimbursement. Each Lender agrees to reimburse the Agent
promptly upon demand for its ratable share of any amounts owing to the Agent by
the Lenders pursuant to this Section. If the indemnity furnished to the Agent
under this Section shall, in the judgment of the Agent, be insufficient or
become impaired, the Agent may call for additional indemnity from the Lenders
and cease, or not commence, to take any action until such additional indemnity
is furnished.
7.9 Successor Agent. The Agent may resign as such at any time upon ten
days' prior written notice to the Company and the Lenders. In the event of any
such resignation, the Required Lenders shall, by an instrument in writing
delivered to the Company and the Agent, appoint a successor, which shall be a
commercial bank organized under the laws of the United States or any State
thereof and having a combined capital and surplus of at least $500,000,000. If a
successor is not so appointed or does not accept such appointment before the
Agent's resignation becomes effective, the retiring Agent may appoint a
temporary successor to act until such appointment by the Required Lenders is
made and accepted or if no such temporary successor is appointed as provided
above by the retiring Agent, the Required Lenders shall thereafter perform all
the duties of the Agent hereunder until such appointment by the Required Lenders
is made and accepted. Any successor to the Agent shall execute and deliver to
the Company and the Lenders an instrument accepting such appointment and
thereupon such successor Agent, without further act, deed, conveyance or
transfer shall become vested with all of the properties, rights, interests,
powers, authorities and obligations of its predecessor hereunder with like
effect as if originally named as Agent hereunder. Upon request of such successor
Agent, the Company and the
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retiring Agent shall execute and deliver such instruments of conveyance,
assignment and further assurance and do such other things as may reasonably be
required for more fully and certainly vesting and confirming in such successor
Agent all such properties, rights, interests, powers, authorities and
obligations. The provisions of this Article VII shall thereafter remain
effective for such retiring Agent with respect to any actions taken or omitted
to be taken by such Agent while acting as the Agent hereunder.
7.10 Sharing of Payments. The Lenders agree among themselves that, in
the event that any Lender shall obtain payment in respect of any Advance or any
other obligation owing to the Lenders under this Agreement through the exercise
of a right of set-off, banker's lien, counterclaim or otherwise in excess of its
ratable share of payments received by all of the Lenders on account of the
Advances and other obligations (or if no Advances are outstanding, ratably
according to the respective amounts of the Commitments), such Lender shall
promptly purchase from the other Lenders participations in such Advances and
other obligations in such amounts, and make such other adjustments from time to
time, as shall be equitable to the end that all of the Lenders share such
payment in accordance with such ratable shares. The Lenders further agree among
themselves that if payment to a Lender obtained by such Lender through the
exercise of a right of set-off, banker's lien, counterclaim or otherwise as
aforesaid shall be rescinded or must otherwise be restored, each Lender which
shall have shared the benefit of such payment shall, by repurchase of
participations theretofore sold, return its share of that benefit to each Lender
whose payment shall have been rescinded or otherwise restored. The Company and
the Guarantors each agrees that any Lender so purchasing such a participation
may, to the fullest extent permitted by law, exercise all rights of payment,
including set-off, banker's lien or counterclaim, with respect to such
participation as fully as if such Lender were a holder of such Advance or other
obligation in the amount of such participation. The Lenders further agree among
themselves that, in the event that amounts received by the Lenders and the Agent
hereunder are insufficient to pay all such obligations or insufficient to pay
all such obligations when due, the fees and other amounts owing to the Agent in
such capacity shall be paid therefrom before payment of obligations owing to the
Lenders under this Agreement. Except as otherwise expressly provided in this
Agreement, if any Lender or the Agent shall fail to remit to the Agent or any
other Lender an amount payable by such Lender or the Agent to the Agent or such
other Lender pursuant to this Agreement on the date when such amount is due,
such payments shall be made together with interest thereon for each date from
the date such amount is due until the date such amount is paid to the Agent or
such other Lender at a rate per annum equal to the rate at which borrowings are
available to the payee in its overnight federal funds market. It is further
understood and agreed among the Lenders and the Agent that if the Agent shall
engage in any other transactions with the Company and shall have the benefit of
any collateral or security therefor which does not expressly secure the
obligations arising under this Agreement except by virtue of a so-called dragnet
clause or comparable provision, the Agent shall be entitled to apply any
proceeds of such collateral or security first in respect of the obligations
arising in connection with such other transaction before application to the
obligations arising under this Agreement.
7.11 Withholding Tax Exemption. At least five Business Days prior to
the first date on which interest or fees are payable hereunder for the account
of any Lender, each Lender that is not incorporated under the laws of the United
States of America, or a state thereof, agrees that it will deliver to each of
the Company and the Agent two duly completed copies of United States Internal
Revenue Service Form 1001 or 4224, certifying in either case that such Lender is
entitled to receive payments under this Agreement and the Notes without
deduction or withholding of any United States federal income taxes. Each Lender
which so delivers a Form 1001 or 4224 further undertakes to deliver to each of
the Company and the Agent two additional copies of such form (or a successor
form) on or before the date that such form expires (currently, three successive
calendar years for Form 1001 and one calendar year
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for Form 4224) or becomes obsolete or after the occurrence of any event
requiring a change in the most recent forms so delivered by it, and such
amendments thereto or extensions or renewals thereof as may be reasonably
requested by the Company or the Agent, in each case certifying that such Lender
is entitled to receive payments under this Agreement and the Notes without
deduction or withholding of any United States federal income taxes, unless an
event (including without limitation any change in treaty, law or regulation) has
occurred prior to the date on which any such delivery would otherwise be
required which renders all such forms inapplicable or which would prevent such
Lender from duly completing and delivering any such form with respect to it and
such Lender advises the Company and the Agent that it is not capable of
receiving payments without any deduction or withholding of United States federal
income tax. Each such Lender delivering such forms shall indemnify the Company
and the Agent, and hold harmless the Company and the Agent from, all losses and
damages suffered by the Company or the Agent for any inaccuracies in any such
forms.
ARTICLE 8
GUARANTY
As an inducement to the Lenders and the Agent to enter into the
transactions contemplated by this Agreement, each Guarantor agrees with the
Lenders and the Agent as follows:
8.1 Guarantee of Obligations.
(a) Each Guarantor hereby (i) guarantees, as principal obligor and
not as surety only, to the Lenders the prompt payment of the principal of and
any and all accrued and unpaid interest (including interest which otherwise may
cease to accrue by operation of any insolvency law, rule, regulation or
interpretation thereof) on the Advances and all other obligations of the Company
to the Lenders and the Agent under the Loan Documents when due, whether by
scheduled maturity, acceleration or otherwise, all in accordance with the terms
of the Loan Documents, including, without limitation, default interest,
indemnification payments and all reasonable costs and expenses incurred by the
Lenders and the Agent in connection with enforcing any obligations of the
Company hereunder, including without limitation the reasonable fees and
disbursements of counsel, (ii) guarantees the prompt and punctual performance
and observance of each and every term, covenant or agreement contained in this
Agreement and the Notes to be performed or observed on the part of the Company,
(iii) guarantees, as principal obligor not as surety only, to the Lenders the
prompt payment of any obligation or other liability pursuant to any Hedging
Contract among the Company or any Guarantor with any Lender, and (iv) agrees to
make prompt payment, on demand, of any and all reasonable costs and expenses
incurred by the Lenders or the Agent in connection with enforcing the
obligations of the Guarantors hereunder, including, without limitation, the
reasonable fees and disbursements of counsel, in all cases described in this
clause (a) whether now owing or outstanding or at any time hereafter owing or
outstanding (all of the foregoing being collectively referred to as the
"Guaranteed Obligations").
(b) If for any reason any duty, agreement or obligation of the
Company contained in this Agreement shall not be performed or observed by the
Company as provided therein, or if any amount payable under or in connection
with this Agreement shall not be paid in full when the same becomes due and
payable, each Guarantor undertakes to perform or cause to be performed promptly
each of such duties, agreements and obligations and to pay forthwith each such
amount to the Agent for the account of the Lenders regardless of any defense or
setoff or counterclaim which the Company may have or assert, and regardless of
any other condition or contingency.
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8.2 Nature of Guaranty. The obligations of the Guarantors hereunder
constitute an absolute and unconditional and irrevocable guaranty of payment and
not a guaranty of collection and are wholly independent of and in addition to
other rights and remedies of the Lenders and the Agent and are not contingent
upon the pursuit by the Lenders and the Agent of any such rights and remedies,
such pursuit being hereby waived by the Guarantors.
8.3 Waivers and Other Agreements. Each Guarantor hereby unconditionally
(a) waives any requirement that the Lenders or the Agent, upon the occurrence of
an Event of Default first make demand upon, or seek to enforce remedies against
the Company before demanding payment under or seeking to enforce the obligations
of the Guarantors hereunder, (b) covenants that the obligations of the
Guarantors hereunder will not be discharged except by complete performance of
all obligations of the Company contained in the Loan Documents, (c) agrees that
the obligations of the Guarantors hereunder shall remain in full force and
effect without regard to, and shall not be affected or impaired, without
limitation, by any invalidity, irregularity or unenforceability in whole or in
part of this Agreement or the Notes, or any limitation on the liability of the
Company thereunder, or any limitation on the method or terms of payment
thereunder which may or hereafter be caused or imposed in any manner whatsoever
(including, without limitation, usury laws), (d) waives diligence, presentment
and protest with respect to, and any notice of default or dishonor in the
payment of any amount at any time payable by the Company under or in connection
with the Loan Documents, and further waives any requirement of notice of
acceptance of, or other formality relating to, the obligations of the Guarantors
hereunder and (e) agrees that the Guaranteed Obligations shall include any
amounts paid by the Company to the Lenders or the Agent which may be required to
be returned to the Company or to its representative or to a trustee, custodian
or receiver for the Company, and this Guaranty shall continue to be effective,
or be reinstated, as the case may be, with respect to any amounts which may be
required to be so returned.
8.4 Obligations Absolute. The obligations, covenants, agreements and
duties of the Guarantors under this Agreement shall not be released, affected or
impaired by any of the following whether or not undertaken with notice to or
consent of the Guarantors: (a) an assignment or transfer, in whole or in part,
of the Advances made to the Company or of this Agreement or any Note although
made without notice to or consent of the Guarantors, or (b) any waiver by any
Lender or the Agent or by any other person, of the performance or observance by
the Company of any of the agreements, covenants, terms or conditions contained
in this Agreement or in the other Loan Documents, or (c) any indulgence in or
the extension of the time for payment by the Company of any amounts payable
under or in connection with this Agreement or any other Loan Document, or of the
time for performance by the Company of any other obligations under or arising
out of this Agreement or any other Loan Document, or the extension or renewal
thereof, or (d) the modification, amendment or waiver (whether material or
otherwise) of any duty, agreement or obligation of the Company set forth in this
Agreement or any other Loan Document (the modification, amendment or waiver from
time to time of this Agreement and the other Loan Documents being expressly
authorized without further notice to or consent of the Guarantors), or (e) the
voluntary or involuntary liquidation, sale or other disposition of all or
substantially all of the assets of the Company or any receivership, insolvency,
bankruptcy, reorganization, or other similar proceedings, affecting the Company
or any of its assets, or (f) the merger or consolidation of the Company or the
Guarantors with any other person, or (g) the release of discharge of the Company
or the Guarantors from the performance or observance of any agreement, covenant,
term or condition contained in this Agreement or any other Loan Document, by
operation of law, or (h) any other cause whether similar or dissimilar to the
foregoing which would release, affect or impair the obligations, covenants,
agreements or duties of the Guarantors hereunder. The Guaranty pursuant to this
Article VIII shall be released, subject to reinstatement under Section 8.3(e),
when all Guaranteed
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Obligations have been irrevocably paid in immediately available funds and all
Commitments, Letters of Credit and Hedging Contracts have expired or been
terminated.
8.5 No Investigation by Lenders or Agent. Each Guarantor hereby waives
unconditionally any obligation which, in the absence of such provision, the
Lenders or the Agent might otherwise have to investigate or to assure that there
has been compliance with the law of any jurisdiction with respect to the
Guaranteed Obligations recognizing that, to save both time and expense, each
Guarantor has requested that the Lenders and the Agent not undertake such
investigation. Each Guarantor hereby expressly confirms that the obligations of
such Guarantor hereunder shall remain in full force and effect without regard to
compliance or noncompliance with any such law and irrespective of any
investigation or knowledge of any Lender or the Agent of any such law.
8.6 Indemnity. As a separate, additional and continuing obligation,
each Guarantor unconditionally and irrevocably undertakes and agrees with the
Lenders and the Agent that, should the Guaranteed Obligations not be recoverable
from the Guarantors under Section 8.1 for any reason whatsoever (including,
without limitation, by reason of any provision of any Loan Document being or
becoming void, unenforceable, or otherwise invalid under any applicable law)
then, notwithstanding any knowledge thereof by any Lender or the Agent at any
time, each Guarantor as sole, original and independent obligor, upon demand by
the Agent, will make payment to the Agent for the account of the Lenders and the
Agent of the Guaranteed Obligations by way of a full indemnity in such currency
and otherwise in such manner as is provided in this Agreement and the Notes.
8.7 Subordination, Subrogation, Etc. Each Guarantor agrees that any
present or future indebtedness, obligations or liabilities of the Company to any
Guarantor shall be fully subordinate and junior in right and priority of payment
to any present or future indebtedness, obligations or liabilities of the Company
to the Lenders and the Agent. Each Guarantor waives any right of subrogation to
the rights of any Lender or the Agent against the Company or any other person
obligated for payment of the Guaranteed Obligations and any right of
reimbursement or indemnity whatsoever arising or accruing out of any payment
which any Guarantor may make pursuant to this Agreement and the Notes, and any
right of recourse to security for the debts and obligations of the Company,
unless and until all Guaranteed Obligations shall have been paid in full.
8.8 Waiver. To the extent that it lawfully may, each Guarantor agrees
that it will not at any time insist upon or plead, or in any manner whatsoever
claim or take any benefit or advantage of any applicable present or future stay,
extension or moratorium law, which may affect observance or performance of the
provisions of the Loan Documents; nor will it claim, take or insist upon any
benefit or advantage of any present or future law providing for the evaluation
or appraisal of any security for its obligations hereunder or the Company under
the Loan Documents prior to any sale or sales thereof which may be made under or
by virtue of any instrument governing the same; nor will it, after any such sale
or sales claim or exercise any right, under any applicable law, to redeem any
portion of such security so sold.
ARTICLE 9
MISCELLANEOUS
9.1 Amendments, Etc.
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(a) No amendment, modification, termination or waiver of any provision
of any Loan Document nor any consent to any departure therefrom shall be
effective unless the same shall be in writing and signed by the Company and
Required Lenders and, to the extent any rights or duties of the Agent may be
affected thereby, the Agent, provided, however, that no such amendment,
modification, termination, waiver or consent shall, without the consent of the
Agent and all of the Lenders, (i) authorize or permit the extension of time for,
or any reduction of the amount of, any payment of the principal of, or interest
on, the Notes or any Letter of Credit reimbursement obligation, or any fees or
other amount payable hereunder, (ii) amend, extend or terminate the respective
Commitments of any Lender set forth on the signature pages hereof or the
definition of Required Lenders, or (iii) provide for the discharge of any
material Guarantor or release all or substantially all of the collateral subject
to the Security Documents.
(b) Any such amendment, waiver or consent shall be effective only in
the specific instance and for the specific purpose for which given.
(c) Notwithstanding anything herein to the contrary, no Lender that is
in default of any of its obligations to fund any amount due under this Agreement
shall be entitled to vote (whether to consent or to withhold its consent) with
respect to any amendment, modification, termination or waiver of any provision
of this Agreement or any departure therefrom or any direction from the Lenders
to the Agent, and, for purposes of determining the Required Lenders at any time
when any Lender is in default under this Agreement, the Commitments and Advances
of such defaulting Lenders shall be disregarded.
9.2 Notices.
(a) Except as otherwise provided in Section 9.2(c) hereof, all notices
and other communications hereunder shall be in writing and shall be delivered or
sent to the Company, Guarantors, the Agent and the Lenders at the respective
addresses for notices set forth on the signatures pages hereof, or to such other
address as may be designated by the Company, any Guarantor, the Agent or any
Lender by notice to the other parties hereto. All notices and other
communications shall be deemed to have been given at the time of actual delivery
thereof to such address, or, unless sooner delivered, (i) if sent by certified
or registered mail, postage prepaid, to such address, on the third day after the
date of mailing, (ii) if sent by telex, upon receipt of the appropriate
answerback, or (iii) if sent by facsimile transmission, upon confirmation of
receipt by telephone at the number specified for confirmation, provided,
however, that notices to the Agent shall not be effective until received.
(b) Notices by the Company to the Agent with respect to terminations or
reductions of the Commitments pursuant to Section 2.2, requests for Advances
pursuant to Section 2.4, requests for continuations or conversions of Loans
pursuant to Section 2.7 and notices of prepayment pursuant to Section 3.1 shall
be irrevocable and binding on the Company.
(c) Any notice to be given by the Company to the Agent pursuant to
Sections 2.4, 2.7 or 3.1 and any notice to be given by the Agent or any Lender
hereunder, may be given by telephone, and all such notices given by the Company
must be immediately confirmed in writing in the manner provided in Section
9.2(a). Any such notice given by telephone shall be deemed effective upon
receipt thereof by the party to whom such notice is to be given. The Company and
the Guarantors shall indemnify and hold harmless the Lenders and the Agent from
any and all losses, damages, liabilities and claims arising from their good
faith reliance on any such telephone notice.
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(d) No Waiver By Conduct; Remedies Cumulative. No course of dealing on
the part of the Agent or any Lender, nor any delay or failure on the part of the
Agent or any Lender in exercising any right, power or privilege hereunder shall
operate as a waiver of such right, power or privilege or otherwise prejudice the
Agent's or such Lender's rights and remedies hereunder; nor shall any single or
partial exercise thereof preclude any further exercise thereof or the exercise
of any other right, power or privilege. No right or remedy conferred upon or
reserved to the Agent or any Lender under this Agreement, the Notes or any
Security Document is intended to be exclusive of any other right or remedy, and
every right and remedy shall be cumulative and in addition to every other right
or remedy granted thereunder or now or hereafter existing under any applicable
law. Every right and remedy granted by this Agreement, the Notes or any Security
Document or by applicable law to the Agent or any Lender may be exercised from
time to time and as often as may be deemed expedient by the Agent or any Lender
and, unless contrary to the express provisions of this Agreement, the Notes or
any Security Document, irrespective of the occurrence or continuance of any
Default or Event of Default.
9.3 Reliance on and Survival of Various Provisions. All terms,
covenants, agreements, representations and warranties of the Company or any
Guarantor made herein or in any Security Document or in any certificate, report,
financial statement or other document furnished by or on behalf of the Company
or any Guarantor in connection with this Agreement shall be deemed to be
material and to have been relied upon by the Lenders, notwithstanding any
investigation heretofore or hereafter made by any Lender or on such Lender's
behalf, and those covenants and agreements of the Company set forth in Section
3.7, 3.9 and 9.5 hereof shall survive the repayment in full of the Advances and
the termination of the Commitments.
9.4 Expenses; Indemnification.
(a) The Company agrees to pay, or reimburse the Agent for the payment
of, on demand, (i) the reasonable fees and expenses of counsel to the Agent,
including without limitation the fees and expenses of Dickinson Wright PLLC, in
connection with the preparation, execution, delivery and administration of this
Agreement, the Notes, the Security Documents and in connection with advising the
Agent as to its rights and responsibilities with respect thereto, and in
connection with any amendments, waivers or consents in connection therewith, and
(ii) all stamp and other taxes and fees payable or determined to be payable in
connection with the execution, delivery, filing or recording of this Agreement,
Notes, the Security Documents (or the verification of filing, recording,
perfection or priority thereof) or the consummation of the transactions
contemplated hereby, and any and all liabilities with respect to or resulting
from any delay in paying or omitting to pay such taxes or fees, and (iii) all
reasonable costs and expenses of the Agent and the Lenders (including reasonable
fees and expenses of counsel and whether incurred through negotiations, legal
proceedings or otherwise)) in connection with any Default or Event of Default or
the enforcement of, or the exercise or preservation of any rights under, any
Loan Document or in connection with any refinancing or restructuring of the
credit arrangements provided under this Agreement and (iv) all reasonable costs
and expenses of the Agent and the Lenders (including reasonable fees and
expenses of counsel) in connection with any action or proceeding relating to a
court order, injunction or other process or decree restraining or seeking to
restrain the Agent from paying any amount under, or otherwise relating in any
way to, any Letter of Credit and any and all costs and expenses which any of
them may incur relative to any payment under any Letter of Credit.
(b) The Company hereby indemnifies and agrees to hold harmless the
Lenders and the Agent, and their respective officers, directors, employees and
agents, harmless from and against any and all claims, damages, losses,
liabilities, costs or expenses of any kind or nature whatsoever which the
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Lenders or the Agent or any such person may incur or which may be claimed
against any of them by reason of or in connection with any Letter of Credit, and
neither any Lender nor the Agent or any of their respective officers, directors,
employees or agents shall be liable or responsible for: (i) the use which may be
made of any Letter of Credit or for any acts or omissions of any beneficiary in
connection therewith; (ii) the validity, sufficiency or genuineness of documents
or of any endorsement thereon, even if such documents should in fact prove to be
in any or all respects invalid, insufficient, fraudulent or forged; (iii)
payment by the Agent to the beneficiary under any Letter of Credit against
presentation of documents which do not comply with the terms of any Letter of
Credit, including failure of any documents to bear any reference or adequate
reference to such Letter of Credit; (iv) any error, omission, interruption or
delay in transmission, dispatch or delivery of any message or advice, however
transmitted, in connection with any Letter of Credit; or (v) any other event or
circumstance whatsoever arising in connection with any Letter of Credit;
provided, however, that the Company shall not be required to indemnify the
Lenders and the Agent and such other persons, and the Lenders shall be liable to
the Company to the extent, but only to the extent, of any direct, as opposed to
consequential or incidental, damages suffered by the Company which were caused
by (A) the Agent's wrongful dishonor of any Letter of Credit after the
presentation to it by the beneficiary thereunder of a draft or other demand for
payment and other documentation strictly complying with the terms and conditions
of such Letter of Credit, or (B) the Agent's payment by the Agent to the
beneficiary under any Letter of Credit against presentation of documents which
do not comply with the terms of the Letter of Credit to the extent, but only to
the extent, that such payment constitutes gross negligence of willful misconduct
of the Agent. It is understood that in making any payment under a Letter of
Credit the Agent will rely on documents presented to it under such Letter of
Credit as to any and all matters set forth therein without further investigation
and regardless of any notice or information to the contrary, and such reliance
and payment against documents presented under a Letter of Credit substantially
complying with the terms thereof shall not be deemed gross negligence or willful
misconduct of the Agent in connection with such payment. It is further
acknowledged and agreed that the Company may have rights against the beneficiary
or others in connection with any Letter of Credit with respect to which the
Lenders are alleged to be liable and it shall be a precondition of the assertion
of any liability of the Lenders under this Section that the Company shall first
have materially exhausted all remedies in respect of the alleged loss against
such beneficiary and any other parties obligated or liable in connection with
such Letter of Credit and any related transactions.
(c) The Company hereby indemnifies and agrees to hold harmless the
Lenders and the Agent, and their respective officers, directors, employees and
agents, from and against any and all claims, damages, losses, liabilities, costs
or expenses of any kind or nature whatsoever (including reasonable attorneys
fees and disbursements incurred in connection with any investigative,
administrative or judicial proceeding whether or not such person shall be
designated as a party thereto) which the Lenders or the Agent or any such person
may incur at any time or which may be claimed against any of them at any time by
reason of or in connection with entering into the Loan Documents or the
transactions contemplated thereby, including without limitation those arising
under Environmental Laws, any transaction financed or to be financed in whole or
in part, directly or indirectly, with any proceeds of any Advance or any other
actions of the Company or any Guarantor; provided, however, that the Company
shall not be required to indemnify any such Lender and the Agent or such other
person, to the extent, but only to the extent, that such claim, damage, loss,
liability, cost or expense is attributable to the gross negligence or willful
misconduct of such Lender or the Agent, as the case may be.
9.5 Successors and Assigns.
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(a) This Agreement shall be binding upon and inure to the benefit of
the parties hereto and their respective successors and assigns, provided that
the Company may not, without the prior consent of the Lenders, assign its rights
or obligations hereunder or under the Notes or any Security Document and the
Lenders shall not be obligated to make any Advance hereunder to any entity other
than the Company.
(b) Any Lender may sell to any financial institution or institutions,
and such financial institution or institutions may further sell, a participation
interest (undivided or divided) in, the Advances and such Lender's rights and
benefits under this Agreement, the Notes and the Security Documents, and to the
extent of that participation interest such participant or participants shall
have the same rights and benefits against the Company under Section 3.7, 3.9 and
6.2(c) as it or they would have had if such participant or participants were the
Lender making the Advances to the Company hereunder, provided, however, that (i)
such Lender's obligations under this Agreement shall remain unmodified and fully
effective and enforceable against such Lender, (ii) such Lender shall remain
solely responsible to the other parties hereto for the performance of such
obligations, (iii) such Lender shall remain the holder of its Notes for all
purposes of this Agreement, (iv) the Company, the Agent and the other Lenders
shall continue to deal solely and directly with such Lender in connection with
such Lender's rights and obligations under this Agreement, and (v) such Lender
shall not grant to its participant any rights to consent or withhold consent to
any action taken by such Lender or the Agent under this Agreement other than
action requiring the consent of all of the Lenders hereunder.
(c) The Agent from time to time in its sole discretion may appoint
agents for the purpose of servicing and administering this Agreement and the
transactions contemplated hereby and enforcing or exercising any rights or
remedies of the Agent provided under this Agreement, the Notes, any Security
Documents or otherwise. In furtherance of such agency, the Agent may from time
to time direct that the Company and the Guarantors provide notices, reports and
other documents contemplated by this Agreement (or duplicates thereof) to such
agent. The Company and each Guarantor hereby consents to the appointment of such
agent and agrees to provide all such notices, reports and other documents and to
otherwise deal with such agent acting on behalf of the Agent in the same manner
as would be required if dealing with the Agent itself.
(d) Each Lender may, with the prior consent of the Company (which shall
not be unreasonably withheld and may not be withheld if an Event of Default has
occurred and is continuing) and the Agent, assign to one or more banks or other
entities all or a portion of its rights and obligations under this Agreement
(including, without limitation, all or a portion of its Commitment, the Advances
owing to it and the Note or Notes held by it); provided, however, that (i) each
such assignment shall be of a uniform, and not a varying, percentage of all
rights and obligations, (ii) except in the case of an assignment of all of a
Lender's rights and obligations under this Agreement, (A) the amount of the
Commitment of the assigning Lender being assigned pursuant to each such
assignment (determined as of the date of the Assignment and Acceptance with
respect to such assignment) shall in no event be less than $5,000,000, and in
integral multiples of $1,000,000 thereafter, or such lesser amount as the
Company and the Agent may consent to and (B) after giving effect to each such
assignment, the amount of the Commitment of the assigning Lender shall in no
event be less than $5,000,000, (iii) the parties to each such assignment shall
execute and deliver to the Agent, for its acceptance and recording in the
Register, an Assignment and Acceptance in the form of Exhibit F hereto (an
"Assignment and Acceptance"), together with any Note or Notes subject to such
assignment and a processing and recordation fee of $3,000, and (iv) any Lender
may without the consent of the Company or the Agent, and without paying any fee,
assign to any Affiliate of such Lender that is a bank or financial institution
all of its rights and obligations under this Agreement. Upon such execution,
delivery, acceptance and
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recording, from and after the effective date specified in such Assignment and
Acceptance, (x) the assignee thereunder shall be a party hereto and, to the
extent that rights and obligations hereunder have been assigned to it pursuant
to such Assignment and Acceptance, have the rights and obligations of a Lender
hereunder and (y) the Lender assignor thereunder shall, to the extent that
rights and obligations hereunder have been assigned by it pursuant to such
Assignment and Acceptance, relinquish its rights and be released from its
obligations under this Agreement (and, in the case of an Assignment and
Acceptance covering all of the remaining portion of an assigning Lender's rights
and obligations under this Agreement, such Lender shall cease to be a party
hereto).
(e) By executing and delivering an Assignment and Acceptance, the
Lender assignor thereunder and the assignee thereunder confirm to and agree with
each other and the other parties hereto as follows: (i) other than as provided
in such Assignment and Acceptance, such assigning Lender makes no representation
or warranty and assumes no responsibility with respect to any statements,
warranties or representations made in or in connection with this Agreement or
the execution, legality, validity, enforceability, genuineness, sufficiency or
value of this Agreement or any other instrument or document furnished pursuant
hereto; (ii) such assigning Lender makes no representation or warranty and
assumes no responsibility with respect to the financial condition of the Company
or the performance or observance by the Company of any of its obligations under
this Agreement or any other instrument or document furnished pursuant hereto;
(iii) such assignee confirms that it has received a copy of this Agreement,
together with copies of the financial statements referred to in Section 4.6 and
such other documents and information as it has deemed appropriate to make its
own credit analysis and decision to enter into such Assignment and Acceptance;
(iv) such assignee will, independently and without reliance upon the Agent, such
assigning Lender or any other Lender and based on such documents and information
as it shall deem appropriate at the time, continue to make its own credit
decisions in taking or not taking action under this Agreement; (v) such assignee
appoints and authorizes the Agent to take such action as agent on its behalf and
to exercise such powers and discretion under this Agreement as are delegated to
the Agent by the terms hereof, together with such powers and discretion as are
reasonably incidental thereto; and (vi) such assignee agrees that it will
perform in accordance with their terms all of the obligations that by the terms
of this Agreement are required to be performed by it as a Lender.
(f) The Agent shall maintain at its address designated on the signature
pages hereof a copy of each Assignment and Acceptance delivered to and accepted
by it and a register for the recordation of the names and addresses of the
Lenders and the Commitment of, and principal amount of the Advances owing to,
each Lender from time to time (the "Register"). The entries in the Register
shall be conclusive and binding for all purposes, absent manifest error, and the
Company, the Agent and the Lenders may treat each person whose name is recorded
in the Register as a Lender hereunder for all purposes of this Agreement. The
Register shall be available for inspection by the Company or any Lender at any
reasonable time and from time to time upon reasonable prior notice.
(g) Upon its receipt of an Assignment and Acceptance executed by an
assigning Lender and an assignee, together with any Note or Notes subject to
such assignment, the Agent shall, if such Assignment and Acceptance has been
completed, (i) accept such Assignment and Acceptance, (ii) record the
information contained therein in the Register and (iii) give prompt notice
thereof to the Company. Within five Business Days after its receipt of such
notice, the Company, at its own expense, shall execute and deliver to the Agent
in exchange for the surrendered Note or Notes a new Note to the order of such
assignee in an amount equal to the Commitment assumed by it pursuant to such
Assignment and Acceptance and, if the assigning Lender has retained a Commitment
hereunder, a new Note to the order of the assigning Lender in an amount equal to
the Commitment retained by it hereunder. Such new Note or Notes shall be in an
aggregate
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principal amount equal to the aggregate principal amount of such surrendered
Note or Notes, shall be dated the effective date of such Assignment and
Acceptance and shall otherwise be in substantially the form of Exhibit F hereto.
(h) Additional lenders may also become Lenders hereunder, with the
prior written consent of the Company and the Agent, by executing an Assumption
Agreement substantially in the form of Exhibit G. Any Lender, subject to the
prior written approval of the Agent and the Company and subject to being paid in
full or all outstanding liabilities owing to such Lender, may be terminated as a
Lender hereunder and upon such termination the Company shall have the option to
select a bank to replace such terminating bank and to assume the rights and
obligations of such terminated Lender hereunder, provided that such replacement
bank is acceptable to the Agent and executes an Assumption Agreement
substantially in the form of Exhibit G hereto. Upon any Lender being added
hereto or terminated, a new schedule will be distributed by the Agent to all
Lenders and the Company showing the Commitment amount and the percentage of
total commitments of each Lender.
(i) The Lenders may, in connection with any assignment or participation
or proposed assignment or participation pursuant to this Section 9.6, disclose
to the assignee or participant or proposed assignee or participant any
information relating to the Company.
(j) Notwithstanding any other provision set forth in this Agreement,
any Lender may at any time create a security interest in, or assign, all or any
portion of its rights under this Agreement (including, without limitation, the
Loans owing to it and the Note or Notes held by it) in favor of any Federal
Reserve Lender in accordance with Regulation A of the Board of Governors of the
Federal Reserve System; provided that such creation of a security interest or
assignment shall not release such Lender from its obligations under this
Agreement.
9.6 Counterparts. This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one and the same
instrument, and any of the parties hereto may execute this Agreement by signing
any such counterpart.
9.7 Governing Law. This Agreement is a contract made under, and shall
be governed by and construed in accordance with, the law of the State
of Michigan applicable to contracts made and to be performed entirely within
such State and without giving effect to choice of law principles of such
State. Each of the Company and the Guarantors and the Lenders further
agrees that any legal or equitable action or proceeding with respect to
any Loan Document or the transactions contemplated hereby shall be brought
in any court of the State of Michigan, or in any court of the United States of
America sitting in Michigan, and the Company and each Guarantor and the
Lenders hereby submits to and accepts generally and unconditionally the
jurisdiction of those courts with respect to its person and property, and, in
the case of the Company and each Guarantor irrevocably appoints Harold
Brown, V.P. Finance, whose address in Michigan is 24331 Sherwood, Centerline,
Michigan 48015, as its agent for service of process and irrevocably consents
to the service of process in connection with any such action or proceeding by
personal delivery to such agent or to the Company or such Guarantor, as the
case may be, or by the mailing thereof by registered or certified mail,
postage prepaid to the Company or such Guarantor at its address for notices
pursuant to Section 9.2. The Company shall at all times maintain such an
agent in Michigan for such purpose and shall notify the Lenders and the Agent
of such agent's address in Michigan within ten days of any change of
address. Nothing in this paragraph shall affect the right of the Lenders and
the Agent to serve process in any other manner permitted by law or limit the
right of the Lenders or the Agent to bring any such action or proceeding
against the Company or any Guarantor or property in the courts of any other
jurisdiction. The Company and each Guarantor and the Lenders
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hereby irrevocably waives any objection to the laying of venue of any such
action or proceeding in the above described courts.
9.8 Table of Contents and Headings. The table of contents and the
headings of the various subdivisions hereof are for the convenience of reference
only and shall in no way modify any of the terms or provisions hereof.
9.9 Construction of Certain Provisions. If any provision of this
Agreement refers to any action to be taken by any person, or which such person
is prohibited from taking, such provision shall be applicable whether such
action is taken directly or indirectly by such person, whether or not expressly
specified in such provision.
9.10 Integration and Severability. The Loan Documents embody the entire
agreement and understanding between the Company, the Guarantors and the Agent
and the Lenders, and supersede all prior agreements and understandings, relating
to the subject matter hereof. In case any one or more of the obligations of the
Company or any Guarantor under any Loan Document shall be invalid, illegal or
unenforceable in any jurisdiction, the validity, legality and enforceability of
the remaining obligations of the Company and the Guarantors shall not in any way
be affected or impaired thereby, and such invalidity, illegality or
unenforceability in one jurisdiction shall not affect the validity, legality or
enforceability of the obligations of the Company or any Guarantor under any Loan
Document in any other jurisdiction.
9.11 Independence of Covenants. All covenants hereunder shall be given
independent effect so that if a particular action or condition is not permitted
by any such covenant, the fact that it would be permitted by an exception to, or
would be otherwise within the limitations of, another covenant shall not avoid
the occurrence of a Default or an Event of Default if such action is taken or
such condition exists.
9.12 Interest Rate Limitation. Notwithstanding any provisions of any
Loan Document, in no event shall the amount of interest paid or agreed to be
paid by the Company exceed an amount computed at the highest rate of interest
permissible under applicable law. If, from any circumstances whatsoever,
fulfillment of any provision of any Loan Document at the time performance of
such provision shall be due, shall involve exceeding the interest rate
limitation validly prescribed by law which a court of competent jurisdiction may
deem applicable hereto, then, ipso facto, the obligations to be fulfilled shall
be reduced to an amount computed at the highest rate of interest permissible
under applicable law, and if for any reason whatsoever any Lender shall ever
receive as interest an amount which would be deemed unlawful under such
applicable law such interest shall be automatically applied to the payment of
principal of the Advances outstanding hereunder (whether or not then due and
payable) and not to the payment of interest, or shall be refunded to the Company
if such principal and all other obligations of the Company to the Lenders have
been paid in full.
9.13 Waiver of Jury Trial. The Lenders and the Agent and the Company
and the Guarantors, after consulting or having had the opportunity to consult
with counsel, knowingly, voluntarily and intentionally waive any right any of
them may have to a trial by jury in any litigation based upon or arising out of
any Loan Document or any of the transactions contemplated by any Loan Document
or any course of conduct, dealing, statements (whether oral or written) or
actions of any of them. Neither any Lender, the Agent, any Guarantor nor the
Company shall seek to consolidate, by counterclaim or otherwise, any such action
in which a jury trial has been waived with any other action in which a jury
trial cannot be or has not been waived. These provisions shall not be deemed to
have been modified in any respect or relinquished by any party hereto except by
a written instrument executed by such party.
60
<PAGE> 66
9.14 Complete Agreement; Amendment and Restatement. This Agreement, the
Notes, any requests for advance or Letters of Credit hereunder, the other Loan
Documents and any agreements, certificates, or other documents given to secure
the Indebtedness, contain the entire agreement of the parties hereto, and none
of the parties hereto shall be bound by anything not expressed in writing. This
Agreement constitutes an amendment and restatement of the Existing Credit
Agreement, which Existing Credit Agreement is fully superseded and amended and
restated in its entirety hereby; provided, however, that the Indebtedness
governed by the Existing Credit Agreement shall remain outstanding and in full
force and effect and, provided further, that this Agreement does not constitute
a novation of such Indebtedness.
61
<PAGE> 67
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered on the __ day of April, 1998, which shall be the
Effective Date of this Agreement, notwithstanding the day and year first above
written.
Address for Notices: AETNA INDUSTRIES, INC.
24331 Sherwood By: /s/ Harold A. Brown
----------------------------
P.O. Box 3067
Center Line, Michigan 48015 Its: Vice President, Finance
----------------------------
Attention: Vice President and Treasurer
Facsimile No.: (810) 759-0508
Facsimile
Confirmation No.: (810) 759-1688
Address for Notices: AETNA EXPORT SALES CORP.
24331 Sherwood By: /s/ Harold A. Brown
P.O. Box 3067 ----------------------------
Center Line, Michigan 48015 Its: Vice President, Finance
Attention: Vice President and Treasurer ----------------------------
Facsimile No.: (810) 759-0508
Facsimile
Confirmation No.: (810) 759-1688
62
<PAGE> 68
Address for Notices: MS ACQUISITION CORP.
- ----------------------------------- By: /s/Harold A. Brown
---------------------------
- ----------------------------------- Its:Vice President, Finance
Attention: ---------------------------
-------------------------
Facsimile No.:
---------------------
Facsimile
Confirmation No.:
-----------------
Address for Notices: AETNA HOLDINGS, INC.
By:/s/Harold A. Brown
------------------------
Its:Vice President, Finance
------------------------
- ----------------------------------
- ----------------------------------
Attention:
------------------------
Facsimile No.:
--------------------
Facsimile
Confirmation No.: AETNA MANUFACTURING CANADA LTD.
--------------
By:/s/Harold A. Brown
Address for Notices: ------------------------
Its:Vice President, Finance
------------------------
- ----------------------------------
- ----------------------------------
Attention:
------------------------
Facsimile No.:
------------------------
63
<PAGE> 69
Facsimile
Confirmation No.:
--------------------
Address for Notices: NBD BANK, as a Lender and as Agent
611 Woodward Avenue By: /s/Theodore J. Willet
Detroit, Michigan 48226 --------------------------
Attention: Michigan Banking Division Its: Vice President
------------------------
Facsimile No.: (313) 226-0855
Facsimile
Confirmation No.: (313) 225-2531
Facility A Commitment Amount during
the period from and including the Effective
Date to and including June 30, 1999: $50,000,000
Facility A Commitment Amount during
the period from and including July 1, 1999
and thereafter: $35,000,000
Facility B Commitment Amount: $5,000,000
Facility C Commitment Amount: $1,500,000
Percentage of
Total Commitments: 100%
Total Commitment Amount of all Lenders
during the period from and including the Effective
Date to and including June 30, 1999: $56,500,000
Total Commitment Amount of all Banks
during the period from and including July 1, 1999
and thereafter: $40,000,000
64
<PAGE> 70
FIRST AMENDMENT TO CREDIT AGREEMENT
THIS FIRST AMENDMENT TO CREDIT AGREEMENT, dated as of May 20,
1998 (this "Amendment"), is among AETNA INDUSTRIES, INC., a Delaware corporation
(the "Company"), the guarantors set forth on the signature pages hereof
(collectively, the "Guarantors"), the Lenders set forth on the signature pages
hereof (collectively, the "Lenders") and NBD BANK, a Michigan banking
corporation, as agent for the Lenders (in such capacity, the "Agent").
RECITALS
A. The Company, the Guarantors, the Agent and the Lenders are
parties to an Amended and Restated Credit Agreement dated as of April 10, 1998
(as now and hereafter amended, the "Credit Agreement").
B. The Company and the Guarantors desire to amend the Credit
Agreement, and the Agent and the Lenders are willing to do so in accordance with
the terms hereof.
TERMS
In consideration of the premises and of the mutual agreements
herein contained, the parties agree as follows:
ARTICLE I. AMENDMENTS. Upon fulfillment of the conditions set forth in Article
III hereof, the Credit Agreement shall be amended as follows:
1.1 The definition of "Permitted Liens" in Section 1.1 shall
be amended by deleting the reference therein to "Section 5.2(d)" and inserting
"Section 5.2(f)" in place thereof.
1.2 Section 5.1(d)(v) shall be amended by inserting ", or,"
between the words "reporting" and "on" in line two.
1.3 Section 9.1(a) shall be amended and restated in its
entirety to read as follows:
(a) No amendment, modification, termination or waiver of any
provision of any Loan Document nor any consent to any
departure therefrom shall be effective unless the same shall
be in writing and signed by the Company and Required Lenders
and, to the extent any rights or duties of the Agent may be
affected thereby, the Agent, provided, however, that no such
amendment, modification, termination, waiver or consent shall,
without the consent of the Agent and all of the Lenders, (i)
authorize or permit the extension of time for, or any
reduction of the amount of, any payment or mandatory
prepayment of the principal of, or interest on, the Notes or
any Letter of Credit reimbursement obligation, or any fees or
other amount payable hereunder, (ii) amend, extend or
terminate the respective Commitments of any Lender set forth
on the signature pages hereof or the definition of Required
Lenders, (iii) provide for the discharge of any material
Guarantor or release all or substantially all of the
collateral subject to the Security Documents, (iv) amend or
modify the definitions of Borrowing
<PAGE> 71
Base, Eligible Accounts Receivable, Eligible Inventory,
Eligible Tooling Inventory or Eligible Fixed Assets, or (v)
amend, modify or waive any indemnity provided hereunder or in
any Loan Document by the Company or any Guarantor.
1.4 Section 9.5(d) shall be amended by adding the following
language immediately after the reference in line 3 to "Agent": "(which consent
shall not be unreasonably withheld)".
1.5 Each and every reference in the Credit Agreement and in
any other Loan Document to "Aetna Industries, Inc., a Michigan corporation"
shall be deleted and replaced with "Aetna Industries, Inc., a Delaware
corporation."
1.6 Exhibit A to the Credit Agreement shall be replaced with
the form of Exhibit A attached hereto.
ARTICLE II. REPRESENTATIONS. The Company and each Guarantor
represent and warrant to the Agent and the Lenders that:
2.1 The execution, delivery and performance of this Amendment
is within its powers, has been duly authorized and is not in contravention of
any statute, law or regulation known to it or of any terms of its Articles of
Incorporation or By-laws, or of any material agreement or undertaking to which
it is a party or by which it is bound.
2.2 This Amendment is the legal, valid and binding obligation
of the Company and each Guarantor enforceable against each in accordance with
the terms hereof.
2.3 The representations and warranties contained in Article IV
of the Credit Agreement are true on and as of the date hereof with the same
force and effect as if made on and as of the date hereof.
2.4 No Event of Default or Default exists or has occurred and
is continuing on the date hereof.
ARTICLE III. CONDITIONS OF EFFECTIVENESS. This Amendment shall
not become effective until this Amendment shall be signed by the Company, the
Guarantors, the Lenders and the Agent.
ARTICLE IV. MISCELLANEOUS.
4.1 References in the Credit Agreement or in any note,
certificate, instrument or other document to the Credit Agreement shall be
deemed to be references to the Credit Agreement as amended hereby and as further
amended from time to time.
4.2 The Company agrees to pay and to save the Agent harmless
for the payment of all reasonable costs and expenses arising in connection with
this Amendment, including the reasonable fees of counsel to the Agent in
connection with preparing this Amendment and the related documents.
4.3 The Company and each Guarantor acknowledge and agree that,
to the best of their knowledge, the Agent and the Lenders have fully performed
all of their obligations under all documents executed in connection with the
Credit Agreement. The Company and each Guarantor represent and warrant that they
are not aware of any claims or causes of action against the Agent or any Lender.
-2-
<PAGE> 72
4.4 Except as expressly amended hereby, the Company and each
Guarantor agree that the Credit Agreement, the Notes, the Security Documents and
all other documents and agreements executed by the Company in connection with
the Credit Agreement in favor of the Agent or any Lender are ratified and
confirmed, as amended hereby, and shall remain in full force and effect in
accordance with their terms and that they are not aware of any set off,
counterclaim or defense with respect to any of the foregoing. Terms used but not
defined herein shall have the respective meanings ascribed thereto in the Credit
Agreement.
4.5 This Amendment may be signed upon any number of
counterparts with the same effect as if the signatures thereto and hereto were
upon the same instrument.
IN WITNESS WHEREOF, the parties signing this Amendment have
caused this Amendment to be executed and delivered as of May 20, 1998.
AETNA INDUSTRIES, INC.
By: /s/ Harold A. Brown
------------------------------------
Its: Vice President, Finance
--------------------------------
AETNA HOLDINGS, INC.
By: /s/ Harold A. Brown
------------------------------------
Its: Vice President, Finance
--------------------------------
AETNA EXPORT SALES CORP.
By: /s/ Harold A. Brown
------------------------------------
Its: Vice President, Finance
--------------------------------
MS ACQUISITION CORP.
By: /s/ Harold A. Brown
------------------------------------
Its: Vice President, Finance
--------------------------------
AETNA HOLDINGS, INC.
By: /s/ Harold A. Brown
------------------------------------
Its: Vice President, Finance
--------------------------------
-3-
<PAGE> 73
AETNA MANUFACTURING CANADA LTD.
By: /s/ Harold A. Brown
------------------------------------
Its: Vice President, Finance
--------------------------------
NBD BANK, as a Lender and as Agent
By:
------------------------------------
Its:
--------------------------------
-4-
<PAGE> 74
Execution Copy
SECOND AMENDMENT TO CREDIT AGREEMENT
THIS SECOND AMENDMENT TO CREDIT AGREEMENT, dated as of August 6, 1998
(this "Amendment"), is among AETNA INDUSTRIES, INC., a Delaware corporation
(the "Company"), the guarantors set forth on the signature pages hereof
(collectively, the "Guarantors"), the Lenders set forth on the signature pages
hereof (collectively, the "Lenders") and NBD BANK, a Michigan banking
corporation, as agent for the Lenders (in such capacity, the "Agent").
RECITALS
A. The Company, the Guarantors, the Agent and the Lenders are parties to
an Amended and Restated Credit Agreement dated as of April 10, 1998 (as now and
hereafter amended, the "Credit Agreement").
B. The Company and the Guarantors desire to amend the Credit Agreement,
and the Agent and the Lenders are willing to do so in accordance with the terms
hereof.
TERMS
In consideration of the premises and of the mutual agreements herein
contained, the parties agree as follows:
ARTICLE I. AMENDMENTS. Upon fulfillment of the conditions set forth in
Article III hereof, the Credit Agreement shall be amended as follows:
1.1 The definition of "Change of Control " in Section 1.1 is restated as
follows:
"Change of Control" shall mean the occurrence of any event or
transaction or series of related transactions in connection with or as a
consequence of which (i) prior to a registered initial public offering of
the Common Stock of the Company, MS (directly or indirectly) or Holdings
shall cease to own 100% of the Company's outstanding Capital Stock, clear
of any Liens; (ii)(A) prior to a registered initial public offering of
the Common Stock of MS or Holdings, the CVC Investor Group and the
SOFEDIT Shareholders, collectively, shall cease to own Common Stock of,
as the case may be, MS or Holdings, representing not less than 51% of the
common equity interest in, as the case may be, MS's or Holding's, Capital
Stock (whether voting or non-voting) on a fully-diluted basis assuming
the exercise of all securities exercisable, convertible or exchangeable
for or into common equity interests or (B) after a registered initial
public offering of the Common Stock of MS, Holdings or the Company, the
CVC Investor Group and the SOFEDIT Shareholders, collectively, shall
cease to own, free
<PAGE> 75
and clear of all Liens, Common Stock of, MS, Holdings or the Company, as
the case may be, representing not less than 10% of the common equity
interest in MS's, Holding's or, as the case may be, the Company's Capital
Stock (whether voting or non-voting) on a fully-diluted basis assuming
the exercise of all securities exercisable, convertible or exchangeable
for or into common equity interests; (iii) after a registered initial
public offering of the Common Stock of MS, Holdings or the Company, any
Person or group of Persons (as such term is used under the Exchange Act)
shall own, beneficially or of record, a greater percentage of the common
equity interests or total combined voting power of all classes of Capital
Stock of MS, Holdings or the Company, as the case may be, than is so
owned by the CVC Investor Group and the SOFEDIT Shareholders; or (iv)
after a registered initial public offering of the Common Stock of MS,
Holdings or the Company, during any one year period individuals who at
the beginning of such one year period constituted the board of directors
(together with any new directors whose election by such board of
directors or whose nomination for election was approved by a vote of a
majority of the directors then still in office who were either directors
at the beginning of such period or whose election or nomination for
election was previously so approved) cease for any reason to constitute a
majority of the board of directors of MS, Holdings or the Company then in
office. For purposes of this definition, the term "CAPITAL STOCK" of any
Person means any and all shares, interests, participations, or other
equivalents, (however designated) of its capital stock and any rights
(other than debt securities convertible into capital stock), warrants or
options to acquire such capital stock and the term "COMMON STOCK" means,
as applicable, the Common Stock, par value $.01, of Holdings and the
Common Stock, par value $.01 of the Company and, collectively, the Class
A Common Stock, par value $.01 per share, and Class B Common Stock, par
value $0.01 per share, of MS, and, in each case, any Capital Stock issued
with respect thereto in a stock consolidation, reclassification or
recapitalization.
1.2 The following new definition is hereby added to Section 1.1 in
appropriate alphabetical order:
"Initial Public Offering" shall mean the initial public
offering of common stock to be made by MS (and pursuant to which MS will be
changing its name) pursuant to the registration to be filed by MS with the
Securities and Exchange Commission on Form S-1 on or before August 31, 1998.
1.3 Section 3.1(f) is redesignated as Section 3.1(g) and a new
Section 3.1(f) is added as follows:
(f) In addition to all other payments of the Advances
required hereunder, the Company shall prepay the Advances by an amount equal to
100% of the net proceeds of any subordinated debt or similar obligation incurred
at any time by the Company or any Guarantor and by an amount equal to 100% of
the net proceeds from the issuance or other sale of any Capital Stock or any
other equity interest of MS, Holdings, any other Guarantor or the Company
(exclusive of the proceeds to be received from the Initial Public Offering).
Such prepayments shall be applied to such Advances as determined by the Agent,
and shall also permanently reduce the Commitments related to the Advances being
prepaid by an amount equal to such prepayment.
1.4 Sections 5.2(b), (c) and (e) are restated as follows:
<PAGE> 76
(b) Fixed Charge Coverage Ratio. Permit or suffer the Fixed Charge
Coverage Ratio to be less than: (i) 1.00:1.00 from and including the
Effective Date through and including July 30, 1998; (ii) 0.75:1.00 from
and including July 31, 1998 through and including August 30, 1998; (iii)
0.55:1.00 from and including August 31, 1998 through and including
December 30, 1998; (iv) 0.65:1.00 from and including December 31, 1998
through and including March 30, 1999; (v) 0.75:1.00 from and including
March 31, 1999 through and including June 29, 1999; (vi) 1.10:1.00 from
and including June 30, 1999 through and including September 29, 1999;
(vii) 1.30:1.00 from and including September 30, 1999 through and
including December 30, 1999; and (viii) 1.60:1.00 at any time thereafter.
(c) Senior Secured Funded Debt Ratio. Permit or suffer the Senior
Secured Funded Debt Ratio of the Company and Subsidiaries to exceed at
any time: (i) 3.00:1.00 from and including the Effective Date through and
including July 30, 1998; (ii) 4.50:1.00 from and including July 31, 1998
through and including August 30, 1998; (iii) 5.25:1.00 from and including
August 31, 1998 through and including September 29, 1998; (iv) 9.00:1.00
from and including September 30, 1998 through and including October 30,
1998; (v) 8.50:1.00 from and including October 31, 1998 through and
including December 30, 1998; (vi) 5.00:1.00 from and including December
31, 1998 through and including February 27, 1999; (vii) 4.00:1.00 from
and including February 28, 1999 to and including March 30, 1999, (viii)
3.00:1.00 from and including March 31, 1999 through and including June
29, 1999, and (ix) 2.00:1.00 at any time thereafter.
(e) Net Worth. Permit or suffer the consolidated Net Worth of the
Company and its Subsidiaries to be less than the sum of: (a)(i)
$21,000,000 from the Effective Date through and including August 30,
1998; and (ii) $19,000,000 thereafter, plus (b) 50% of Net Income,
adjusted as of the last day of the fiscal quarter of the Company ending
December 31, 1998 as calculated for the fiscal quarter then ending and as
of each fiscal year of the Company thereafter as calculated for the
fiscal year ending; provided, that if such Net Income is negative in any
fiscal quarter or any fiscal year, as the case may be, the amount added
for such period shall be zero and shall not reduce the amount added for
any other period.
1.5 The periods at the end of Sections 6.1(i) and (j) are deleted
and replaced with "; or" and the following new Section 6.1(k) is hereby added:
(k) Senior Notes. Any offer is made to repurchase, redeem, defease
or otherwise prepay, whether mandatory or otherwise, any of the Senior
Notes (including without limitation any Change of Control Offer, as
defined in the Senior Note Documents) or the Company makes or is required
to make any prepayment, redemption, repurchase or other defeasance or any
of the Senior Note Debt, whether mandatory or otherwise, provided that an
Event of Default shall not be deemed to have occurred in connection with
an offer to repurchase the Senior Notes if either of the following two
conditions is satisfied: (i) none of the holders of any of the Senior
Notes tenders the Senior Notes and none of the Senior Notes are
repurchased or (ii) if any of the Senior Notes are tendered or otherwise
requested to be repurchased, then at least 10 days prior to the
repurchase, redemption or other prepayment thereof the Company obtains,
or makes arrangements satisfactory to the Agent to obtain, Subordinated
Debt or equity
<PAGE> 77
sufficient to make all such repurchases, redemptions or other
prepayments.
1.6 A new Section 8.9 is hereby added to read as follows:
8.9 Aetna. MS represents and acknowledges that it owns,
directly or indirectly, all of the capital stock and other equity and
other ownership interests of the Company (the "Company Ownership
Interests") free and clear of all Liens. MS will not permit or suffer
any Lien to exist on the Company Ownership Interests and will not sell
or otherwise transfer the Company Ownership Interests. MS will take or
cause to be taken all actions necessary, to the extent possible, to
avoid the occurrence of any Event of Default.
ARTICLE II. REPRESENTATIONS. The Company and each Guarantor
represent and warrant to the Agent and the Lenders that:
2.1 The execution, delivery and performance of this Amendment is
within its powers, has been duly authorized and is not in contravention of any
statute, law or regulation known to it or of any terms of its Articles of
Incorporation or By-laws, or of any material agreement or undertaking to which
it is a party or by which it is bound.
2.2 This Amendment is the legal, valid and binding obligation of
the Company and each Guarantor enforceable against each in accordance with the
terms hereof.
2.3 After giving effect to the amendments contained herein, the
representations and warranties contained in Article IV of the Credit Agreement
are true on and as of the date hereof with the same force and effect as if made
on and as of the date hereof.
2.4 After giving effect to the amendments contained herein, no
Event of Default or Default exists or has occurred and is continuing on the
date hereof. Without limiting the foregoing, no event of default or event or
condition which may become an event of default under the Senior Note
Documents has occurred or will be caused by this Amendment or any of the
transactions contemplated hereby.
2.5 MS will be filing a registration statement with the Securities
and Exchange Commission on Form S-1 on or before August 31, 1998.
ARTICLE III. CONDITIONS OF EFFECTIVENESS. This Amendment shall not
become effective until each of the following conditions is satisfied:
3.1 The Company shall have delivered to the Agent a comfort letter
from SOFEDIT in the form attached hereto.
3.2 The Company shall have delivered to the Agent the most recent
draft of the S-1 registration statement to be filed by MS with the Securities
and Exchange Commission, provided that the Agent and each Lender agree to hold
any such draft it may receive in confidence, unless such draft otherwise becomes
public information, and except for disclosure to its affiliates, to legal
counsel, accountants and other professional advisors, to regulatory officials,
or to any person as required pursuant to law, regulation or legal process.
<PAGE> 78
3.3 The Company, the Guarantors and the Required Lenders shall
have signed this Amendment.
3.4 The Company shall have delivered to the Agent such other
documents and satisfied such other conditions, if any, as reasonably requested
by the Agent.
ARTICLE IV. MISCELLANEOUS.
4.1 References in the Credit Agreement or in any note, certificate,
instrument or other document to the Credit Agreement shall be deemed to be
references to the Credit Agreement as amended hereby and as further amended
from time to time.
4.2 The Company agrees to pay and to save the Agent harmless for
the payment of all reasonable documented costs and expenses arising in
connection with this Amendment, including the reasonable documented fees of
counsel to the Agent in connection with preparing this Amendment and the
related documents.
4.3 The Company and each Guarantor acknowledge and agree that, to
the best of their knowledge, the Agent and the Lenders have fully performed
all of their obligations under all documents executed in connection with the
Credit Agreement. The Company and each Guarantor represent and warrant that
they are not aware of any claims or causes of action against the Agent or any
Lender.
4.4 Except as expressly amended hereby, the Company and each
Guarantor agree that the Credit Agreement, the Notes, the Security Documents
and all other documents and agreements executed by the Company in connection
with the Credit Agreement in favor of the Agent or any Lender are ratified
and confirmed, as amended hereby, and shall remain in full force and effect in
accordance with their terms and that they are not aware of any set off,
counterclaim or defense with respect to any of the foregoing. Terms used but
not defined herein shall have the respective meanings ascribed thereto in the
Credit Agreement. This Amendment may be signed upon any number of counterparts
with the same effect as if the signatures thereto and hereto were upon the same
instrument, and telecopied signatures shall be effective as originals.
4.5 The Company and the Guarantors agree to deliver to the Agent
board resolutions approving this amendment and all transactions contemplated
hereby on or before August 21, 1998, and any failure to deliver such board
resolutions shall be an Event of Default under the Credit Agreement.
IN WITNESS WHEREOF, the parties signing this Amendment have caused
this Amendment to be executed and delivered as of the day and year first above
written.
AETNA INDUSTRIES, INC.
By:______________________________________
__
<PAGE> 79
Its:
__________________________________
Guarantor
AETNA HOLDINGS, INC.
By:______________________________________
__
Its:
__________________________________
Guarantor
AETNA EXPORT SALES CORP.
By:
_______________________________________
Its:________________________________
______
Guarantor
MS ACQUISITION CORP.
By:
_______________________________________
Its:________________________________
______
Guarantor
AETNA MANUFACTURING CANADA LTD.
By:
_______________________________________
Its:________________________________
______
NBD BANK, as a Lender and as Agent
By:
_______________________________________
<FF>
<PAGE> 80
Its:________________________________
______
PNC BUSINESS CREDIT, INC.
By:
_______________________________________
Its:________________________________
______
NATIONAL BANK OF CANADA
By:
_______________________________________
Its:________________________________
______
MICHIGAN NATIONAL BANK
By:
_______________________________________
Its:________________________________
______
<PAGE> 1
EXHIBIT 10.4
1
THE SECURITY REPRESENTED BY THIS NOTE WAS
ORIGINALLY ISSUED ON AUGUST 13, 1996, AND
HAS NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR
UNDER ANY STATE SECURITIES LAWS. THIS
NOTE MAY NOT BE RESOLD OR TRANSFERRED, IN
WHOLE OR IN PART, UNLESS REGISTERED OR
EXEMPT FROM REGISTRATION UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, AND
ALL APPLICABLE STATE SECURITIES LAWS.
AETNA HOLDINGS, INC.
Amended and Restated
Junior Subordinated Promissory
Note Due 2007
August 13, 1996 $_______
New York, New York
FOR VALUE RECEIVED, AETNA HOLDINGS, INC., a Delaware corporation (the
"Company"), promises to pay to____________, or his registered assigns (each a
"Holder"), the principal sum of _____________________________($_______), as
such sum may be decreased by prepayments made pursuant to Section 4 below, on
August 13, 2007 (the "Maturity Date"), all in accordance with the provisions of
this Amended and Restated Note (this "Note").
This Note is one of the junior subordinated promissory notes required to
be issued pursuant to Section 1.2 of the Stock Purchase Agreement dated as of
August 13, 1996, among the Company, MS Acquisition Corp., a Delaware
corporation and the parent of the Company ("Parent"), the Holder and the other
stockholders of Parent named therein (as the same may be amended, supplemented
or modified from time to time, the "Purchase Agreement"). This Note has been
amended and restated pursuant to Section 2.02 of that certain Stock Purchase
Agreement dated as of April 3, 1998, among Parent, Societe Financiere de
Developpement Industriel et Technologique and the other parties named on the
signature pages thereto. This Note, any notes issued pursuant to Section 2
below, and any notes issued upon registration of transfer or exchange of this
Note or any of the aforementioned notes are collectively referred to herein as
the "Notes".
1. Interest. Interest will accrue on the principal amount of this Note at
the rate of 11% per annum and on any due and unpaid amount of principal hereof
or interest hereon (to the extent permitted by applicable law)o after the
Maturity Date at the rate of 13% per annum.
<PAGE> 2
2
The Company will pay interest in arrears on the 13th date of February and
August of each year, beginning February 13, 1997, and on the Maturity Date.
2. Method of Payment. Subject to the second succeeding paragraph, the
Company will pay the principal of, and interest on, this Note in money of the
United States that at the time of payment is legal tender for payment of public
and private debts. The Company shall make all payments of principal of and
interest on this Note by wire transfer of immediately available funds to the
account specified by Holder in a written notice to the Company delivered at
least two business days prior to such payment date; provided that the Company
may pay interest amounts if less than $10,000 by check payable in such money and
may mail an interest check to the Holder's registered address.
If a payment date is a legal holiday, payment shall be made on the next
succeeding business day.
To the extent that (a) the provisions of Section 7 below, or of any
agreement or instrument evidencing or relating to any Senior Debt, then
prohibit the payment of interest on this Note in cash or (b) the Company's
subsidiaries are then prohibited from paying cash dividends to the Company for
the purpose of paying such interest by reason of the provisions of the
agreements and instruments evidencing or relating to Det of such subsidiaries,
and the aggregate initial outstanding principal or commitment amount of such
Debt exceeds $10,000,000, the Company shall, on each interest payment date
prior to the Maturity Date (other than the mandatory prepayment dates specified
in Sections 4(b) and (c) below), in lieu of the payment in whole or in part of
interest in cash on this Note, pay interest on this Note through the issuance
of additional Notes of like tenor (the "Secondary Notes") in an aggregate
principal amount equal to the amount of interest that would be payable with
respect to this Note if such interest were paid in cash. In the event that
Secondary Notes are issued by the Company in lieu of interest paid in cash, the
Company shall deliver to Holder, on the relevant interest payment date,
Secondary Notes, dated the date of such interest payment date, in an aggregate
principal amount equal to the amount of cash interest not paid on this Note on
such interest payment date. For purposes of the prepayment provisions set
forth in Section 4(b) below, $2,275,800 original principal amount of the Junior
Notes (as defined below) prepayable under such Section 4(b) shall constitute
the "Prepayment Principal Amount" and the remaining $6,455,004 shall constitute
the "Remaining Principal Amount." All Secondary Notes issued prior to
repayment in full of the Prepayment Principal Amount shall be issued as either
"Series A Secondary Notes," which shall mean Secondary Notes derivative of the
then unpaid Prepayment Principal Amount or of other Series A Secondary Notes,
or as "Series B Secondary Notes," which shall mean Secondary Notes derivative
of the then unpaid Remaining Principal Amount or of other Series B Secondary
Notes. "Junior Notes" means the Notes, together with all Secondary Notes and
all other subordinated promissory notes due 2007 of the Company issued on the
date hereof and all secondary notes issued thereunder.
<PAGE> 3
3
3. Intentionally Omitted.
4. Mandatory and Optional Prepayments.
(a) The Company, at its option, may prepay all or a portion of the
outstanding principal amount of the Junior Notes at any time and from time to
time pro rata among all Junior Notes at 100% of the principal amount of the
Junior Notes being prepaid plus accrued but unpaid interest thereon to the
prepayment date.
(b) The Company shall prepay principal of all Junior Notes on the dates
and as provided for in Section 1.4 of the Purchase Agreement.
(c) At the occurrence of a "Sale of the Company" (as defined in that
certain Stockholders Agreement dated as of April 9, 1998 as such may be
amended, supplemented or modified from time to time (the "Stockholders
Agreement"), among Parent and its stockholders listed therein) or a "Qualifying
Offering" (as defined below), the Company shall prepay all of the principal
amount of the Junior Notes plus accrued but unpaid interest thereon to the
prepayment date. Promptly, and in no event later than 30 days prior to any
Sale of the Company or Qualifying Offering, the Company shall give written
notice thereof to the Holder describing such transaction in reasonable detail
and specifying the proposed date for such transaction. "Qualifying Offering"
means the consummation of an underwritten primary or secondary offering of
common stock of Parent pursuant to an effective registration under the
Securities Act of 1933, as amended, as a result of which (together with all
similar previous public offerings) at least $20 million of aggregate net
proceeds are raised for Parent.
(d) In the event that the Company prepays less than all the outstanding
principal amount of this Note under subsections (a) or (b) above, the Company
shall deliver to Holder upon such prepayment a replacement Note, dated the date
hereof, or like tenor representing the remaining outstanding principal amount
hereof and any accrued but unpaid interest hereon. Any prepayment of less than
all of the outstanding principal amount of this Note pursuant to this Section 4
will be made pro rata among the registered holders of the Junior Notes on the
basis of the outstanding principal amount of the Junior Notes then held by each
such holder. From and after the date of any prepayment of this Note, interest
shall cease to accrue on the portion of this Note so prepaid.
5. Notice of Prepayment. Notice of prepayment of this Note pursuant to
Section 4(a) or 4(b) above will be delivered at least 15 days but not more than
60 days before the prepayment date to Holder at the address specified in
Section 14 hereof.
<PAGE> 4
4
6. Repayment. The Company will repay this Note on the Maturity Date at
100% of the then outstanding principal amount of this Note plus accrued but
unpaid interest thereon to such date.
7. Subordination.
7.1 Notes Subordinated to Senior Debt. The Company, for itself and its
successors, and Holder, for itself and its successors and assigns by its
acceptance of this Note, agree that the payment by the Company of the principal
of and interest on this Note and all other amounts owed in respect of this
Note, both before and after the commencement of a bankruptcy proceeding
(collectively, the "Subordinated Obligations"), is subordinated, to the extent
and in the manner provided in this Section 7, to the prior payment in full in
cash of all amounts payable under or in respect of the Senior Debt.
The provisions of this Section 7 are for the benefit of the holders of the
Senior Debt, and such holders are made obligees under this Section 7 and may
enforce its provisions.
7.2 No Payment on Notes in Certain Circumstances.
(a) Subject to Section 7.9 below, prior to the payment in full in cash of
all amounts payable under or in respect to the Senior Debt, no payment (whether
of cash, properties or securities other than Secondary Notes) will be made by
the Company on account of principal of or interest on this Note or any other
amount owed in respect of this Note, or to redeem, retire, purchase, deposit
moneys for defeasance of or otherwise acquire any Junior Notes for value, and
the Company shall not segregate and hold separate for the benefit of Holder or
any other registered holder of Junior Notes, money for such payment, if there
shall have occurred and be continuing (i) any default in the payment when due
of any amount constituting Senior Debt (whether principal, interest or
otherwise, and whether due on the scheduled payment date, a date fixed for
prepayment or otherwise) or (ii) any other default under any agreement or
instrument evidencing or relating to any Senior Debt that has resulted in, or
would permit the holders of any Senior Debt to cause (subject to any applicable
notice requirement or grace period), the acceleration of any Senior Debt.
(b) If any payment or distribution of assets of the Company is received
by Holder or any other holder of Notes in respect of principal of, interest on
or any other amount owed in respect of this Note at a time when the payment or
distribution should not have been made because of paragraph (a) above, such
payment or distribution (subject to the provisions of Section 7.9 below) will
be received and held in trust for the benefit of, and will be paid over to, the
holders of the Senior Debt or their representatives (pro rata as to each of
such holders on the basis of their respective unpaid amounts of Senior Debt
held by them) for application to the
<PAGE> 5
5
payment of the Senior Debt until all Senior Debt has been paid in full in cash,
after giving effect to any concurrent payment to the holders of the Senior
Debt.
7.3 Notes Subordinated to Prior Payment of All Senior Debt upon Dissolution,
Liquidation or Reorganization. Subject to Section 7.9 below, in the event of
(i) any insolvency or bankruptcy case or proceeding, or any receivership,
liquidation, reorganization, adjustment, composition or other similar case or
proceeding, relative to the Company or to its creditors, as such, or to its
assets, (ii) any liquidation, dissolution or other winding up of the Company,
whether voluntary or involuntary and whether or not involving insolvency or
bankruptcy, or (iii) any assignment for the benefit of creditors or any other
marshaling of assets and liabilities of the Company (collectively, "Bankruptcy
Events"), then in any such event:
(a) the holders of the Senior Debt will first be entitled to receive
payment in full in cash of the principal and interest due on the Senior Debt
and all other amounts payable under or in respect of the Senior Debt before
Holder and the other registered holders of Junior Notes are entitled to receive
any payment on account of the principal of or interest on, or any other amount
owed in respect of, the Junior Notes;
(b) any payment or distribution of assets of the Company of any kind or
character (whether in cash, property or securities other than Secondary Notes)
to which Holder and the other holders of Junior Notes would be entitled except
for the provisions of this Section 7.3 will be paid by the person making such
payment or distribution (whether a trustee in bankruptcy, a receiver, custodian
or liquidating trustee or otherwise) directly to the holders of the Senior Debt
or their representatives to the extent necessary to make payment in full in
cash of all Senior Debt remaining unpaid, after giving effect to any concurrent
payment to the holders of the Senior Debt; and
(c) if, notwithstanding the foregoing, any payment or distribution of
assets of the Company of any kind or character (whether in cash, property or
securities) is received by Holder or any other registered holder of Junior
Notes on account of the principal of or interest on, or any other amount owed
in respect of, the Junior Notes before the Senior Debt is paid in full in cash,
such payment or distribution (subject to the provisions of Section 7.9) will be
received and held in trust for the benefit of, and will be paid over to, the
holders of the Senior Debt or their representatives (pro rata as to each of
such holders on the basis of the respective unpaid amounts of Senior Debt held
by them) for application to the payment of the Senior Debt until all Senior
Debt has been paid in full in cash, after giving effect to any concurrent
payment to the holders of the Senior Debt.
The Company will give prompt written notice to Holder of any dissolution,
winding up, liquidation or reorganization of the Company or any assignment for
the benefit of the Company's creditors.
<PAGE> 6
6
(d) Any holder of Senior Debt shall have the right to request Holder
to file and, in the event Holder fails to do so within 10 days, is hereby
authorized to file a proper claim or proof of debt in the form required in any
Bankruptcy Event for and on behalf of Holder or any other holder of this Note,
to accept and receive any payment or distribution which may be payable or
deliverable at any time upon or in respect of the Subordinated Obligations in
an amount not in excess of the Senior Debt then outstanding, and to take such
other action as may be reasonably necessary to effectuate the foregoing.
Holder and any other holder of this Note shall provide to such holder of Senior
Debt all information and documents reasonably necessary to present claims or
seek enforcement as aforesaid. Holder and any other holder of this Note shall
retain the right to vote to accept or reject any plan or partial or complete
liquidation, reorganization, arrangement, composition or extension; provided,
however, that neither Holder nor such other holder shall take any action or
vote in any way so as to contest the enforceability of this Section 7, any
Senior Debt or any other agreement or instrument to the extent evidencing or
relating to any Senior Debt.
7.4 Acceleration Rights; Remedies. If an Event of Default shall exist at
any time that any Senior Debt shall be outstanding, neither Holder nor any
other holder of this Note shall take any action to accelerate or to collect
payment of any Subordinated Obligation or to pursue any other remedy with
respect to any Subordinated Obligation (including, without limitation, joining
with any creditor to commence any bankruptcy proceeding) prior to the earlier
of:
(a) the payment in full in cash of all Senior Debt;
(b) the occurrence of commencement of a Bankruptcy Event (with
respect to which the provisions of Section 7.3 shall govern);
provided, however, that this paragraph (b) shall apply to an
involuntary Bankruptcy Event only if such involuntary Bankruptcy
Event is not dismissed, stayed, vacated or discharged within sixty
(60) days of commencement thereof; and
(c) the acceleration of the maturity of any of the Senior
Debt.
Prior to the payment in full in cash of all amounts payable under or in respect
of the Senior Debt, any amount received by Holder or any other holder of this
Note in respect of any Subordinated Obligation as a result of any acceleration
or other action permitted by this Section 7.4 shall be paid to the holders of
Senior Debt in accordance with the provisions of this Section 7.
7.5 Holder to be Subrogated to Rights of Holders of Senior Debt. Upon the
payment in full in cash of all Senior Debt, Holder and the other registered
holders of Junior Noes will be subrogated to the rights of the holders of the
Senior Debt to receive payments and distributions of assets of the Company
applicable to the Senior Debt until all amounts owing in
<PAGE> 7
7
respect of the Junior Notes have been paid in full, and for the purpose of such
subrogation, no payments or distributions to the holders of the Senior Debt by
or on behalf of the Company or by or on behalf of Holder or any other
registered holder of Junior Notes by virtue of this Section 7 which otherwise
would have been made to Holder or any such other holder will, as between the
Company, on the one hand, and Holder and the other registered holders of Junior
Notes, on the other hand, be deemed to be payment by the Company to or on
account of the Senior Debt, it being understood that the provisions of this
Section 7 are and are intended to be solely for the purpose of defining the
relative rights of Holder and the other registered holders of Junior Notes, on
the one hand, and the holders of the Senior Debt, on the other hand.
7.6 Obligations of the Company Unconditional. Nothing contained in this
Note is intended to or will impair, as between the Company and Holder, the
obligations of the Company, which are absolute and unconditional, to pay to
Holder the principal of and interest on this Note as and when they become due
and payable in accordance with the terms hereof, or is intended to or will
affect the relative rights of Holder and the other holders of Junior Notes, on
the one hand, and the other creditors of the Company (other than the holders of
the Senior Debt), on the other hand, nor, except as provided in this Section 7,
will anything herein prevent Holder from exercising all remedies otherwise
permitted by applicable law upon default under this Note, subject to the
rights, if any, under this Section 7 of the holders of Senior Debt in respect
of cash, property or securities of the Company received upon the exercise of
any such remedy.
7.7 Subordination Rights Not Impaired by Acts or Omissions of the Company
or Holders of Senior Debt. No right of any present or future holders of any
Senior Debt to enforce subordination, as provided herein, will at any time in
any way be prejudiced or impaired by any act or failure to act on the part of
the Company or by any act or failure to act on the part of any such holder, or
by any noncompliance by the Company with the terms of this Note, regardless of
any knowledge thereof which any such holder may have or otherwise be charged
with. The holders of the Senior Debt may extend, renew, amend, waive or
otherwise modify the terms of the Senior Debt or any security therefor and
release, sell or exchange such security and otherwise deal freely with the
Company, all without releasing or otherwise impairing the rights of such
holders hereunder.
7.8 Reinstatement. The provisions of this Section 7 shall continue to be
effective or be reinstated, as the case may be, if at any time any payment of
any of the Senior Debt is rescinded or must otherwise be returned by any holder
of Senior Debt upon the occurrence of a Bankruptcy Event, all as though such
payment has not been made.
7.9 Issuance of Secondary Notes Not Prohibited. Notwithstanding anything
in this Section 7 to the contrary, nothing in this Section 7 shall prohibit the
Company from issuing, or Holder or any other registered holder of Junior Notes
from receiving and retaining, Secondary
<PAGE> 8
8
Notes issued or required to be issued on any interest payment date to pay
interest on this Note in lieu of the payment in whole or in part of such
interest in cash.
7.10 Amendment. Any amendment, waiver or other modification of the
provisions of this Section 7 shall not be effective against any holder of
Senior Debt without such holder's consent.
7.11 Remedies. The holders of Senior Debt shall be entitled to enforce
their rights under this Section 7 specifically, to recover damages by reason of
any breach of any provision of this Section 7 and to exercise all other rights
existing in their favor. Holder acknowledges and agrees that money damages may
not be an adequate remedy for any breach of the provisions of this Section 7
and that any holder of Senior Debt may apply to any court of competent
jurisdiction for specific performance and injunctive relief in order to enforce
and prevent any violation of the provisions of this Section 7.
8. Transfers. (a) This Note will not be sold, assigned, pledged,
hypothecated or otherwise transferred, in whole or in part to any person other
than a Permitted Transferee (as defined in the Stockholders Agreement) of the
Holder or another Stockholder (as defined in the Stockholders Agreement).
(b) Each Note surrendered for registration of a permitted transfer shall
be duly endorsed, or shall be accompanied by a written instrument of transfer
duly executed, by the registered holder of such Note or his attorney duly
authorized in writing. The Note issued upon such transfer shall bear the
restrictive legend set forth in paragraph (c) below.
(c) Each Note will be stamped or otherwise imprinted with a legend in
capital letters and otherwise in substantially the following form:
"THE SECURITY REPRESENTED BY THIS NOTE WAS ORIGINALLY
ISSUED ON AUGUST 13,1 996, AND HAS NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1993, AS AMENDED, OR UNDER
ANY STATE SECURITIES LAWS. THIS NOTE MAY NOT BE
RESOLD OR TRANSFERRED, IN WHOLE OR IN PART, UNLESS
REGISTERED OR EXEMPT FROM REGISTRATION UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, AND ALL APPLICABLE
STATE SECURITIES LAWS."
(d) This Note is intended to be treated as an obligation in registered
form for United States federal income tax purposes.
<PAGE> 9
9
9. Amendments and Waivers. The terms of the Junior Notes may be amended,
modified or supplemented by the Company with the consent of the registered
holders of a majority of the then outstanding principal amount of the Junior
Notes, and any existing default may be waived with the consent of the
registered holders of a majority of the then outstanding principal amount of
the Junior Notes; provided, however, that without the consent of the registered
holder of this Note, the interest rate on this Note may not be reduced, the
principal amount of this Note may not be reduced, the date when interest or
principal under this Note becomes due and payable may not be changed and
Section 4, Section 7 and this Section 9 may not be amended, modified or
supplemented.
10. Defaults and Remedies.
(a) An "Event of Default" shall occur if:
(i) the Company defaults in the payment of interest on
this Note when the same becomes due and payable, and
the default continues for a period of 15 days;
(ii) the Company defaults in the payment of principal
of this Note when the same becomes due and payable,
whether on the Maturity Date, a date fixed for the
prepayment hereof in accordance with Section 4 or
otherwise;
(iii) the Company or the Subsidiary, pursuant to or
within the meaning of any Bankruptcy law:
(A) commences a voluntary case or consents to the entry of any
receivership, liquidation, reorganization, adjustment, composition
or other similar case or proceeding, relative to the Company or to
its creditors, as such or its assets;
(B) is subject to any liquidation, dissolution or other winding up
of the Company, whether voluntary or involuntary and whether or not
involving insolvency or bankruptcy;
(C) consents to the appointment of a custodian of it or for all or
substantially all of its property;
(D) makes a general assignment for the benefit of its creditors or
any other marshaling of assets and liabilities of the Company; or
<PAGE> 10
10
(E) generally is unable to pay its debts as the same become due.
(iv) a court of competent jurisdiction enters an order or decree
under any Bankruptcy Law that:
(A) is for relief against the Company or the Subsidiary in an
involuntary case;
(B) appoints a custodian of the Company or the Subsidiary or for
all or substantially all of the property of either of them; or
(C) orders the liquidation of the Company or the Subsidiary;
and, in each case, the order or decree remains unstayed an in
effect for 60 days; or
(v) any Senior Debt is accelerated without recission.
The term "Bankruptcy Law" means Title 11 of the United States Code
and any similar federal or state law for the relief of debtors.
The term "Custodian" means any receiver, trustee, assignee,
liquidator or similar official under any Bankruptcy Law.
(b) If an Event of Default (other than an Event of Default specified in
clause (iii), (iv) or (v) of Section 10(a)) occurs and is continuing, the
registered holders of at least a majority of the then outstanding principal
amount of the Notes, by five business days' prior written notice to the
Company, may, subject to Section 7 hereof, declare the unpaid principal of and
accrued interest on all the Notes to be due and payable. If such Event of
Default is not cured or waived within the earlier of (x) the passage of such
five business days and (y) the acceleration of any Senior Debt, such
acceleration shall become effective as of the earlier thereof, and such unpaid
principal and interest shall thereupon become due and payable. If an Event of
Default specified in clause (iii), (iv) or (v) of Section 10(a) occurs, the
unpaid principal of and interest on all Notes shall, subject to Section 7
hereof, forthwith become and be immediately due and payable without any
declaration or other act on the part of any registered holder of Notes (and, in
the case of a rescission of a Senior Debt acceleration, the resultant Section
10(a)(v) Event of Default shall be rescinded automatically). The registered
holders of a majority of the then outstanding principal amount of the Junior
Notes (as defined below) may rescind an acceleration and its consequences if
the rescission would not conflict with any judgment or decree and all
<PAGE> 11
11
existing Events of Default have been cured or waived except nonpayment of
principal, interest or any other amount that has become due solely because of
the acceleration.
(c) Subject to Section 7 hereof, if an Event of Default occurs and is
continuing, the registered holders of a majority of the then outstanding
principal amount of the Notes may pursue any available remedy to collect the
principal of and interest on the Notes or to enforce the performance of any
provision of the Notes.
(d) Subject to Section 7 hereof, the holders of a majority of the then
outstanding principal amount of the Notes may direct the time, method and place
of conducting any proceeding for any remedy then available.
11. Definitions.
"Affiliate" means a person that, directly or indirectly, through one or
more intermediaries, controls, is controlled by or is under common control with,
the first mentioned person.
"CVC" means Citicorp Venture Capital, Ltd., a New York corporation.
"Debt" of any person means at any date, without duplication, (a) all
obligations of such person for borrowed money, (b) all obligations of such
person evidenced by bonds, Junior Notes, notes, letters of credit or other
similar instruments (including, without limitation, reimbursement and all other
obligations with respect to letters of credit), (c) all obligations of such
person to pay the deferred purchase price of property or services, except
accounts payable and other liabilities arising in the ordinary course of
business, (d) all obligations of such person as lessee under capital leases,
(e) all debt of others secured by alien on any asset of such person, whether or
not such debt is assumed by such person, except accounts payable and other
liabilities arising in the ordinary course of business, (f) all obligations of
such person pursuant to any interest rate swap, cap or collar agreement or any
other similar agreement and (g) all Debt of others guaranteed by such person.
"Employee Stock Redemption" means any purchase or redemption of shares of
capital stock (or options or warrants in respect of such shares) of the Parent
or any subsidiary thereof (including related stock appreciation rights or
similar securities) held by any current or former director, officer or employee
or Affiliate of CVC of any of its Affiliates) upon any such person's death,
disability, retirement or termination of employment or pursuant to the terms of
any agreements (including employment agreements) or plans (or amendments
thereto), approved by the Parent's or such subsidiary's Board of Directors (as
applicable), under which any such person may purchase and sell, or is granted
options to purchase and sell, any of the securities referred to in this
definition.
<PAGE> 12
12
"Guaranties" means (i) the guarantee issued by the Company contained in
the Credit Agreement dated as of May 2, 1996, as amended on August 13, 1996 and
from time to time, among Aetna Industries, Inc. ("Aetna"), the Company and NBD
Bank, as agent for itself and the lenders named therein and (ii) the guarantee
dated August 13, 1996 by the Company in favor of Norwest Bank Minnesota, N.A.,
as trustee for the holders of Aetna's 11 7/8% Senior Notes due 2006.
"Senior Debt" means (i) the "Obligations" as such term is defined in the
Guarantees, including without limitation any interest accruing on any
Obligation after the date of filing of a petition in any bankruptcy,
insolvency, arrangement, reorganization and receivership proceeding involving
the Company (or any other obligor with respect to the underlying Debt), whether
or not such interest is an allowed claim in such proceeding, and (ii) any and
all refundings, renewals, refinancings, replacements and extensions of any
Senior Debt described in clause (i) above, whether or not with the original
Holder or holders thereof.
12. No Recourse Against Others. A director, officer, employee or
stockholder of the Company, as such, shall not have any liability for any
obligations of the Company under this Note or for any claim based on, in
respect of or by reason of such obligations or their creation. Holder and each
other holder hereof, by accepting this Note, waives and releases all such
liability. The waiver and release set forth in this Section 12 are part of the
consideration for the issue of this Note.
13. Place of Payment. Payments of principal and interest in respect of
this Note, and notices given by the Company pursuant to the provisions of this
Note, are to be delivered at the address set forth on Annex I hereto, or to
such other address or to the attention of such other person as specified by
Holder by prior written notice to the Company.
14. Governing Law. This Note shall be governed and construed in
accordance with the laws of the State of New York, without giving effect to any
choice of law provision or rule (whether of the State of New York or any other
jurisdiction) that would cause the application of the laws of any jurisdiction
other than the State of New York.
15. Restricted Payments.
(a) The Company shall not, nor shall it permit any subsidiary to:
(i) declare or pay any dividends or make any other distributions
(including through merger, liquidation or otherwise) on any class of the
capital stock or other equity interests of the Company other than dividends or
other distributions to the Company;
<PAGE> 13
13
(ii) pay any management or services fee or any expenses related thereto
to the Parent, other than management or services fees payable to Parent in an
amount not to exceed $300,000 in any fiscal year of the Company, all or
substantially all of which shall be paid in such fiscal year by the Parent to
(x) its employees who are also employees of Aetna, or (y) third parties,
provided that none of such employees or third parties shall be CVC or any
Affiliate thereof or an employee of CVC or any such Affiliate;
(iii) purchase, redeem, retire or otherwise acquire for value any capital
stock of the Company held by persons other than subsidiaries; or
(iv) purchase, redeem, defease or otherwise acquire or retire for value,
prior to scheduled maturity, scheduled repayment or scheduled sinking fund
payment any Junior Subordinated Obligations (other than the purchase,
repurchase or other acquisition of Junior Subordinated Obligations purchased in
anticipation of satisfying a sinking fund, obligation, principal installment or
final maturity, in each case due within one year of the date of acquisition).
(b) The provisions of the foregoing paragraph (a) will not prohibit:
(i) any purchase or redemption of capital stock of the Company or Junior
Subordinated Obligations of the Company or Parent made by exchange for capital
stock of the Company;
(ii) any purchase or redemption of Junior Subordinated Obligations of the
Company or Parent made by exchange for other Junior Subordinated Obligations of
the Company or Parent;
(iii) the issuance of Junior Subordinated Obligations in exchange for
shares of preferred securities in accordance with Parent's certificate of
incorporation; or
(iv) Employee Stock Redemptions, in each case regardless of whether the
Company pays cash or issues notes in connection therewith, and any payment of
principal or interest on, or any purchase or redemption of, any such notes;
provided, however, that the aggregate amount of (A) Employee Stock Redemptions
made in cash and (B) cash payments to pay principal of, or interest on, or to
purchase or redeem any such notes, shall not exceed in any twelve-month period
$1,000,000 (net of purchases for cash after the date hereof in such twelve
month period of the Company's or any of its subsidiaries' capital stock by
officers, directors and employees of the Company and its subsidiaries);
provided further that in each case no Employee Stock Redemption shall be made
unless the Company has paid in full in cash the most recent scheduled interest
payment under the Junior Notes.
<PAGE> 14
14
For purposes of this Section 15, "Junior Subordinated Obligation" means
any Indebtedness of Parent or of the Company outstanding from time to time
which is subordinate or junior in right of payment to the Notes pursuant to a
written agreement or instrument entered into or accepted by the holders of a
majority in principal amount of the Junior Notes.
16. Waiver. The Company hereby waives presentment, demand, protest and
notice of every kind, and the Company assents to any extension or postponement
of the time of payment or any other indulgence, to any modification to this
Note, to the substitution, release or addition of any collateral which at any
time may be security for payment of this Note, and to the substitution,
release, or addition of any party which may, from time to time, be primarily or
secondarily obligated for the payment of this Note.
17. Costs. The Company will pay all costs and expenses of collection,
including reasonable attorneys' fees and costs, incurred or paid by the Holder
of this Note enforcing this Note or the obligations evidenced hereby.
<PAGE> 15
15
IN WITNESS WHEREOF, the Company has executed and delivered this Note as of
the date first above written.
AETNA HOLDINGS, INC.
By:______________________________
Name:
Title:
<PAGE> 1
Exhibit 10.5
FORM OF UNFUNDED PROMISES TO PAY
Dated February 13, 1998
AETNA HOLDINGS, INC.
24331 Sherwood Avenue
Centerline, Michigan 48015-0067
February 13, 1998
RE: AETNA HOLDINGS, INC. - DEFERRED OBLIGATIONS
Dear [__________]:
Pursuant to our letter to you dated August 9, 1996, you received a mix of
consideration for your then outstanding options under the MS Acquisition Corp.
Executive Stock Option Plan. Part of such mix of consideration included an
unfunded, unsecured promise by Aetna Holdings, Inc. ("Holdings") to pay you $[
] on or about August 13, 2007, plus interest (the "Deferred Obligations").
Payment of such amounts are subject to the same terms and conditions as are
applicable to the payment of principal and interest under the junior
subordinated promissory notes due 2007 of Holdings (the "Notes"). Pursuant to
the Notes, in lieu of the payment of interest in cash, interest may
be paid by the issuance of additional Notes of like tenor. The current amounts
Holdings is obligated to pay under the Deferred Obligations are as follows:
<TABLE>
<CAPTION>
PREPAYMENT REMAINING
DESCRIPTION PRINCIPAL AMOUNT PRINCIPAL AMOUNT TOTAL
- ------------------------------------- ---------------- ---------------- -----
<S> <C> <C> <C>
Original Deferred Obligations........ $ $ $
February 13, 1998 Interest...........
Total as of February 13, 1998........ $ $ $
</TABLE>
If you have any questions or comments regarding the above, please feel
free to contact me.
Very truly yours,
AETNA HOLDINGS, INC.
By: _______________________
Name: Harold A. Brown
Its: Vice President, Finance
<PAGE> 1
EXHIBIT 10.6
MS ACQUISITION CORP.
AMENDED AND RESTATED
EXECUTIVE STOCK OPTION PLAN
1. PURPOSE
The MS Acquisition Corp. Amended and Restated Executive Stock Option
Plan (the "Plan") is intended as a performance incentive for officers,
employees and other key persons of MS ACQUISITION CORP. (the "Company") or
its Subsidiaries (as hereinafter defined) to enable the persons to whom options
are granted (the "Optionees") to acquire or increase a proprietary interest in
the success of the Company. The Company intends that this purpose will be
effected by the granting of nonqualified stock options (as opposed to
"incentive" stock options, as defined in Section 422(b) of the Internal Revenue
Code of 1986, as amended) under the Plan (the "Options"). As used herein, the
terms "Subsidiary" or "Subsidiaries" include any corporation in which stock
possessing one hundred percent (100%) of the total combined voting power of all
classes of stock is owned directly or indirectly by the Company.
The Plan was initially adopted by the Company prior to the merger of the
Company with and into DCI Acquisition Corp., a Delaware corporation ("DCI"),
with DCI as the surviving corporation in the merger. Pursuant to a
recapitalization (the "Recapitalization") of the Company, Citicorp Venture
Capital, Ltd. and related parties have acquired a significant equity interest
in the Company from the equity holders of the Company. As part of the
Recapitalization, the Company has, among other things, amended its charter to
provide for the reclassification of its capital stock into two new classes
(voting and non-voting) of common stock and a new class of preferred stock.
All references in this Plan to the "Common Stock" shall be deemed to refer to
the Class A Common Stock, $.01 par value per share, of the Company. In
connection with the consummation of the transactions related to the
Recapitalization, all Options which have been granted under the Plan prior to
the consummation of such transactions have been terminated and canceled. The
Company desires that the Plan be amended and restated in its present form to
provide for additional grants of nonqualified Options to executives of the
Company or its Subsidiaries after the Recapitalization. The number of shares
issuable under the Plan pursuant to the exercise of Options granted under this
Amended and Restated Plan shall be 100,000 shares of the Common Stock.
2. OPTIONS TO BE GRANTED AND ADMINISTRATION
(a) Options granted under the Plan shall be nonqualified Options.
(b) The Plan shall be administered by a committee (the "Option
Committee") of not less than three (3) directors appointed by the board of
directors of the Company (the "Board of Directors"). Action by the Option
Committee shall require the affirmative vote of a majority of all its members.
<PAGE> 2
(c) Subject to the terms and conditions of the Plan, the Option
Committee shall have the power:
(i) to determine, with the approval of the Board of
Directors, the Options to be granted to eligible persons under
the Plan, to prescribe the terms and provisions (which need
not be identical) of each Option granted under the Plan to such
persons, and to recommend to the Board of Directors for its
approval the grant of Options;
(ii) to construe and interpret the Plan and Option
Agreements granted thereunder and to establish, amend and
revoke rules and regulations for administration of the Plan;
provided, however, that, in the event of a conflict in
construction or interpretation between the Option Committee and
the Board of Directors, any construction or interpretation made
by the Board of Directors regarding the Plan shall be binding
and conclusive on the Company and the Optionees; and
(iii) generally, to exercise such powers and to perform
such acts as are deemed necessary or expedient to promote the
best interests of the Company with respect to the Plan.
3. STOCK SUBJECT TO PLAN
(a) The stock subject to the Options granted under the Plan shall be
shares of the Company's authorized but unissued Common Stock (as defined in
Section 1 hereof), or shares of Common Stock reacquired by the Company. The
total number of shares that may be issued pursuant to Options granted under the
Plan shall not exceed an 100,000 shares of Common Stock. Such number shall be
subject to adjustment as provided in Section 7 hereof.
(b) Unless otherwise determined by the Board of Directors, in the
event outstanding Options under the Plan are forfeited or are canceled for any
reason (other than by exercise), the shares of Common Stock allocable to the
unexercised portion of such Option shall become available for reissuance under
the Plan.
4. ELIGIBILITY
Options may be granted, in the sole discretion of the Board of
Directors, to officers or other key employees of the Company or its
Subsidiaries.
5. OPTION TERMS
(a) Subject to the terms and conditions of the Plan, each grant of
an Option hereunder shall be evidenced by an Option agreement, which shall
contain such provisions regarding the grant as the Board of Directors shall
from time to time deem appropriate (an "Option Agreement"). Option Agreements
need not contain identical provisions.
2
<PAGE> 3
(b) Notwithstanding any other provisions of the Plan or any Option
Agreement, each Option shall expire on the date specified in the Option
Agreement, which date shall not be later than the tenth (10th) anniversary of
the date on which the Option was granted.
(c) Other than (i) in connection with the termination of the
Optionee's employment as provided in Section 5(g) of the Plan, or (ii) after the
occurrence of a Change of Control as provided in Section 8 of the Plan, each
Option shall be exercisable in such installments (which need not be equal) and
at such times as set forth in the Option Agreement. Subject to the provisions
of Sections 5(g) and 8 of the Plan, to the extent not exercised, installments
shall accumulate and be exercisable, in whole or in part, at any time after
becoming exercisable, but no later than the date the Option expires.
(d) The purchase price per share of Common Stock under each Option
shall be as determined by the Board of Directors and as set forth in the Option
Agreement.
(e) No Optionee shall be deemed for any purpose to be the owner of
any shares of Common Stock subject to any Option unless and until (i) the Option
shall have been exercised pursuant to the terms thereof, (ii) all requirements
under applicable law and regulations shall have been complied with to the
satisfaction of the Company, (iii) the Company shall have issued and delivered
the shares to the Optionee, and (iv) the Optionee's name shall have been
entered as a stockholder of record on the books of the Company. Thereupon, the
Optionee shall have full voting, dividend and other ownership rights with
respect to such shares of Common Stock, subject to the limitations set forth in
the Stockholders Agreement (as hereinafter defined).
(f) No Options shall be transferable by the Optionee other than by
will or by the laws of descent and distribution, and may be exercised during
the Optionee's lifetime only by the Optionee, his or her guardian or legal
representative.
(g) An Option granted pursuant to this Plan shall cease to vest
and shall terminate whenever the Optionee is for any reason no longer
employed by the Company or any Subsidiary; provided, however, that any portion
of the Option that was vested and exercisable as of the date of such
termination may be exercised as to any Common Stock not theretofore purchased
for a period of three months following such date, except that if such
termination of employment results from the Optionee's death or permanent, total
disability (as defined in the long-term disability policy maintained by the
Company or its Subsidiaries applicable to the Optionee), any such portion of
this Stock Option may be exercised (in the case of Optionee's death by his
executors or administrators) for a period of twelve months following such
termination date.
(h) No Option shall confer upon an Optionee any right to continued
employment by the Company, nor will it interfere in any way with Optionee's
right or the Company's right to terminate, or otherwise modify, the terms of
the Optionee's employment at any time for any reason.
3
<PAGE> 4
6. METHOD OF EXERCISE; PAYMENT OF PURCHASE PRICE
(a) Unless otherwise indicated in the Option Agreement, an Option
granted under the Plan shall be exercised by the Optionee by delivering to the
Option Committee on any business day prior to the Expiration Date set forth in
the Option Agreement a notice of his or her election to purchase some or all of
the Common Stock purchasable at the time of such notice (the "Notice"). The
Notice shall specify the number of shares of Common Stock to be purchased and
shall be accompanied (i) by payment therefor in cash, and (ii) by such
agreement, statement or other evidence as the Company may require in order to
satisfy itself that the issuance of the Common Stock being purchased pursuant
to such exercise and any subsequent resale thereof will be in compliance with
applicable laws and regulations including without limitation all applicable
federal and state securities laws and regulations.
(b) Certificates for the Common Stock so purchased will be issued
to the Optionee upon compliance to the satisfaction of the Company with all
requirements under applicable laws or regulations in connection with such
issuance. The Company shall be under no obligation to issue the Common Stock
subject to the Option until the Optionee has (i) executed and delivered to the
Company a certain Stockholders Agreement between the Company and the Optionee
in the form attached hereto as Exhibit A (the "Stockholders Agreement") and
(ii) complied with the requirements of the Plan and the Option Agreement and
provided that the determination of the Board of Directors as to such compliance
shall be final and binding on the Optionee.
(c) No portion of the Option shall be exercisable after the
Expiration Date .
7. ADJUSTMENT UPON CHANGES IN CAPITALIZATION
(a) If the shares of the Company's Common Stock as a whole are
increased, decreased, changed into or exchanged for a different number or kind
of shares or securities of the Company, whether through merger, consolidation,
reorganization, recapitalization, reclassification, stock dividend, stock
split, combination of shares, exchange of shares, change in corporate structure
or the like (other than in connection with a Change of Control (as herein
defined), in which case the provisions of Section 8 shall control), an
appropriate and proportionate adjustment shall be made in the number and kind
of shares subject to the Plan, and in the number, kind and per share exercise
price of shares or other securities subject to unexercised Options or portions
thereof granted prior to any such change.
(b) Adjustments under this Section 7 shall be determined by the
Board of Directors and such determinations shall be conclusive. No fractional
shares of Common Stock shall be issued under the Plan on account of any
adjustment specified above.
4
<PAGE> 5
8. EFFECT OF CHANGE OF CONTROL
(a) Notwithstanding anything in the Plan or Option Agreement which
may be construed to the contrary, upon the occurrence of a Change of Control (as
herein defined), all Options granted pursuant to this Plan which have not
previously terminated or expired pursuant to the operation of the Plan or the
Option Agreement and which remain unvested as of the date of the occurrence of
the Change of Control shall become 100% vested and exercisable immediately
prior thereto.
(b) In the event of the occurrence of a Change of Control, to the
extent that any outstanding Options under the Plan are not exercised and
extinguished upon the consummation of the transactions in connection with the
Change of Control, all Options which remain outstanding under the Plan after the
consummation of such transactions shall be immediately terminated and canceled
without the necessity of further action by any party, by operation of this
Section 8(b), unless determined otherwise by the Board of Directors in its sole
discretion.
(c) For purposes of the Plan, "Change of Control" means the following
(capitalized terms not defined in the Plan shall have the meaning ascribed to
them in the Stockholders Agreement): the sale of the Company, Aetna Holdings or
Aetna Industries, Inc. ("Aetna") (whether by merger, consolidation,
recapitalization, reorganization, sale of securities, sale of assets or
otherwise) in one transaction or a series of related transactions to a Person
or Persons that is not an Affiliate of CVC pursuant to which such Person or
Persons (together with its Affiliates) acquires (i) securities representing at
least a majority of the voting power of all securities of the Company or Aetna,
assuming the conversion, exchange or exercise of all securities convertible,
exchangeable or exercisable for or into voting securities, or (ii) all or
substantially all of the Company's or Aetna's assets; provided that a merger or
consolidation of Aetna Holdings into or with the Company or Aetna shall not
constitute a Change of Control.
9. AMENDMENT OF THE PLAN
The Board of Directors may amend the Plan at any time, and from time to
time. Rights and obligations under any Option granted before any amendment of
the Plan shall not be altered or impaired by such amendment, except with the
consent of the Optionee.
10. NONEXCLUSIVITY OF THE PLAN
The adoption of the Plan by the Board of Directors shall not be construed
as creating any limitations on the power of the Board of Directors to adopt
such other incentive arrangements as it may deem desirable, including,
without limitation, the granting of stock options otherwise than under the
Plan, and such arrangements may be either applicable generally or only in
specific cases.
5
<PAGE> 6
11. GOVERNMENT AND OTHER REGULATIONS
The obligation of the Company to sell and deliver shares of Common Stock
with respect to Options granted under the Plan shall be subject to all
applicable laws, rules and regulations, including all applicable federal and
state securities laws, and the obtaining of all such approvals by governmental
agencies as may be deemed necessary or appropriate by the Board of Directors.
12. EFFECTIVE DATE OF THE PLAN; STOCKHOLDER APPROVAL
This Amended and Restated Plan shall be effective August 13, 1996, subject
to the approval of the Company's stockholders. No Options granted under the
Plan prior to such stockholder approval may be exercised until such approval
has been obtained. No Option may be granted under the Plan after the tenth
(10th) anniversary of the effective date of this Amended and Restated Plan.
* * *
This MS Acquisition Corp. Amended and Restated Executive Stock Option Plan has
been adopted by the Board of Directors of the Company as of August 13, 1996.
6
<PAGE> 7
MS ACQUISITION CORP. AMENDED AND RESTATED
EXECUTIVE STOCK OPTION PLAN
AMENDMENT NO.1
THIS AMENDMENT NO. 1, made as of the 7th day of April, 1998 by MS
Acquisition Corp. (the "Company").
WITNESSETH
WHEREAS, the Company maintains the MS Acquisition Corp. Amended and
Restated Executive Stock Option Plan (the "Plan"), which has been adopted and
approved by the Company's Board of Directors (the "Board") as of August 13,
1996; and
WHEREAS, the Company desires to amend the Plan effective as of the date
hereof to provide more flexibility to the Plan participants to the effect that,
in the event of the occurrence a Change in Control (as defined in the Plan), to
the extent that any options are not exercised upon consummation of such Change
in Control, all options which remain outstanding under the Plan after such
consummation will not automatically be terminated and canceled, but will
continue to be exercisable in accordance with the terms of the Plan; and
WHEREAS, Section 9 of the Plan provided that the Company (through action of
the Board) may amend the Plan at any time, and from time to time.
NOW, THEREFORE, the Plan is amended, effective as of the date of hereof, as
follows:
Section 8(b) of the Plan is deleted in its entirety.
IN WITNESS WHEREOF, the Company has caused this instrument to be executed
by its duly authorized officer as of the date first written above.
MS ACQUISITION CORP.
By: /s/ Ueli Spring
-----------
Name:
Title:
<PAGE> 1
EXHIBIT 10.7
FORM OF STOCK OPTION AGREEMENT
MS ACQUISITION CORP.
STOCK OPTION AGREEMENT
Name of Optionee: _____________________________________
Number of Option Shares: ____________ Date of Grant: August 13, 1996
Option Exercise Price: $0.75 Expiration Date: August 13, 2006
Pursuant to the MS Acquisition Corp. Amended and Restated Executive Stock
Option Plan (the "Plan"), MS Acquisition Corp., a Delaware corporation, (the
"Company"), hereby grants to the Optionee named above, who is now employed by a
Subsidiary of the Company (as defined in the Plan), a stock option ("Stock
Option") to purchase on or prior to the Expiration Date specified above all or
any part of the number of shares of Common Stock (as defined in the Plan)
specified above (the "Option Shares") at the Option Exercise Price per share
determined by the Board of Directors and specified above, subject to the terms
and conditions set forth herein and in the Plan, a copy of which is attached
hereto, and subject to the approval of the Plan by the Company's stockholders.
This Stock Option is a nonqualified option.
1. Plan Incorporated by Reference. The terms and conditions of the Plan
are hereby incorporated into this Agreement by reference. All terms used herein
and not defined herein shall have the meanings as set forth in the Plan.
2. Vesting Schedule. No portion of this Stock Option may be exercised
until such portion shall have vested. Subject to the Plan provisions which
call for forfeitability in the event of a termination of the Optionee's
employment, or early acceleration of vesting in the event of a Change of
Control, this Stock Option shall be vested and exercisable with respect to the
following number of Option Shares at the expiration of the following period
from the Date of Grant specified above:
Number of Period from
Option Shares Exercisable the Date of Grant
------------------------- -----------------
20% 1 year
40% 2 years
60% 3 years
80% 4 years
100% 5 years
<PAGE> 2
Once vested, unless otherwise indicated in the Plan, the Stock Option shall
continue to be exercisable, in whole or in part, at any time or times prior to
the Expiration Date.
3. Nontransferability. This Agreement is personal to Optionee, is
non-assignable and is not transferable in any manner, by operation of law or
otherwise, other than by will or by the laws of descent and distribution, and
is exercisable, during Optionee's lifetime, only by Optionee, his or her
guardian or legal representative.
4. Counterparts. This Agreement may be executed in several counterparts,
each of which shall be deemed to be an original but all of which together will
constitute one and the same instrument.
5. Choice of Law; Miscellaneous. This Agreement shall be governed by and
construed in accordance with the domestic laws of the State of New York,
without giving effect to any choice of law or conflict of law provision or rule
(whether of the State of New York or any other jurisdiction) that would cause
the application of the laws of any jurisdiction other than the State of New
York. Notice hereunder shall be mailed or delivered to the Company at its
principal place of business, and shall be delivered to Optionee in person or
mailed or delivered to Optionee at the address set forth below, or in either
case at such other address as one party may subsequently furnish to the other
party in writing.
MS ACQUISITION CORP.
By:_________________________________
Title:
2
<PAGE> 3
The foregoing Agreement is hereby accepted and the terms and conditions
thereof and the Plan are hereby agreed to by the undersigned.
____________________________________
Optionee's Signature
____________________________________
Optionee's address
____________________________________
3
<PAGE> 1
Exhibit 10.20
PROMISSORY NOTE OF MS ACQUISITION
Dated April 14, 1998
THE SECURITY REPRESENTED BY THIS NOTE WAS ORIGINALLY ISSUED ON APRIL 14, 1998,
AND HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
UNDER ANY STATE SECURITIES LAW. THIS NOTE MAY NOT BE RESOLD OR TRANSFERRED, IN
WHOLE OR IN PART, UNLESS REGISTERED OR EXEMPT FROM REGISTRATION UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, AND ALL APPLICABLE STATE SECURITIES LAWS.
MS ACQUISITION CORP.
Promissory Note
April 14, 1998 $[______]
New York, New York
FOR VALUE RECEIVED, MS ACQUISITION CORP., a Delaware corporation (the
"Company"), promises to pay to [_______________] or his, her or its registered
successor or assigns (each a "Holder") , the principal sum of [____________]
($[________]), as such sum may be decreased by prepayments made pursuant to
Section 3 below, on October 14, 1999 (the "Maturity Date"), all in accordance
with the provisions of this Note.
This note is one of the promissory notes required to be issued pursuant to
Section 2.02 of the Stock Purchase Agreement dated as of April 3, 1998 among
the Company, Societe Financiere de Developpement Industriel et Technologique
and the other parties set forth on the signature pages thereto (as the same may
be amended, supplemented or modified from time to time, the "Purchase
Agreement"). This note and any notes issued upon registration of transfer or
exchange of this Note or any of the aforementioned notes are collectively
referred to herein as the "Notes".
1. Interest. In the event that he Company has not consummated a
Qualifying Offering (as defined below) on or prior to April 14, 1999 (the
"Accrual Date"), interest will accrue on the principal amount of this Note from
and after the Accrual Date at the LIBOR Rate (as defined below) plus two
percent (2%) per annum. If applicable, the Company will pay interest in
arrears on the 14th day of April and October of each year, beginning October
14, 1999, and on the Maturity Date ( each, an "Interest Period").
"LIBOR Rate" as used herein shall mean, with respect of any applicable
Interest Period, the rate per annum (rounded upwards if necessary to the
nearest 1/16 of 1%) quoted at approximately 11:00 a.m., London Time, by the
principal London branch of Citibank. N.A. two (2) banking days prior to the
first day of such Interest Period for the offering to leading banks in the
London interbank market of Dollar deposits in immediately available funds, for
an Interest Period, and in an amount equal to the aggregate principal amount of
the Notes outstanding during such Interest Period.
<PAGE> 2
2
"Qualifying Offering" as used herein shall mean the consummation of an
underwritten primary or secondary public offering of Common Stock pursuant to
an effective registration statement under the Securities Act of 193, as
amended, as a result of which (i) (together with all similar previous public
offerings) at least $50 million of aggregate net proceeds are raised for the
Company, and (ii) the Common Stock is listed on the New York Stock Exchange,
the American Stock Exchange, the Nasdaq National Market or any successor
thereto.
2. Method of Payment. Subject to the next sentence, the Company will pay
the principal of, and interest on, this Note in money of the United States that
at the time of payment is legal tender for payment of public and private debts.
The Company shall make all payments of principal of and interest on this Note,
subject to any applicable withholding tax or similar withholding, by wire
transfer of immediately available funds to the account specified by Holder in a
written notice to the Company delivered at least two business days prior to
such payment date; provided that the Company may pay interest amounts if less
than $10,000 by check payable in such money and may mail an interest check to
the Holder's registered address.
If a payment date is a legal holiday in the State of New York or Paris,
France, payment shall be made on the next succeeding business day.
3. Mandatory and Optional Prepayments.
(a) The Company, at its option, may prepay all or portion of the
outstanding principal amount of the Notes at any time and from time to time pro
rata among all Notes at 100% of the portion of the principal amount of the
Notes being prepaid plus accrued but un unpaid interest thereon on the
prepayment date.
(b) Immediately upon (i) the consummation of a Qualifying Offering,
(ii) the consummation of a Sale of the Company (as defined below) pursuant to
the clause (i) of the definition of "Sale of the Company" or (iii) the
distribution of any proceeds from a Sale of the Company to the stockholders of
the Company pursuant to clause (ii) of the definition of "Sale of the Company",
the Company shall prepay all of the principal amount of the Notes plus accrued
but unpaid interest thereon on the prepayment date. "Sale of the Company" as
used herein shall mean the sale of the Company (wether by merger, consolidation,
recapitalization, reorganization, sale of securities, sale of assets or
otherwise) in one transaction or a series of related transactions to a Person
or Persons pursuant to which such Persons acquires (i) securities representing
at least a majority of the voting power of all securities of the Company,
assuming the conversion, exchange or exercise of all or substantially all
securities convertible, exchangeable or exercisable for or into voting
securities, or (ii) all or substantially all of the business or assets of the
Company and its Subsidiaries. The terms "Affiliate", "Associate", "Person",
"Sofedit Stockholder", "Sofedit Institutional Stockholder"and "Subsidiary" have
the respective meanings ascribed thereto in
<PAGE> 3
3
the Stockholders Agreement dated as of April 9, 1998 by and among the Company
and its stockholders, as in effect on the date of execution thereof.
(c) In the event that the Company prepays less than all the
outstanding principal amount of this Note under subsection (a) above, the
Company shall deliver to Holder upon such prepayment a replacement note, dated
the date thereof, of like tenor representing the remaining outstanding principal
amount hereof and any accrued but unpaid interest thereon. Any prepayment of
less than all of the outstanding principal amount of this Note pursuant to this
Section 3 will be made pro rata among the registered Holders of the Notes on
the basis of the outstanding principal amount of the Notes then held by each
such Holder. From and after the date of any prepayment of this Note, interest
shall cease to accrue on the portion of this Note so prepaid.
4. Notice of Prepayment. Notice of any prepayment of this note pursuant
to Section 3(a) will be delivered at least 15 days but not more than 60 days
before the prepayment date to Holder at the address specified in Section 10
hereof.
5. Repayment. The Company will repay this Note on the Maturity Date at
100% of the then outstanding principal amount of this Note plus accrued but
unpaid interest thereon to such date.
6. Transfers.
(a) This Note will not be sold, assigned, pledged, hypothecated or
otherwise transferred, in whole or in part to any Person without the prior
written consent of the Company; provided, however, that (i) this Note may be
sold, assigned or otherwise transferred by the Holder to any Person who has
issued a Note upon the closing of the Purchase Agreement and (ii) upon ten (10)
days prior written notice to the Company, this Note may be pledged by the
Holder to any bank or other financial institution as collateral for money
borrowed by the Holder.
(b) Each Note surrendered for registration of a permitted transfer
shall be duly endorsed, or shall be accompanied by a written instrument of
transfer duly executed, by the registered holder of a such Note or his, her or
its attorney duly authorized in writing. The Note issued upon such transfer
shall bear the restrictive legend set forth in paragraph (c) below.
(c) Each Note will be stamped or otherwise imprinted with a legend
in capital letters and otherwise in substantially the following form:
"THE SECURITY REPRESENTED BY THIS NOTE WAS ORIGINALLY ISSUED ON
APRIL 14, 1998, AND HAS NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, OR UNDER ANY STATE SECURITIES LAWS. THIS
NOTE MAY NOT BE RESOLD OR TRANSFERRED, IN WHOLE OR IN PART, UNLESS
REGISTERED
<PAGE> 4
4
OR EXEMPT FROM REGISTRATION UNDER THE SECURITIES ACT OF
1933, AS AMENDED, AND ALL APPLICABLE STATE SECURITIES LAWS."
7. Amendments and Waivers. The terms of the Notes may be amended,
modified or supplemented by the Company with the consent of the registered
holders of a majority of the then outstanding principal amount of the Notes,
and any existing default may be waived with the consent of the registered
holders of the majority of the then outstanding principal amount of the Notes;
provided, however, that without the consent of the registered holders of at
least two-thirds (2/3) of the then outstanding principal amounts of the Notes,
the interest rate on this Note may not be reduced, the principal amount of
this Note may not be reduced, the date when interest or principal under this
Note becomes due and payable may not be changed and this Section 7 may not be
amended, modified or supplemented.
8. Defaults and Remedies.
(a) An "Event of Default" shall occur if:
(i) the Company defaults in the payment of interest on this
Note when the same becomes due and payable, and the default
continues for a period of 15 days;
(ii) the Company defaults in the payment of principal of
this Note when the same becomes due and payable;
(iii) the 11 7/8 % Senior Notes Due 2007 issued by Aetna
Industries, Inc. under that certain Indenture dated as of
August 13, 1996 become due and payable prior to their
scheduled maturity;
(iv) the Company, pursuant to or within the meaning of any
Bankruptcy Law:
(A) commences a voluntary case or consents to the entry
of any receivership, liquidation, reorganization,
adjustment, composition or other similar case or proceeding,
relative to the Company or to its creditors, as such or its
assets;
(B) is subject to any liquidation, dissolution or other
winding up of the Company, whether voluntary or involuntary
and wether or not involving insolvency or bankruptcy;
(C) consents to the appointment of a custodian of it or
for all or substantially all of its property;
<PAGE> 5
5
(D) makes a general assignment for the benefit of its
creditors or any other marshaling of assets and liabilities
of the Company; or
(E) generally is unable to pay its debts as the same
become due; and
(v) a court of competent jurisdiction enters an order or
decree under any Bankruptcy Law that:
(A) is for relief against the Company in an involuntary
case;
(B) appoints a custodian of the Company or for all or
substantially all of the property of the Company ;or;
(C) orders the liquidation of the Company;
and, in each case, the order or decree remains
unstayed and in effect for 60 days.
The term 'Bankruptcy Law" means Title 11 of the United
States Code and any similar federal or state law for
the relief of debtors. The terms "Custodian" means any
receiver, trustee, assignee, liquidator or similar
official under the Bankruptcy Law.
(b) If an Event of Default (other than an Event of Default specified
in clause (iv) or (v) of Section 8(a)) occurs and is continuing, the registered
holders of at least two-third (2/3) of the then outstanding principal amount of
the Notes, by five business days prior written notice to the Company, may
declare the unpaid principal of and accrued interest on all the Notes to be due
and payable. If such Event of Default is not cured or waived within the
passage of such five business days, such acceleration shall become effective,
and such unpaid principal and interest shall thereupon become due and payable.
If an Event of Default specified in clause (iv) or (v) of Section 8(a) occurs,
the unpaid principal of and interest on all Notes shall forthwith become and be
immediately due and payable without any declaration or other act on the part of
any registered holder of Notes. The registered holders of a majority of the
then outstanding principal amount of the Notes may rescind an acceleration and
its consequences if the rescission would not conflict with any judgment or
decree and all existing Events of Default have been cured or waived except
nonpayment of principal, interest or any other amount that has become due
solely because of the acceleration.
(c) If an Event of Default occurs and is continuing, the registered
holders of at least two-thirds ( 2/3) of the then outstanding principal amount
of the Notes may pursue any available remedy to collect the principal of and
interest on the Notes or to enforce the performance of any provision of the
Notes.
<PAGE> 6
6
(d) The holders of at least two-thirds (2/3) of the then outstanding
principal amount of the Notes may direct the time, method and place of
conducting any proceeding for any remedy then available.
9. No Recourse Against Others. A director, officer, employee or
stockholder of the Company, as such, shall not have any liability for any
obligations of the Company under this Note or for any claim based on, in respect
of or by reason of such obligations or their creation. Holder and each other
holder hereof, by accepting this Note, waives and releases all such liability.
The waiver and release set forth in this Section 9 are part of the consideration
for the issuance of this Note.
10. Place of Payment. Payments of principal and interest in respect
of this Note, and notices given by the Company pursuant to the provisions of
this Note, are to be delivered at the address set forth on Annex 1 hereto, or to
such other address or to the attention of such other Person as specified by
Holder by prior written notice to the Company.
11. Governing Law. This Note shall be governed by and construed in
accordance with the laws of the State of New York, without giving effect to any
choice of law or conflict of law provision or rule (whether of the State of New
York or any other jurisdiction) that would cause the application of the laws of
any jurisdiction other than the State of New York.
12. Costs. The Company will pay out-of-pocket costs and expenses of
collection, including reasonable attorneys' fees and costs, incurred or paid by
the Holder of this Note, enforcing this Note or the obligations evidenced
hereby.
<PAGE> 7
7
IN WITNESS WHEREOF, the Company has executed and delivered this Note
of the date first above written.
MS ACQUISITION CORP.
By: ___________________
Name:
Title:
<PAGE> 1
Exhibit 15.1
August 7, 1998
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington D.C. 20549
Ladies and Gentlemen,
We are aware that MS Acquisition Corp. has included our report dated July 30,
1998 (issued pursuant to the provisions of Statement on Auditing Standards No.
71) in the Prospectus constituting part of its Registration Statement on Form
S-1 to be filed on or about August 12, 1998. We are also aware of our
responsibilities under the Securities Act of 1933.
Yours very truly,
Barbier Frinault & Autres
(member Firm of Arthur Andersen)
/s/ Philippe Taupin
- -------------------
Philippe Taupin
<PAGE> 1
EXHIBIT 21.1
SUBSIDIARIES OF THE REGISTRANT
<TABLE>
<CAPTION>
JURISDICTION OF PERCENTAGE HELD ON
COMPANY INCORPORATION JUNE 30, 1998
- -------------------------------------------- ----------------------- ------------------
<S> <C> <C>
Aetna Holdings, Inc......................... Delaware 100
Aetna Industries, Inc....................... Delaware 100
Aetna Export Sales Corp..................... U.S. Virgin Islands 100
Aetna Manufacturing Canada Ontario, Canada 100
Limited................................
Aubecq S.A.................................. France 100
BDHI S.A.................................... France 100
Bonin S.A................................... France 100
Brouillet S.A............................... France 100
Cabrit S.A.................................. France 100
CIBA S.A.................................... France 100
C.L.A. S.A.................................. France 100
Coventry Presswork Ltd...................... U.K. 100
C.T.A.A. SA................................. France 100
Euralcom.................................... Netherlands 15.14
Laprade Emboutissage S.A.................... France 100
Lebranchu Le Theil S.A...................... France 100
Lebranchu Prototypes S.A.................... France 100
Lebranchu UK Ltd............................ U.K. 100
Saufedit Assurances SARL.................... France 50
Serte EURL.................................. France 100
Sofedit S.A................................. France 100
Sofedit Europest SARL....................... France 100
Sofedit Iberica............................. Spain 100
Sofedit Polska SARL......................... Poland 100
Sotramex S.A................................ France 100
Towerstream Ltd............................. U.K. 100
</TABLE>
<PAGE> 1
EXHIBIT 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
As independent accountants, we hereby consent to the use of our report on the
consolidated financial statements of Societe Financiere d'Etude et de
Developpement Industriel et Technologique S.A. dated June 15, 1998 (and to all
references to our Firm) included in or made a part of this registration
statement on Form S-1.
Paris, France, August 7, 1998
Barbier Frinault & Autres
(member firm of Arthur Andersen)
/s/ Philippe Taupin
- -------------------
Philippe Taupin
<PAGE> 1
EXHIBIT 23.3
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Prospectus constituting part of this
Registration Statement on Form S-1 of our report dated February 6, 1998,
relating to the financial statements of MS Acquisition Corp., which appears in
such Prospectus. We also consent to the references to us under the headings
"Experts" and "Selected Financial Data" in such Prospectus. However, it should
be noted that PricewaterhouseCoopers LLP has not prepared or certified such
"Selected Financial Data."
PricewaterhouseCoopers LLP
Bloomfield Hills, MI
August 7, 1998 /s/ PricewaterhouseCoopers LLP
______________________________
PricewaterhouseCoopers LLP
<PAGE> 1
EXHIBIT 23.4
CONSENT OF CABINET CONSTANTIN & ASSOCIES,
INDEPENDENT AUDITORS
As independent auditors, we hereby consent to the use of our report on the
consolidated financial statements of Societe Financiere d'Etude et de
Developpement Industriel et Technologique S.A. for fiscal years 1993 and 1994
(and to all references to our firm), in the registration statement to be filed
by MS Acquisition Corp. on Form S-1 on or about August 12, 1998.
Paris, August 11, 1998
Cabinet Constantin & Associes
/s/ Pierre Labourdette
- -------------------
By: Pierre Labourdette
Title: Associe.
<PAGE> 1
EXHIBIT 23.5
AUGUST 11, 1998
24331 Sherwood Avenue
P.O. Box 3067
Centerline, MI 48015-0067
Ladies and Gentlemen:
This letter serves as written consent for MS Acquisition Corp. to
include my name and information in the filing to the Securities and Exchange
Commission of its Registration Statement on Form S-1 (the "Registration
Statement") on or about August 11, 1998 as a nominee to the board of directors
of MS Acquisition Corp., following the Offering (as defined in the
Registration Statement).
Sincerely,
/s/ Ueli Spring
_______________
Ueli Spring
